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”.
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’”.
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. 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.
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.
