Exploring Alternative Dispute Resolution (ADR): Types, Pros, and Cons
What is ADR?
Alternative Dispute Resolution (ADR) refers to methods of resolving a dispute which do not involve going to court. It is an alternative to litigation, which refers to the process of settling a dispute in a court of law.
In this article, we look at different kinds of ADR and why you might want to use it depending on the dispute you are settling and the outcome you may be looking for.
Types of ADR
Negotiation: A process in which the individual parties involved in the dispute look to settle by coming to an agreement directly or through their legal advisors. Negotiation is a common ADR method when it concerns private individuals involved in a dispute.
Mediation: A process in which the parties to a dispute engage in a discussion of the conflict in an effort to come to a resolution with the help of an independent third party. A mediator has an active and direct position in offering proposals for settlement and is usually called on to assist with an ongoing dispute. Any agreement reached is facilitated through the agreement of the parties. Unlike a Judge, the mediator does not have the authority to impose a decision or in any way bind the parties.
Conciliation: A process in which an independent third party is chosen as a neutral person to assist the parties to a dispute to achieve a settlement by guiding negotiations to a satisfactory outcome. A conciliator will make proposals for settlement without imposing their suggestions upon the parties. Conciliation is commonly used as a preventative method of dispute resolution.
Adjudication: A process involving an independent third party, usually an expert in the subject of dispute, who takes the claims of both sides into consideration and makes a decision that is binding (pending any future court or arbitral award) on their dispute.
Expert Determination: A process in which an independent technical expert is appointed to give a (usually) final binding decision on a dispute based on technical issues and expertise.
Early Neutral Evaluation: A process in which parties ask an independent evaluator to gauge the strengths and weaknesses of each of their cases and form a neutral and non-binding evaluation, intended to serve as a basis for negotiations to start, helping parties prevent unnecessary litigation and providing incentive for a resolution to be achieved.
Advantages of using ADR
Less time consuming: As ADR is often a less formal, structured process, disputes using ADR are usually resolved or settled much faster than when dealt with using litigation as there is no need to wait for a court date and parties can usually just arrange to meet at a convenient time.
Less expensive: Going through an ADR method is usually considerably cheaper than the court process. For small early-stage businesses, ADR is usually a popular choice for this reason. Note that if a dispute ends up going to court, a failure to have considered using a form of ADR before going to court may incur additional costs.
Flexibility in the outcome: When using some ADR methods, such as mediation, those involved in the dispute can come to a resolution by determining the outcome themselves, as opposed to having a resolution imposed on them by law. That is, using methods of ADR often have the capacity to be significantly more flexible with respect to how the dispute is resolved and how it bears on the law.
It is sometimes possible to arrive at an outcome which could not be ordered by a court, or conclude a dispute based on a resolution which both parties think is more satisfactory than the limited number of outcomes which a court can order. A lack of flexibility where neither party can be fully satisfied by the outcome which the court might come to can sometimes bear negatively on the parties’ business relationships.
Privacy: ADR procedures are usually carried out in private and conducted confidentially, averting the possibility of adverse publicity and preserving your company reputation. Additionally, ADR procedures are usually run on a “without prejudice” foundation, so nothing disclosed by the parties can be used as evidence in any future court proceedings.
Confidentiality: The parties can ensure that the terms of any agreement made via a process of ADR remain confidential.
Disclosure: In some instances, parties can attempt settlement of one aspect of a dispute whilst formal court proceedings are ongoing in the background. Disclosure of documents as part of this exercise may give parties an invaluable insight into the strength of their opponent’s case and enable them to re-evaluate their own case strategy.
Disadvantages of using ADR
Non-binding: Depending on the ADR method you use, there may not be any certainly of a binding result.
May be unsuitable: Going through a process of ADR may be unsuitable in cases where emergency relief is required, where an emergency injunction is required, or where the opposing party is not prepared to engage in a process of resolving the conflict.
No guarantee of a resolution: The ADR process does not always result in a resolution or settlement of a dispute. The parties to a dispute may have invested time and money in an effort to come to a resolution via ADR, and if the process does not lead to any satisfactory outcome, the dispute might end up in court.
Note on limitation periods: If you decide to use a form of ADR, it is important to note any limitation periods in bringing your claim to court i.e. the period of time in which a party to a contract or a party who has suffered damages resulting from another party’s conduct, must bring the claim. Note that going through the ADR process will not extend the limitation period.
Useful limitation periods to note
Breach of Contract Limitation date: 6 years from the date the cause of action accrued (s.5 of the Limitation Act 1980).
Professional Negligence Limitation Date: if based on contract, 6 years from the date the breach of contract (s.5 of the Limitation Act 1980).
If based on the common law tort of negligence, 6 years from the date the claimant suffered a financial loss as a result of a negligent professional (s.2 of the Limitation Act 1980).
Useful resources
A list of certified ADR entities can be found on the Chartered Trading Standards Institute website at: https://www.tradingstandards.uk/consumer-help/adr-approved-bodies/
- Author: Gaia Freydefont
- Author: Gaia Freydefont
In partnership with:
DISCLAIMER
This article has been written by law students for the sole purpose of providing informative insight. The information in this article is intended for educational purposes only and does not constitute legal advice, nor should the information be used for the purpose of advising clients. You should seek independent legal advice before relying on any of the information provided in this article.
Sources
Centre for effective dispute resolution (cedr), 'Early Neutral Evaluation' (Commercial ADR) <https://www.cedr.com/alternative-dispute-resolution-processes/earlyneutralevaluation/> accessed 4 September 2022
Herbert smith freehills , 'Common ADR Processes - an overview' (ADR Practical Guide Series No 1) <https://sites-herbertsmithfreehills.vuturevx.com/31/7491/landing-pages/0883a-adr-practical-guides-no1-d5.pdf> accessed 4 September 2022
Herbert smith freehills , 'Adjudication ' (ADR Notes) <https://hsfnotes.com/adr/adjudication/> accessed 4 September 2022
Harper james llp, 'Types of alternative dispute resolution methods: choosing the best one for your business' (Alternative Dispute Resolution, 12 April 2021) <https://harperjames.co.uk/article/choosing-types-of-alternative-dispute-resolution-adr/> accessed 4 September 2022
Harper james llp, 'What is alternative dispute resolution?' (Alternative Dispute Resolution , 21 June 2021) <https://harperjames.co.uk/article/alternative-dispute-resolution/> accessed 4 September 2022
Lex law , 'Why is limitation in litigation important?' (Limitation Periods) <https://lexlaw.co.uk/limitation-periods-time-limits-bar-statute-expired-start-claim-litigation-legal-advice/> accessed 4 September 2022
Thomson reuters , 'Alternative dispute resolution (ADR)' (Practical Law) <https://uk.practicallaw.thomsonreuters.com/0-107-6391?transitionType=Default&contextData=(sc.Default)&firstPage=true> accessed 4 September 2022
Jmw solicitors llp, 'Conciliation' (Commercial Litigation and Dispute Resolution) <https://www.jmw.co.uk/services-for-business/commercial-litigation-dispute-resolution/alternative-dispute-resolution/conciliation> accessed 4 September 2022
