| ADR | Litigation | Arbitration |
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. |
| The Independent Third Party The independence of the third party is an essential feature of ADR, as is the fact that he cannot impose a solution. As the parties know that he is independent, they are more likely to trust him and be open with him. They will not want to be seen as an obstacle towards settlement and are likely to be more accommodating. He may therefore be able to defuse the dispute and make settlement more likely. A further advantage is that the independent third party not only will be trained to act as a neutral, but also should have any necessary industry knowledge required to understand the dispute. The third party can help the parties to settle their dispute in another way. A commercially-minded neutral may come up with ideas that the parties might not have thought of, and which solve the problem without either side losing face. |
| 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 |
| Using ADR |
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. | |
| Disclosure Obligations | Confidentiality | Other Matters |
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 vexatious applications to set aside any settlement, it might be wise to stipulate in the disclosure clause that a settlement can be challenged only for fundamental non-disclosure of matters which would significantly have affected the result of the ADR process. | A confidentiality clause in the agreement will encourage full disclosure. The mediator is always under a duty of confidentiality, but the parties will be more likely to disclose information to each other if they know that the other party has agreed not to divulge the information to anyone else. | An ADR agreement should explain how the mediator or other arbiter will be appointed and specify the procedure he should follow. It should also specify that the representatives who attend any ADR process must have full authority to settle the dispute there and then. |
If the parties are commercial rivals, who need to keep their methods secret from each other,
disclosure and confidentiality clauses are pointless. |
| Choosing ADR A solicitor should discuss with the client the possible uses of ADR whenever a dispute arises in a commercial matter. If the client is willing (or has already agreed) to use ADR, it should be used unless it is obviously inappropriate (e.g. because an injunction is required, or the other party cannot be trusted to comply with an award or to cooperate in the process). **Always check for an arbitration clause before advising.** |
