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Advantages and Disadvantages of ADR
Advantages and Disadvantages of ADR
It has
been used successfully for hundreds, if not thousands, of years. However, in recent years, it has
been growing in use with more companies choosing to use arbitration in commercial and
consumer disputes. With this increased usage, the methods for conducting ADR have expanded
making it an even more practical and cost-effective solution for many types of disputes.
Arbitration vs Litigation
Simply stated, litigation is formal, generally public process which resolves disputes through a
court with a judge or jury. It is subject to strict rules imposed by law governing the conduct of
the proceeding, such as the formal rules of evidence.
Arbitration is private process whereby parties work with a neutral third party to hear both sides
and make a final and binding decision, using agreed-upon rules governing how the process will
work.
Advantages of ADR
3. Procedural flexibility saves valuable time and money and absence of stress of a
conventional trial.
4. Parties can set terms in their arbitration contract governing how the process will work.
This includes establishing rules regarding discovery, hearings, time limitations and other
matters. In addition, parties can schedule hearings and deadlines to accommodate their
needs.
5. The possibility of ensuring that specialized expertise is available on the tribunal in the
person of the arbitrator, mediator, conciliator or neutral adviser.
6. Less time spent to resolve a dispute means lower costs for attorneys’ fees. In addition,
discovery is much more limited in arbitration, and appeals are very limited, so those costs
are all saved.
7. Typically, there are limits on the nature and scope of discovery and time limits on how
long the process can take. Issues are handled through phone calls rather than multiple
hearings, depositions, interrogatories and also strict rules of evidence don’t apply.
8. It offers greater direct control over the outcome. Personal relationships also suffer less.
9. Parties can choose an arbitrator with subject matter expertise as opposed to being
assigned a judge randomly. This is particularly important in complex cases requiring
specialized knowledge.
10. Appeal rights are very limited in arbitration, so disputes are finally resolved more
quickly.
11. ADR permits more participation by the litigants. ADR gives the opportunity to parties to
tell their side of the story and have more control over the outcome than normal trials
overseen by a judge. Many parties desire the opportunity to speak their piece and tell
their side of the story in their own words rather than just through counsel.
Disadvantages of ADR
2. ADR methods are not certain ,there is no certainity of rules and regulation which must be
followed.
6. Precedents are not followed in ADR ,there is no rule in ADR that the judgments of one
case to be followed in other similar cases.
7. The neutral mediator or arbitrator charges a fee for his or her services. Depending on the
arbitrator or mediator selected, the fees can be substantial (of course the parties typically
agree to divide the fees between themselves). Depending on the contract language and
state law, a prevailing party can be awarded fees and costs. A judge on the other hand,
charges no fees for his services.
9. May have no choice, Often the contract in dispute contains a broadly worded mandatory
arbitration clause. Many lease agreements and employment contracts, for example
contain mandatory arbitration provisions, as do operating agreements and other types of
business contracts. Unless both parties waive arbitration, most states will compel
arbitration at the request of any party.
10. Delay in resolving the disputes ,If the issues are not resolved in ADR the parties must opt
for the Law suit where the court procedure starts from then onwards .Hence there will be
lot of wastage of time and also there will be delay in the disputes.