What Do the Different Types of ADR Entail?
No business wants to become involved in disputes, but very few can avoid it forever. Litigation is sometimes necessary. However, it is often desirable to avoid court for many reasons: information used in court may become public record, trials can be costly, lengthy legal proceedings distract from doing business and courts sometimes make surprising rulings.
Often, parties find advantages to participating in alternative dispute resolution. Benefits to ADR include faster resolution, more control over the process and outcome, and privacy for all parties involved. The most common forms of ADR are arbitration and mediation, but hybrid solutions also exist.
In arbitration, a neutral third party renders a decision after hearing all sides. Parts of this process are similar to a trial. Both sides make opening statements and present evidence. After careful consideration, the arbitrator presents a solution. If disputing parties agreed to binding arbitration, this decision is as final as a judges ruling. In nonbinding arbitration, the parties involved can agree to the verdict or proceed with traditional litigation. Even if the case ends up in court, arbitration can be faster than the conventional legal process.
Mediation is similar to arbitration, in that it involves a knowledgeable, neutral third party. However, unlike an arbitrator, a mediator does not render a decision. Rather, the mediator helps disputing parties come to their own agreement. This process is less like a trial and more like a negotiation. The mediator sets ground rules and allows each side to provide information and proposed solutions. If the opposing parties are able to resolve the dispute, the mediator can formalize the agreement with a written contract.
Conflicts often involve multiple issues. An experienced third party may be able to break down a dispute into several discrete parts and handle each aspect differently. This allows parties to resolve the less contentious aspects quickly and away from public scrutiny, with mediation or arbitration. Meanwhile, parties do not need to compromise on the more problematic aspects of the dispute, which they can pursue in court.