Whenever business disputes arise, owners may experience financial losses, damage to reputation, strained relationships with parties, and even emotional turmoil due to drawn-out legal processes.
Parties who choose to litigate quickly realize how cost-intensive the process can be, not to mention the mental and emotional drain that comes with court procedures.
Luckily, exploring alternative dispute resolution methods can help businesses save time and money and maintain relationships.
Understanding Alternative Dispute Resolution
Alternative dispute resolution, or ADR, refers to any process of resolving a dispute outside of the judicial process.
Common ADR methods include:
- Mediation
- Arbitration
- Other techniques, including med-arb, early neutral evaluation, and mini-trials
Mediation
Mediation involves a neutral third party who helps disputants hammer out a voluntary, sustainable, and non-binding resolution. Mediators help resolve disputes by finding information that parties initially withheld from each other, overcoming the parties’ communication resistance, and brainstorming options for finding a mutually agreeable resolution.
Arbitration
In arbitration, disputing parties vest authority in a neutral third party to listen to their case and issue a decision. An arbitrator acts like a judge during a trial and often specializes in the law and subject matter of the issue. They determine the evidence to be introduced, listen as each party argues its case, and render a binding decision.
Med-Arb
Mediation-arbitration is a hybrid ADR technique that involves a neutral mediator. If mediation fails, the mediator arbitrates by listening to both parties’ testimonies and renders a decision. Disputing parties can choose this ADR method when they need a negotiated but quick resolution.
Early Neutral Evaluation
An early neutral evaluation is a confidential and non-binding process often done early in a lawsuit. Parties to a dispute choose an expert evaluator, or the court appoints one. The evaluator meets with both parties and their attorneys and helps them simplify their case, for instance, by discarding trivialities. They also give disputants more insights into their cases to help them adopt reasonable settlement positions.
Mini-trials
A mini-trial refers to a structured, non-binding form of negotiated settlement. Each party to a dispute presents its case as they would in a regular trial, with the decision-makers listening to each side’s case’s facts and legal merits. Ideally, decision-makers can be in a better position to resolve their differences when they fully understand the strengths and weaknesses of their respective cases,
Advantages of ADR Over Litigation
ADR methods are cost-effective and time-efficient. Also, ADR procedures can protect businesses from adverse publicity and reputation damage that may arise from court cases.
Even more important for businesses, ADR can help preserve relationships. As Ryan Clement of B&T Legal Group states, “ADR procedures are generally less adversarial or confrontational than court proceedings, which is an essential consideration when the parties understand that they need to have an ongoing relationship.”
Most importantly, ADR procedures tend to be more flexible in terms of the outcome; disputants have greater control over the process and outcome, unlike in litigation.
Disadvantages of ADR
Some ADR methods, such as arbitration, often raise issues of fairness, especially when the disputing parties possess unequal power. Others, like mediation, may be ineffective if disputants are unwilling to cooperate. Also, ADR procedures don’t always guarantee a mutually agreeable outcome.
Choosing the Right ADR Method for Your Business Dispute
Usually, the nature and complexity of the dispute will guide the choice of your ADR method. Mediation often suffices in the case of small disputes. For more complex cases, parties may need to involve a neutral third party, such as an arbitrator.
When it comes to the relationship of the disputing parties, mediation works best when the parties still have a positive working relationship. Conversely, parties with strained relationships would be better off trying arbitration.
The parties’ desired outcome and timeline also influence the choice of the ADR method. Disputants usually opt for mediation if they aim for a mutually beneficial solution that preserves their business relationships. However, arbitration is more appropriate where one party seeks a binding decision.
Parties to a dispute also consider a dispute resolution procedure’s speed, efficiency, and structure before settling for one. Mediation is preferred where parties seek a swift resolution. Arbitration, on the other hand, offers a more structured way of resolving a dispute.
Navigating the ADR Process
You’ve explored your ADR options. You’ve set your mind on an ADR method.
Next, you need to start by selecting a neutral third party. Ideally, you should work with a skillful and ethical neutral who satisfies disputants’ reasonable expectations.
What follows is preparing for your ADR session, which you can do by:
- Being clear with your interests, priorities, and preferred solution to the dispute
- Organizing your case presentation
- Anticipating counterarguments from the other party and preparing responses
Disputants should always engage sincerely and cooperatively in the resolution process by:
- Providing truthful information
- Communicating openly
- Respecting the integrity and neutrality of the process
- Abiding by any agreements.
Finally, parties should be willing to compromise to craft a mutually beneficial resolution.
Colorado Resources for Alternative Dispute Resolution
Resolving a dispute can be daunting, especially if business owners don’t know where to look for help.
- Checking out online resources such as the Colorado Bar Association ADR Section would be a great place to start.
- Reaching out to mediation and arbitration services in the state could further help you familiarize yourself with ADR processes.
- Online dispute resolution platforms may also be vital sources of information on ADR.
Key Takeaways
ADR methods are cost-effective and time-efficient. They also allow businesses to have greater control over outcomes in disputes and preserve business relationships – all of which makes them more desirable than litigation.
However, keep in mind that ADR isn’t suitable for all business disputes. Before embarking on a business dispute resolution journey, it would be wise first to seek the guidance of a business dispute attorney. That way, you can understand the scope of your dispute and ultimately find the best solution.
Resources
1. Using Alternative Dispute Resolution Techniques | GSA
2. Colorado Academy of Mediators & Arbitrators – An Introduction to ADR (colmediators.org)
3. Alternative Dispute Resolution – Fundamentals of Business Law (pressbooks.pub)4. Alternative Dispute Resolution: Why It Doesn’t Work and Why It Does (hbr.org)