Commonly abbreviated as ADR, Alternative Dispute Resolution refers to any means, process or method of mutually resolving conflicts & disputes outside the court. ADR typically includes early neutral evaluation, negotiation, and conciliation, however mediation, and arbitration remain two primary forms.
Arbitration is an informal and private process to resolve disputes. The decision made by the arbitrator is binding on the parties as well as enforceable. The hearing process is less formal and allows using flexible timing for the convenience of the parties in a dispute. Each party has the opportunity to present evidence as well as argument to an impartial arbitrator. In arbitration, the parties let go of their rights to create their own solution and instead place their trust in the hands of the arbitrator to choose a suitable solution for their dispute.
There are several benefits of arbitration, 3 of them are discussed below.
Faster than litigation
Normal court proceedings take time while completing a case's due course. And in business, this time has a real cost to your bottom line. Both parties are required to submit relevant documents in order to take proceedings to the next step all the while racking up attorney’s fees for this preparation. This happens for as long as it takes the court to decide on the case or even refer it to another court which would drag the timeline out even further. One study suggests that it takes 18 months to three years for courts to decide on cases which could be resolve within just a few weeks in arbitration.
Arbitration tends to take least timely course when it comes to dispute resolution. The very purpose of arbitration involves a quick, yet thorough approach towards resolving the matter. Moreover arbitrators do not face caseloads or crowded courtrooms, therefore it results in a quicker final resolution between the parties.
In case of normal court proceedings, it is usually seen that a high amount of tension as well as hostility persists among the parties no matter how small the dispute. Taking a dispute to public trial fuels someone's long-standing grudge against the other party. This hostility could result in taking a destructive course that involves publicly airing grievances you would rather remain private. And as the legal fees continue to mount, hostility can grow causing each party to dig in and demand their own version of a victory. However, while in alternative dispute resolution, it is less likely for the parties to become hostile and therefore it is easier to keep an open mind on reaching a mutually agreeable solution to the dispute. Since the parties are encouraged to become active part of the resolution process, they channel their energies and resources to structure the resolution instead of aggravating the process. During arbitration, the parties more often work together to resolve the issue instead of escalating their angst toward the other.
In contrast with legal proceedings in court, arbitration holds its proceedings in private. This is extremely important since many parties will be better off keeping the terms and consequences of their dispute private. This need of privacy can have any reason from prestige to family name or even goodwill. Several corporations opt for arbitration and tend to choose a softer path in their dispute resolutions as well as avoid limelight. This holds particular importance in commercially sensitive cases.
The proceedings of arbitration are not held in a public courtroom and are often held in an arbitrator’s private conference room. This is to give both parties all the chances they need to bring all possible, legal solutions to the table without fear of public outrage or reaction that might hamper their standing, name or even stock price in the market. Think of it as a confidential and constructive conversation. This is given extreme consideration because the dispute itself or the final resolution might reveal private information like client's list, key financials, or even personnel or HR records.
At times parties even agree to have the proceedings as well as the resolution completely confidential, so as to keep any prying eye out of reach from their private matters & disputes.