It is now common practice in commercial contracts to include a dispute resolution clause instructing parties on how to proceed in the event something goes wrong. More often than not, that dispute resolution clause refers to a form of alternative dispute resolution (ADR).
But what is ADR, and how can you use it to resolve your dispute successfully?
ADR refers to resolving a dispute or issues between parties through an impartial third party. It aims to offer an alternative to the judicial process, that is, simply proceeding through Court.
There are several ADR processes, each approaching dispute resolution slightly differently. Below, we explain the three main types of ADR processes as well as the benefits of ADR.
1. Facilitative ADR
This describes ADR processes like mediation, conciliation, facilitation and facilitated negotiation. The most common facilitative ADR process is mediation. It typically involves a third party assisting the parties involved in a dispute or disagreement to identify the issues, develop options and to try and strike an agreement.
Notably, mediation is a voluntary process entered into by the parties. The mediator cannot impose any settlement, and it is strictly up to the parties to reach an agreement. The mediator’s role is to provide a framework to allow the parties to try and resolve the differences between them.
2. Advisory ADR
Common advisory ADR processes are conciliation, expert appraisal and case appraisal. As the name suggests, advisory ADR processes involve the third party considering the material before them and providing advice to the parties as to the facts, the appropriate law and how the parties may achieve them.
3. Determinative ADR
Probably the closest ADR process to a judicial decision (i.e. Court), determinative ADR includes arbitration, private judging and expert determination. In these processes, the third party uses more ‘formal techniques’.
It’s not uncommon for parties to provide statements and evidence, and the third party (typically an expert or an arbitrator) determines an award.
Benefits of ADR
ADR is advantageous for many reasons, including:
- The process is generally faster than going through the Court process. In some instances, a dispute can be resolved in a matter of weeks or months, as opposed to the months or even years that court matters can take.
- It’s often cheaper than litigation.
- The processes give parties an opportunity to ‘have their day in court’ and returns control back to the parties who focus on the issues important to them.
- Settlement between the parties can be flexible and involve different remedies, as opposed to court where remedies are typically a monetary award.
- The dispute can remain private between the parties.
- Positive results for parties and a high satisfaction rate.
- Preserves relationships between parties, particularly mediation where there isn’t a ‘winner’ and ‘loser’ but rather, a mutually negotiated resolution.
ADR won’t be suitable for every dispute between parties, but it’s worth exploring ADR options and is in some instances, required by the dispute resolution clause.
Questions about including a dispute resolution clause in your commercial contract, or exploring ADR? Let our disputes lawyers know.