What is ADR?

What is ADR?

Alternative Dispute Resolution

Introduction to ADR

Popular television shows depict trials as the climatic event – an intellectual sparring of wit and strategy – and the whole dispute is over within an hour. In reality, legal disputes drag over months or years before a trial may take place. Preparation can be tedious and insipid, while 95% of lawsuits will settle and never even go to trial, which has led some lawyers to write about the phenomenon of the “Vanishing Trial”.[1]

Most lawsuits today are resolved through Alternative Dispute Resolution (ADR). ADR refers to various processes to resolve disputes outside of the formal public courts system. The main forms of ADR are negotiation, mediation, and arbitration, although there are also hybrid processes such as the minitrial, med-arb, and early neutral evaluation.

A Spectrum of ADR Options

ADR options are organized along a spectrum, from negotiation, which is the least formal process, to arbitration, which is the most formal process and therefore, the most similar to a trial. The more informal the process, the more control the parties have. In more formal processes such as arbitration, the parties have less control because the outcome is determined by a third party. Mediation falls somewhere in between. These processes are by no means mutually exclusive, and parties may pursue these options in sequence, or even at the same time.

Negotiation is the most informal process and has the fewest rules and procedures. Parties may negotiate directly with each other, or through their lawyers. Mediation involves a neutral third-party who does not impose a solution but helps the parties reach a resolution by facilitating more structured negotiations. The parties retain control over the final agreement. Arbitration is the most formal process where a third party adjudicator has the power to impose a binding solution on the parties after hearing each party’s position.

Key Differences Between ADR and the Traditional Trial

Trials are open, so all members of the public, including journalists, are welcome to attend (with a few exceptions in special cases). Furthermore, trial decisions are published and establish a precedent for future cases. In contrast, ADR is private and the result remains confidential between the parties.

The courts system is a formal process with rules of civil procedure and statutory deadlines. ADR is crafted to suit the needs and demands of the parties, and may take many different forms.

Trials are adversarial, where each party advocates that the law favours its position, and the judge ultimately rules in favour of one party. Although in ADR each party is seeking to maximize personal gains, the parties accomplish this through cooperation and compromise, rather than a winner-takes-all situation. Especially in non-adjudicative options such as mediation, “a mediator can often persuade the parties to resolve their dispute without determining which of their positions is ‘right’”. [2] Because ADR is less adversarial, it is better suited when parties want to continue their relationship beyond the present dispute.

Advantages of ADR

Some of the advantages that make ADR appealing are:

1.     Cost

The cost of a trial has made it prohibitive. In 1995, it cost each party over $40,000 in legal fees to go to trial, and in 2011, this estimate was close to $60,000.[3] This astronomical cost is out of reach for many people and even corporations, and is often disproportionate to the amount in dispute. Moreover, since the losing party is often required to pay part of the winning party’s legal fees on top of its own, this penalty serves as a looming risk and a deterrent for parties to go to trial.

The cost of resolving a dispute informally through ADR is much lower, and parties have more control over the process and the resulting legal fees. For smaller disputes, parties may choose less costly mediators, but select specialized mediators at a higher price for more complex disputes. A dispute over a $100 million may be resolved in a single day, negating the need to spend months of expensive preparation for a trial.

2.     Speed and efficiency

A backlog in the court system has meant when litigants request a trial date, they have to wait one or two years from that point, and even longer in some jurisdictions. Even after trial, parties may wait weeks or months for a decision to be released.

In contrast, a mediation or arbitration can be scheduled within a few months, and can be resolved fairly quickly. While courts usually discourage forum-shopping, which is choosing one court over another, ADR allows the parties to choose a decision-maker who best fits their schedule and needs. In mediation, the mediator does not make a decision, rather helping the parties come to a solution collaboratively. ADR may also remove the need for pre-trial procedures such as examinations-for-discovery and motions, which may be time-consuming and cause further delays. Instead, if there is a dispute about evidence or submissions, the parties may informally negotiate a mutually acceptable solution.

3.     Customizing the process

ADR is flexible to become whatever the parties agree to make of it. Parties may set their own procedures and decide which law applies. Most courts have judges who are generalists and must decide on cases ranging from criminal convictions to complex shareholder disputes – although there a few exceptions for Family Law Court or the Commercial List in Toronto. But in ADR, parties may choose a decision-maker who is a recognized expert in the area of the dispute.

Parties are free to use whichever form of ADR best matches their priorities. Parties may choose to air their grievances, or to never speak to each other except through a neutral third-party. They can choose whether their priority is to reconcile the parties in conflict or simply to reach a binding decision for the dispute at hand. Moreover, the parties can tailor the resolution to their own needs. Unlike court decisions, which often grant judgment in the form of a monetary payment, in ADR the parties have a greater range of options. Sometimes an aggrieved party may be simply seeking an apology or an acknowledgement that his/her actions were right. In other cases, one party may want to maintain the relationship while having a discrete issue addressed, which is easier to accomplish in an informal ADR atmosphere than in an adversarial process that pitches one party against another.

4.     Privacy and maintaining relationships

Another advantage of using ADR is that the situation giving rise to the dispute, the conflict resolution process, and the outcome all remain private and confidential between the parties and any decision maker. Typically, the decision-maker will require all participants to sign a confidentiality agreement. Privacy may be an important factor when there are claims that could significantly harm one party’s image and reputation, e.g. allegations of fraud, sexual harassment. With a private ADR resolution, the parties avoid being publicly convicted and may even agree to a no-fault settlement.

The ability to privately and quietly resolve a conflict allows parties to maintain their relationship if that is one of their goals.

When a Trial May be Preferable to ADR

ADR is not suitable for every legal dispute. Disputes involving the interpretation of a new statute or provision, the application of the Charter and Constitutional rights, and other public interest litigation require a public ruling to establish a precedent. Class actions may require litigation in order to ensure that all plaintiffs receive an equivalent remedy, rather than separate and inconsistent results. A trial is also preferable in situations where the defendant is being sanctioned, its conduct is condemned, and deterrence is a goal.[4] 

About the Author - What is ADR

Rhema - Legal Dispute Blogger

Rhema Kang is a litigation lawyer. She graduated with an Honours Bachelor of Arts from the University of Toronto in International Relations, and Juris Doctor from the University of Ottawa. She first became excited about mediation while working for the Honourable George W. Adams, a prominent Canadian mediator who handles legal disputes worth up to several hundred million dollars. Rhema was the researcher behind the book, Mediating Justice: Legal Dispute Negotiations, and won second prize in the FMC Negotiation Competition. Rhema enjoys dark chocolate with sea salt and finds it awkward to write about herself in the third person.

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[1] Robert M Ackerman, “Vanishing Trial, Vanishing Community? The Potential Effect of the Vanishing Trial on America’s Social Capital” (2006) J Disp Resol165.

[2] Frank E.A. Sander and Stephen B. Goldberg, “Fitting the Forum to the Fuss: A User-Friendly Guide to Selecting an ADR Procedure” Negotiation Journal (1994) 49 at 56.

[3] George W. Adams, Mediating Justice: Legal Dispute Negotiations, 2d ed (Toronto: CCH Canadian Limited, 2011).

[4] Sander and Goldberg at 60.