ADR Pros and Cons

Alternative Dispute Resolution (ADR) is an approach that allows people or business entities to settle their disputes privately, without litigation. Sometimes called mediation or arbitration, it is a much less formal court process, and it will generally save you a lot of money and time.

In a perfect world, every conflict can be resolved privately, equitably, and without a lot of fuss and expense. However, this isn’t always the case. When disputes are more complicated or if they are emotionally-charged, they are often better heard in court, where third-parties oversee the proceedings, and the letter of the law prevails.

As with every legal decision, the decision to proceed with ADR merits some thought. Most major corporations write ADR into their contracts, so it’s likely that you, as an entrepreneur, will need to consider it at some point.

Types of ADR

There are three types of ADR. Independent negotiation, mediation, and arbitration.

Independent Negotiation

Independent negotiation is probably the most common and the least formal form of dispute resolution. This is how most processes begin, and if both parties can come to an agreement, much time and money can be saved by all parties. Both sides come together to attempt to work out their differences.

Independent negotiation pros:

• Inexpensive

• Expedient

• Private

• Low risk

• Usually, working relationships can continue

Independent negotiation cons:

• No guarantees of good faith

• Can be used as a delay tactic

• If power is unbalanced, there might be no way to correct

• Lack of neutrality

Mediation

You might find yourself in mediation if it is a contractual requirement. In some cases, it is a mandatory step before litigation.

The two parties meet before a neutral third-party in an attempt to find a resolution. If the mediation is binding, the decision of the mediator must be accepted. If it is non-binding, the situation is open to escalation.

Mediation pros:

• Less expensive than a trial

• More private

• Faster than going to court

• You can choose a mediator who has expertise in your issue

• A neutral party helps to keep emotions under control

Mediation cons:

• Can be expensive if the dispute could have been settled another way

• Your choice of mediator could be detrimental to the process

• The rights of each party might not be sufficiently safeguarded

• There are no legal precedents created

Arbitration

In most cases, arbitration is legally binding. Whether it is or not is dictated by the contract in question. Because of the expense of arbitration, it doesn’t make sense to agree to a non-binding procedure when litigation might be the next step.

Arbitration pros:

• Confidentiality

• Faster resolution than litigation

• The parties are in control of the proceedings

• More formal than mediation

• Parties can choose an expert to be the arbitrator

Arbitration cons:

• The outcome often hinges on the quality and expertise of the arbitrator

• If the result is unsatisfactory, it may not be disputed

• If one party is uncooperative, it can extend the process at great expense

• No legal precedents are set to avoid repeat incidents

Ultimately, unless ADR is mandated in a contract, the decision on how to proceed is yours. If you are unsure, obtaining legal counsel is always a good idea. Reach out to ElawKSA today to access the legal advice you need to move forward.