Here’s the best way to describe alternative dispute resolution. Picture this: You loaned a friend a substantial amount of cash. They were down on their luck and were having a hard time trying to make ends meet.
So, they asked you for money to help get them through their rough patch. You obliged, especially because they promised to pay it back as soon as they got back on their feet. Besides, that’s what good friends do, right?
Fast forward to a year later, and your friend’s luck is now on the up and up. They used the funds you loaned them to start a business that has picked up steam. They moved out of the apartment they were living in, in the rough part of town, and got a house in an upscale, gated neighborhood community.
They look like they’re doing well for themselves. There’s only one problem.
Every time you bring up the loan they’re supposed to pay back, they keep giving you the run-around. And now, the amount they’re supposed to pay back seems to be in question too. You also feel like you’re entitled to some of the company’s shareholding since you technically funded the startup.
Lawsuit … or Something Else?
Going the court route seems like the natural solution to get this resolved. But, when you weigh the cost-benefit ratio of retaining a lawyer and the time and resources the whole litigation process would take, it just doesn’t add up.
You also, to some extent, want to maintain the friendship. Litigation would ruin that.
Alternative dispute resolution would be a better remedy and is more likely to yield a favorable outcome for both parties. Here’s everything you need to know about it.
What Is Alternative Dispute Resolution – An Overview
Alternative dispute resolution, or ADR for short, refers to the process of settling disputes between two or more parties without having to go through litigation.
While going through a court-ordained process is an option worth exploring, you also have to remember that it is an expensive, emotionally-draining, and time-consuming endeavor.
Keep in mind as well that not all disputes have a legal solution. Plus, in some instances, going through the court system can aggravate a problem and make it a bigger deal than it was initially.
There are several reasons why ADR, in general, is a better method of resolving disputes as opposed to litigation.
- Gives you more control over the entire process – ADR processes give both parties the chance to give their side of the story and share their experiences based on how they see it. This, in itself, allows all parties to shape the process and outcome.
- Helps to preserve relationships – An ADR process is a less adversarial way to resolve a dispute. All parties can reach an amicable solution and maintain or repair the existing relationships.
- Increases satisfaction – Trials have a winner and loser. The losing side will likely feel short-changed while the winner may not be entirely satisfied with the ruling. An ADR process helps all the parties find a win-win solution.
- Saves money – Lawsuits cost money. There are court costs, attorney fees, expert witness fees, and several other litigation-related costs to consider. You would only spend a small fraction of this amount if you were to go through an ADR process.
- Saves time – Taking a lawsuit to trial is a long-drawn-out affair. It could take a year or more, depending on the complexities involved. ADR, on the other hand, can resolve a dispute in a matter of months.
Alternative Dispute Resolution Methods
Dispute resolution can take one of several forms. The two most common ones are arbitration and mediation. Here’s what you need to know about them.
What Is Arbitration?
Arbitration is a private process where the feuding parties agree on a neutral third party to hear from the disputing sides, receive evidence, and make a decision on the issue in question.
Once the hearing is over, and both sides have presented their cases, the arbitrator issues an award. The arbitration process can take one of two forms.
- It can be binding, in which case, the decision is final. The court has the power to enforce the arbitration agreement that was reached.
- It can also be non-binding where the arbitrator’s award is only on an advisory capacity. The disputing parties would have to agree on it for the award to be final.
What Is Mediation?
Mediation is a private process that involves a neutral third party – the mediator – who helps the feuding parties discuss and work through their issues, to reach an amicable resolution.
You might ask – What is a mediation hearing then? It is the legal term for the mediation process in general. The terms mediation and mediation hearing both refer to the same thing.
In this ADR process, the aggrieved parties are given a chance to table their interests, discuss their points of view on the matter, and explore different ways to resolve the dispute.
So, what is the difference between mediation and arbitration? Well, it has everything to do with the power vested in the neutral third party. In arbitration, the arbitrator has the authority to make a binding/non-binding award on the dispute in question.
The mediator in a mediation process, on the other hand, doesn’t have this power. They can only guide the disputing parties through the ADR process and help them come to an agreement that is mutually acceptable to all involved.
Mediators establish the ground rules and set the agenda for the session. The process may either be joint, with all the disputing parties present, or separate, in which case the mediator would have to shuttle back and forth between all parties.
A Better Alternative for Dispute Resolution
Arbitration or mediation are alternative ways to resolve disputes without having to go through a court litigation process. It’s faster, cheaper, and more likely to yield a favorable outcome by the end of the process.
Not all disputes have to be heard by a judge. If you can handle it yourselves, you’re more likely to get a better outcome.