In essence, ADR is made up of two basic components: mediation and arbitration.
Mediation is consensual, meaning that a resolution cannot be forced on an
unwilling party, while arbitration is almost always binding.
My 26 years in the modular building business has naturally given rise,
occasionally, to various disputes and disagreements with customers, suppliers,
and sub-trades. I recall that in the early years of our company, our first
response to any such problems was to "push the lawyer button," waste a lot of
time and money and usually end up with an unsatisfactory result and irrevocably
alienating those parties we were in a dispute with. The common theme in most of
these disputes was primarily based on a breakdown in communication between
ourselves and other parties. About five years ago we started to adopt
alternative dispute resolution (ADR) as a method to solve these problems. The
following excerpt of an article by J.L. McDougall, QC, senior litigation
partner of the international law firm, Fraser Milner Casgrain LLP, is timely
and informative.
* * *
Disputes are an inevitable part of business. They are annoying, distracting,
create uncertainty and ultimately cost time and money for all involved. Not
only do disputes add to the cost of doing business and thus directly affect the
bottom line, but they also create uncertainty. While there is no known way to
eliminate disagreement between participants in the business world, many firms
are now turning to "alternative dispute resolution" or "amicable dispute
resolution" strategies in an effort to mitigate the adverse effects of
disputes.
Not only do disputes add to the cost of doing business and thus directly affect
the bottom line, but they also create uncertainty. A dispute over the cost of a
part required by a manufacturer affects its ability to prepare estimates of net
income. A fight over liability for injuries allegedly caused by a child's toy
can create large uncertainties about the viability of the toy manufacturer. It
is in everybody's interest to reduce these uncertainties, and the costs, as far
as possible. Fortunately, there is a developing infrastructure for doing just
that.
Unfortunately, when you get down to specifics and start talking about all of the
approaches, which come under the ADR umbrella, it can quickly become highly
technical and, frankly, not terribly helpful. For example, the definition and
relative merits of such things as neutral evaluation, mini-trials, expert
opinions and med-arb are really matters for the ADR professional and are not
normally of major concern to the business person.
In essence, ADR is made up of two basic components: (1) mediation and (2) arbitration.
Mediation is consensual, meaning that a resolution cannot be forced on an
unwilling party. Arbitration is almost always binding; the parties, in choosing
to submit to arbitration, agree in most cases to be bound by the mutually
agreed-upon dispute resolution mechanisms or process in place up front, prior
to the emergencies of any business dispute. While they are distinctly different
processes, it is quite common for the parties to agree that an arbitration is
to be preceded by a mediation, which, if successful, would dispose of the need
for arbitration. Equally, the mediation might serve to solve some aspects of
the dispute and thereby facilitate the arbitration.
It is important to keep in mind that disagreement is really just the flip side
of agreement; just as agreement is the essence of business, so too are
disagreement and disputes. The real question becomes one of how to plan for,
and hopefully resolve, any future disputes in the least disruptive way
possible. Setting up dispute resolution mechanisms after a dispute has arisen
is always difficult and often impossible. Parties already in a dispute find it
hard to agree on anything at the early stages, let alone on a mechanism to
settle a dispute.
Most people quite naturally don't like to think about possible disputes at the
front-end of a budding business relationship. In the rosy glow of negotiating
and consummating a deal, it is hoped, will be mutually profitable, the tendency
is often to avoid focusing to any great extent on what might go wrong and how
to deal with it. What is sometimes forgotten, however, is that a relatively
amicable resolution of a business dispute can preserve the relationship whereas
a full blown lawsuit will usually damage it beyond repair.
While the court system is always available, one must bear in mind that the
courts essentially represent a "top-down" approach to resolving disputes. The
judges derive their powers to adjudicate from the state and not from the
parties. As a consequence, the parties have relatively little power to control
the process or outcomes. On the other hand, ADR is a "bottom-up" system. The
parties control the process and, most importantly, the adjudicator (a term used
to include both mediator and arbitrator) derives his or her power solely from
the parties.
ADR has become very fashionable in recent years. The courts have adopted ADR as
a means of clearing the backlog of cases on their lists and lawyers have found
ADR techniques to be a helpful tool in resolving their client's disputes. ADR
is participatory process. The clients have a direct say in the choice of
resolution mechanisms, who is going to adjudicate, and how the process is to be
conducted. If the business community were more active in exploiting ADR, it
would be beneficial both for those in the dispute and ADR as a whole.
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