A General Guide to Alternative Dispute Resolution (“ADR”)

What is Alternative Dispute Resolution? Is it right for your problem? What types of ADR exist? How are they used?

What is Alternative Dispute Resolution?

Alternative Dispute Resolution (ADR) is any method of sorting out a dispute without going to court.

Discussing the problem with the other person involved and trying to agree a compromise is a type of ADR – and often the best first step!

Often, however, reaching an agreement will be helped by the intervention of an independent and neutral person, trusted by the people in dispute.

Sometimes ADR is referred to as Mediation. This is not strictly correct as ADR can involve more ways of dealing with a dispute than just mediation. See below for more details.

ADR has been around for 30 years or more – I dealt with my first ADR case in 1981. It is only recently, however, that it has been widely accepted by lawyers, the public and the courts.

It is now actively encouraged by the courts in many countries around the world.

When is Alternative Dispute Resolution used?

It is used in many circumstances, including:

  • Business dispute resolution. For example:
    • A restaurant owner who is far behind on his bills to the wine merchant
    • A graphic designer whose client won’t pay unless she does extra work
    • Two businesses who disagree on the terms of a previously-agreed partnership
  • Divorce mediation
  • Other family dispute resolution
  • Disagreements between employees, or between an employer and an employee, within a workplace

 

Is Alternative Dispute Resolution a first step before going to court?

No. ADR should be an alternative to going to court.

How does Alternative Dispute Resolution differ from going to court?

There are many ways. It is usually:

  • Less formal
  • More flexible
  • Faster
  • Cheaper
  • Less stressful
  • More likely to leave the people in dispute as friends or business associates

How does Alternative Dispute Resolution work?

ADR requires the two people involved in the dispute to agree to it being dealt with in a particular way.

This can often be done in the initial contract between them or it can be agreed once the dispute has arisen.

There are no cases where ADR cannot be used – though there are some where it is not possible to prevent a person who does not accept the outcome from later taking the case to the courts.

How fast is Alternative Dispute Resolution?

Usually a lot faster than the courts!

The timescale depends upon the complexity of the dispute but my firm’s target, in a simple dispute, was to deal with the whole ADR within four weeks. In more complicated cases we worked to a longer timeframe of about three months.

How cheap is Alternative Dispute Resolution?

Usually, a lot cheaper than going to court!

The cost will, naturally, vary with the complexity of the case and so the amount of time it takes to deal with it.  .

What types of Alternative Dispute Resolution exist?

The range is almost limitless as, in each case, the process can be tailored to the precise needs of the parties.

However, there are several basis models and one of these often works best:

Arbitration

This was the starting point for ADR.  An independent person, appointed by the parties, studies the dispute, listens to the parties and any witnesses and decides about who is in the right.

The arbitrator is given the power to make decisions which are legally binding on the parties to the dispute

In many ways, this is similar to the process of going to court, but it is generally less costly, more flexible and much less expensive.

It is also, usually, entirely confidential.

Example arbitration case

Homeowner and builder disagree as to whether the £15,000 pool added to the homeowner’s property in Spain has been built to a satisfactory standard.

They decide to appoint an independent arbitrator and choose John Howell & Co.

John Howell & Co asks the parties for a written initial statement of their case, limited to four typed pages of A4. They are also asked to produce copies of the construction contract, the building licence and any other relevant documents, including any correspondence between them.

John Howell & Co decides that a technical report is needed and obtains one.

John Howell & Co holds a ‘hearing’ of the arbitration. By agreement between the parties, this is done by telephone conference call. The hearing is limited to 2 hours.

At the hearing both parties can present their case and will and answer questions from each other and from the arbitrator.

The arbitrator issues a written decision about the case.

Likely Cost: £1,500 (6 hours of the arbitrator’s time) + the expert’s report. The likely cost is paid equally by the parties at the beginning of the arbitration process and the decision as to who pays the final cost is part of the arbitration.

Likely timescale: 6 weeks.

Conciliation

Conciliation is the process whereby an independent person brings the parties together and helps them conduct discussions with a view to reaching a mutually acceptable settlement of their dispute.

The conciliator does not make a decision in the case.  He or she is simply there to help the parties reach their own decision.  In some cases he or she may also help by, for example, drawing to their attention certain aspects of the case or certain possible solutions that might not have occurred to them.

John Howell & Co can provide conciliation services.

Mediation

Mediation is a logical extension of conciliation, where the mediator takes a much more active role in helping the parties reach an agreement that is mutually acceptable.

The process still depends upon the consent of the parties.  The mediator cannot impose a solution upon them.

The mediator helps the parties by arranging a meeting in a neutral location and then helps them:

  • Understand the nature and cause of their problem
  • Explore the relative strengths and weaknesses of their positions (legally and in business terms)
  • Work out potential solutions to their problem – often by suggesting mechanisms that might not have occurred to them
  • Attempt to build sufficient trust to allow a settlement of the dispute and, in many cases, an ongoing commercial relationship

The end result of a successful mediation is an agreement which both parties can live with.  This is then documented by the mediator.

Mediation is now the most common form of ADR – though my favourite is Mediation/Arbitration (see below).

Example mediation case

Developer and estate agent in dispute over whether there should be any deductions from the £50,000 owed by way of commission on sales of property in Bulgaria.

They decide to appoint a mediator and choose John Howell & Co.

John Howell & Co asks the parties for a written statement of their case, limited to two typed pages of A4. They are also asked to produce copies of their contract and any other relevant documents, including any correspondence between them.

John Howell & Co discusses the case, individually, with each party to clarify the key issues.

John Howell & Co holds a meeting to explore the problem and possible ways of settlement. The meeting is scheduled for 4 hours.

At the meeting a satisfactory compromise is agreed.

Likely Cost: £2,500 (10 hours of the arbitrator’s time). The likely cost is paid equally by the parties at the beginning of the arbitration process and the decision as to who pays the final cost is part of the agreed settlement.

Likely timescale: 4 weeks.

Mediation/Arbitration

This is my preferred solution in most cases, as it is guaranteed to reach a result.

It combines all of the features of mediation (see above) with the big stick that, if the parties can’t reach an agreement, the mediator magically becomes an arbitrator (see above) and can impose a decision upon them.

Neutral Evaluation

This is a service where a neutral person, preferably an expert in the field, hears the arguments put forward by both parties to the dispute and then gives an opinion as to what would be likely to happen if the case were to go to either court or arbitration.

This can, obviously, be of great assistance in helping the parties reach a realistic agreement.

What happens if I ‘lose’ arbitration or mediation?

In most cases, the outcome of the ADR will be final.

In some cases, there may be an inbuilt (and equally quick and simple) appeal process.

In a few cases (for example, disputes relating to the title of land) the local law of the country where the dispute is located may well reserve the right, in all cases, to bring a case before the local courts if you are dissatisfied with the ADR.

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