Alternative Dispute Resolution Notes

• ADR is a means of resolving disputes by using an independent third party, who may help the parties to reach their own solution but who cannot impose a solution. It is voluntary and without prejudice.

• The parties choose the process, and either of them can withdraw at any time before a solution is agreed.

• If either party does not like the proposed solution, he does not have to accept it.

• Litigation is not voluntary (except that the claimant chooses to issue the claim).

• Once the case is started, usually neither party can withdraw without paying the opponent’s costs.

• If the parties are unable to negotiate a settlement, the court will impose its own solution. The winner will enforce that solution.

• Arbitration is voluntary in the sense that the parties voluntarily entered into an arbitration agreement.

• However, when a relevant dispute arises, one party can force the other to arbitrate against his will because of the original contractual agreement to do so, provided it is enforceable.

• The arbitrator will impose a solution which the winner can enforce.

Advantages of ADR

• ADR procedures are confidential. Nothing said can be referred to in any later court proceedings unless all parties agree to waive confidentiality.

• Quicker and significantly cheaper than both arbitration and litigation – if ADR works, however, there will be a significant reduction in the amount of time the lawyers spend in preparing and presenting the case, which will save costs.

• Flexibility

  • parties can choose one of several forms of ADR

  • do not have to comply with any statutes or rules of court

  • no case law limiting what the parties or the neutral can do

• Ideal for cases where the parties to the dispute will have to continue to deal with each other – non-confrontational method of solving their problem makes it much easier for them to continue their relationship, since the solution is theirs and has not been imposed upon them.

Disadvantages of ADR

• It does not bind the parties to the procedure

  • no one can be forced to resolve a dispute by any form of ADR

  • if one party suggests ADR, the other parties do not have to agree; and even if the parties have started to resolve a dispute by ADR, most ADR agreements allow any party to withdraw at any stage before a solution

• The awards are not so easily enforceable – no equivalent of s..66 AA 1996 enabling ADR awards to be enforced as if they were court judgments

• Facts may not be fully disclosed – no equivalent of disclosure, so there is a risk that the parties may resolve the dispute without knowing all the facts

• ADR is not appropriate for all cases; e.g.

  • where the client needs an injunction or security for costs

  • where there is no dispute – i.e. simple debt collection matter

  • where the client needs a ruling on a point of law

• Parties to a dispute can always reach an ad hoc agreement, when the dispute arises, to use any form of ADR they see fit to solve their problems.

• It is more proactive, however, to agree in the original contract that, if any dispute does arise between the parties, they will resolve it by some specified form of ADR.

• Such contracts may not be effective, because a party cannot be forced to reach a consensual solution, but they do give the parties an opportunity to resolve their disputes peaceably.

• The parties should decide whether to have a clause requiring full disclosure.

• The drawback of such a clause is that the more information the parties have to provide to each other, the longer the proceedings may take and the more expensive they will be.

• The advantage is that it would be possible to set aside any settlement reached, as a result of ADR, on discovering that one of the parties had concealed vital information.

• To prevent...