The trend toward using alternative dispute resolution (ADR) methods as a means of settling disputes without resorting to national or regional court systems began in the U.S. in the 1970s.

Commercial litigation is lengthy, costly, hard to enforce and, because of the adversarial nature of the proceedings, will often damage business relationships beyond compare.

ADR aims to resolve disputes in a way that is less expensive, faster and more predictable than adversarial judicial proceedings.

Assessing your options

There are several forms of ADR:

1. Arbitration

This is a legal form of ADR. The disputing parties refer the problem to an arbitrator or an arbitral tribunal and agree to be bound by its findings.

2. Conciliation

This is a form of ADR in which the disputing parties use a conciliator, who meets with each party separately to determine their issues and help resolve their conflicts. It is different from mediation because the main goal is to conciliate, usually by seeking concessions.

3. Mediation

This is a process that sues a neutral third party to help the disputing parties resolve their disagreement. The mediator assists communication between the parties and generates options that might help resolve the conflict. A mediator helps the parties form their own solution, rather than making a decision.

4. Fact finding

This form of ADR uses an impartial group of experts to determine what the facts are in a dispute. The fact finders might be requested to investigate or evaluate the matters under dispute and present a report that establishes the facts. In some circumstances, the fact finder might also be asked to prepare a situation assessment or a recommendation for resolution.

Fact finding is often a valuable form of ADR because many international trade disputes arise from different understandings of the facts by the parties involved.

Save money, time and business relationships

Besides the cost and time advantages of ADR, there are additional benefits.

It offers a less formal and simplified forum in which conflicting parties can negotiate, and it presents the possibility of a more flexible or creative decision.

For example, parties can agree to settle a dispute over the cost of production materials where the manufacturer wants the materials at a lower price than the supplier is willing to pay.

Through mediation, the supplier concedes on the promise of a future contract commitment. Not only does this ADR please the manufacturer who gets materials at lower cost, while avoiding the possibility of costly litigation, but the ADR means that the business relationship has been salvaged, enabling future trade.

Arbitral awards and damages are often easier to enforce than those ruled in foreign courts. There are a number of international, national and regional AFR institutions whose goals are to educate entrepreneurs about the advantages of ADR and to provide professional ADR services.

Find the best option for your business

If an organization is seeking an ADR institution to specify in a contract, attention must be paid to the procedures and techniques they offer. Many international law experts will offer services in these areas.

Some can offer procedures and techniques such as negotiation, mediation, conciliation and arbitration, whereas some may only offer services for arbitration. Also, some ADR organizations specialize their services for specific industry sectors, such as mining, oil and commodities.

Care must be taken to choose the right kind of organization to represent the services an organization requires, as well as those who will have experience and expertise in its area of business.

For a complete list of national and regional ADR institutions, please visit https://www.worldbank.org/.

How can your business relationships be improved by using ADR to resolve conflicts?

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