Importance of Alternate Dispute Resolution

Alternate Dispute Resolution (ADR) refers to alternative ways of resolving disputes without the need for a trial, by settling a dispute outside of the courtroom. You can use ADR to narrow issues in dispute before court proceedings are issued. You can also use ADR to settle proceedings before reaching trial. The most common types of ADR are negotiation, mediation, arbitration and conciliation.

There are a range of ADR options, some binding and some non-binding. If you engage in a binding ADR process, then this means that the outcome of the ADR is final and can be enforced by the courts or through arbitration. You cannot subsequently issue court proceedings just because you disagree with the outcome of the ADR. If non-binding ADR is used, this means the parties can proceed with litigation to resolve the dispute if they are not satisfied with the outcome of the ADR process.

Is Alternate Dispute Resolution Mandatory?

Following the case of Churchill v Merthyr Tydfil [2023], it’s worth noting the following.

It was decided that the court can order parties to engage in ADR in certain circumstances. When considering the conduct of the parties in the context of deciding what order (if any) to make about costs, the court will have regard to whether a party failed to comply with an order for ADR or unreasonably failed to participate in ADR proposed by another party.

This essentially means that following this case, the court can now impose a much stricter obligation on parties to mediate. Significant cost consequences can follow if you fail to engage in ADR.

Pros and cons of Alternate Dispute Resolution:

Pros of Alternate Dispute Resolution:

The use of ADR to settle a dispute can have the following benefits:

• Cost-effective – it is usually cheaper than proceeding with formal litigation to a final hearing.
• Time-saving – ADR is usually quicker than going through the court system. Litigation can take months or even years to conclude, whereas an ADR process can often be completed in a matter of weeks or months.
• Flexibility – it gives the parties more control over the process and result. ADR can enable parties to reach solutions that are not based on ‘win or lose’. Parties are free to tailor the process to suit their needs and to reach a settlement based on their interests rather than having solutions imposed on them by the court.
• Confidentiality – ADR is usually confidential in nature, which can give the parties the freedom to air commercially sensitive subjects and enable full and frank negotiation.

Cons of Alternate Dispute Resolution:

The perceived drawbacks of ADR can include the following:

• Delay and increased cost – where settlement is not reached and litigation is ultimately pursued, the ADR process can result in wasted time and money for the parties.
• Unenforceable outcomes – settlement terms agreed through a non-binding ADR process are not enforceable. It is, however, always open to the parties to formalise any agreement reached in a written and signed contract or sometimes by way of court order.
• Limitation issues – unlike legal proceedings, most forms of ADR do not ‘stop the clock’ for the purpose of limitation. The parties will therefore need to keep limitation under review and consider the possibility of having to use protective legal proceedings whilst undertaking ADR.

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For advice on business dispute resolution, please contact our Dispute Resolution team by completing our online enquiry form or by calling 0330 191 4857.