A Beginner's Guide to Alternative Dispute Resolution
The American Arbitration Association a public-service, not-for-profit organization, has been the leading advocate of alternative dispute resolution since 1926.9 min read
The American Arbitration Association a public-service, not-for-profit organization, has been the leading advocate of alternative dispute resolution since 1926. ADR (Alternative Dispute Resolution) is a term that refers to a variety of techniques for resolving disputes without litigation. In keeping with its mission, the AAA is in the forefront of efforts to create alternative systems that respond to the needs of parties involved in disputes.
Two of the better known methods of ADR are mediation (in which the parties to a dispute reach a voluntary settlement with the help of a skilled facilitator) and arbitration (in which the parties choose a disinterested neutral to whom to present their case for a legally binding ruling). Many specialized rules and procedures have been developed in cooperation with interested organizations and industries to facilitate these dispute resolution processes.
Brief descriptions of some of ADR systems follow.
Arbitration is submission of a dispute to one or more impartial persons for a final and binding decision. The arbitrators may be attorneys or business persons with expertise in a particular field. The parties control the range of issues to be resolved by arbitration, the scope of the relief to be awarded, and many of the procedural aspects of the process. Arbitration is less formal than a court trial. The hearing is private. Few awards are reviewed by the courts because the parties have agreed to be bound by the decision of their arbitrator. In some cases, it is prearranged that the award will only be advisory.
Mediation involves an attempt by the parties to resolve their dispute with the aid of a neutral third party. The mediator's role is advisory. The mediator may offer suggestions but resolution of the dispute rests with the parties themselves. Mediation proceedings are confidential and private.
What do these techniques have in common? Control. Think of dispute resolution as a continuum with maximum control at one end and minimum control at the other. An example of maximum control might be thought of as any relationship in which disputes never arise (not a very common occurrence). Minimum control would be a solution that is imposed upon the parties to a dispute by the public courts. ADR consists of every alternative in between.
The ADR band within that continuum is marked by varying degrees of party control over the outcome. In negotiation, the parties achieve an agreeable outcome without the need for the involvement of any neutral party. In dispute avoidance strategies, like partnering, a neutral is involved to help parties anticipate likely sources of future disputes in order to prevent them. In mediation, a neutral party is again involved, this time after a dispute has arisen. The mediator is called in to help facilitate the parties' own settlement process. In arbitration, the neutral provides the parties with a binding ruling after hearing each side argue its case.
Although the degree of control over the outcome varies from one method to another, in all methods the parties control the process. They will agree to the procedures and to the individuals who will assist in the dispute resolution process. The parties can agree to fashion a process or combination of processes especially well suited to the dispute between them.
ARBITRATION AND THE LAW
Many of the cases that the AAA handles stem from the inclusion of an arbitration clause in a contract between the parties. Rules applicable to specific types of disputes are available from the AAA free of charge.
Arbitration awards are legally binding and enforceable in most jurisdictions. The US Arbitration Act provides for enforcement of arbitration agreements and awards in interstate-commerce and international contracts.
Most persons do not want to become involved in lawsuits. Litigation can entail lengthy delays, high costs, unwanted publicity, and ill will. Appeals might be filed, causing further delay, after a decision has been rendered. Arbitration, on the other hand, is usually faster and less expensive, and it is also conclusive.
Based on nearly 70 years of experience, the AAA processes each case so that it moves smoothly from initiation to resolution. If problems arise, a case administrator will assist the participants. Each dispute is handled with confidentiality and integrity. Professionalism is the key to the AAA's services, which explains why so many parties bring cases to the AAA.
SOME OF THE ADVANTAGES OF ARBITRATION INCLUDE:
SPEED. Despite the best efforts of our court systems to improve processing time of civil disputes, the burdens of criminal cases, tight budgets, and other factors still create delays of years to bring a case to court in many jurisdictions. Appeals extend the time required to reach a final result still further.
In ADR there is no "docket" - no line in which to wait for your day in court. The only elements governing speed are the eagerness of the parties to end the dispute and the complexity of the cases to be resolved. Most mediations processed by the American Arbitration Association are completed in a few weeks; most arbitrations are decided within a few months of filing. The Association offers expedited services for disputes where the parties agree that speed is of the essence or where the claims are not large or complex.
CHOICE AND EXPERTISE OF IMPARTIAL NEUTRALS: Parties who resolve their disputes through ADR enjoy the assistance of neutrals who are already expert in the subject matter of their disputes. The AAA's panel consists of expert and knowledgeable neutrals from many professions and industries.
For example, parties to a construction industry dispute might select an architect, a contractor, or a lawyer with a lifelong practice in construction law to serve as their mediator or arbitrator. The "subject matter expertise" of the neutral reduces the time typically required to attempt to educate a judge or jury about the technical elements of a dispute, and raises the confidence level of the parties that the result of the process will be well-informed. The Association maintains a panel of more than 20,000 individuals with a expertise in a broad array of businesses, technology, insurance, labor relations, and many other fields.
INFORMALITY and FLEXIBILITY: Alternative dispute resolution is conducted in a manner that is more business-like than litigation. Each party tells its side of the story to the arbitrator in an atmosphere that is less formal than a court proceeding.
For example, where a court must apply complex rules of evidence, and the decision of the trial judge can be overturned for admitting evidence that should have been excluded, arbitrators have a duty under law to admit any evidence which might be relevant. Arbitrators will of course discount questionable testimony and evidence, such as obvious hearsay, but the relaxed rules of evidence do allow each side to present their case in a more informal manner. The parties better understand the process and feel confident that they had the opportunity to present their whole story.
Since the parties control the process, they enjoy tremendous flexibility.Hearings might take place at the site of the dispute or during evening hours. Testimony might be taken by telephone.
The Association even offers case administration via private online computer chat rooms on Lexis Counsel Connect.
PRIVACY: Arbitration, Mediation and other forms of ADR are not open to public scrutiny like disputes settled in court. The hearings and awards are kept private and confidential, which helps to preserve positive working relationships.
ECONOMY Time saved is money saved. ADR processes are designed to be faster, more streamlined, and more informal than litigation. Many of the costly procedures associated with formal court processes, such as filing appeals and motions can be eliminated.
FINALITY: AAA arbitration awards are final, binding, and legally enforceable, subject only to limited review by the courts. The court does not second guess the arbitrator's decision as to the facts or the law. Of course, parties may also agree in advance that awards will be advisory only.
WHO ARE THE NEUTRALS?
More than 20,000 individuals in diverse fields and professions are listed on the AAA's national panel of arbitrators and mediators. These neutrals represent a broad spectrum of expertise. Many are nominated to the panel by leaders in their industry or profession. Others are invited directly by the AAA.
Participation by business executives and professionals as arbitrators is vital to the system. Because of their specialized knowledge and experience, the parties are not required to spend time educating the arbitrator about relevant industry practices and customs. In labor- management relations, impartial experts arbitrate disputes arising out of the application and interpretation of collective bargaining agreements.
Biographies of neutrals, describing their occupations, qualifications, and availability, are maintained in the AAA's computerized network for submission to the parties.
HOW IT BEGAN
The movement toward ADR in the United States began after World War I, and reached its first milestone with the passage of the first modern arbitration statute in New York in the mid 1920's. Since then the movement has grown steadily, achieving explosive growth since 1980.
Today, ADR methods have achieved broad acceptance by the America's business, labor-management, and legal communities. The annual ADR caseload processed by the American Arbitration Association alone has surpassed 60,000 cases--a figure equivalent to one fourth of the cases now handled each year in the Federal Courts. In fact, our courts have recognized the value of ADR. Today in many state and federal jurisdictions around the country there are mandatory and voluntary court-sponsored ADR programs to divert cases which might be settled without litigation.
WHO USES ALTERNATIVE DISPUTE RESOLUTION?
Virtually every sort of dispute that can be litigated can be mediated or arbitrated. The American Arbitration Association's caseload includes disputes involving business, insurance, labor relations, environment, public policy, family, securities, technology, employment, international trade, and many other areas.
Business controversies arise from millions of commercial contracts containing clauses that provide for arbitration of disputes. Even if a clause has not been included in a contract, parties can agree to use an alternative dispute resolution method administered by the AAA.
The construction industry is a major user of the services of the AAA. The AAA's Construction Industry Arbitration Rules are designated in most building contracts. The industry is an active participant in alternative dispute resolution through the National Construction Dispute Resolution Committee (NCDRC), which is composed of representatives from 14 major industry organizations. Claims involve cost overruns, changes in specifications, and delays.
In international commerce, many firms incorporate arbitration clauses in their contracts to avoid litigating in a foreign court.
The Association a source of information on international arbitration. In addition to administering such cases under its own International Arbitration Rules, the AAA will administer under any other system selected by the parties.
The AAA promotes New York City as an attractive site for international arbitration. On the West Coast, the AAA's Asia/Pacific Center for the Resolution of International Business Disputes provides information on international commercial arbitration in the Pacific Rim.
Labor-management disputes can also be resolved using the Association's procedures. Labor contracts usually contain provisions calling for the arbitration of grievances that cannot be settled. The disputes arbitrated involve issues in such areas as discipline, discharge, demotion, promotion, productivity, pensions, and seniority.
Insurance claims are also administered by the AAA under its arbitration and mediation rules.
Claims arising out of automobile accidents involving uninsured or underinsured motorists can be filed under the AAA's accident claims rules. Uninsured-motorist coverage protects motorists against financial loss from personal injuries inflicted by uninsured drivers. No-fault insurance claims can be arbitrated in those states-New York, New Jersey, Minnesota, Hawaii, and Oregon-that have no-fault legislation providing for arbitration of unresolved disputes regarding personal injuries.
Securities arbitration is an area of steady case growth. Disputes arising out of contracts between stockbrokers and customers are generally handled under the Association's Securities Arbitration Rules.
An important feature of these rules is the requirement that the majority of arbitrators on a panel be people who are not affiliated with the securities industries.
Trade associations and professional societies in many specialized fields use the AAA's services to resolve disputes. Procedures and rules are developed to meet their needs. Panels of neutrals who are familiar with the field and the technical questions involved are recruited and trained. The Arbitration Rules of the General Arbitration Council of the Textile and Apparel Industries, for example, provide a standard procedure for settling disputes involving cloth and yarn mills, converters, dyers and garment manufacturers.
For a list of other specialized rules and procedures, contact your nearest regional office.
WHERE CAN I GET MORE INFORMATION?
In a sometimes too litigious society, it makes sense to recognize the potential for disputes in every relationship and to develop a strategy to avoid disputes by anticipating how they might arise, and to plan for the most effective methods to resolve conflicts once they occur. A simple one sentence ADR clause in your agreements can ensure that your disputes will stay out of court.
To learn more about how ADR might benefit your business or law practice, the Association invites you to call, visit, or send e-mail to one of its nearby regional offices.
This file was prepared from material copyrighted by, and is posted with the permission of, the American Arbitration Association. For more info visit the AAA's web site at https://www.adr.org