Essays On Alternative Dispute Resolution

Introduction
Alternative dispute resolution refers to any method for solving disputes other than by litigation. It is a constrictive dispute resolution method to the extent that a decision by such a method cannot be overruled by a public court of law. A public court of law cannot also give awards different from the ones issues by the method. The two most common used methods of alternative dispute resolution are arbitration and mediation. These methods mainly include evaluation of a case that is done on neutral basis, negotiations, conciliation, mediation and finally arbitration. Alternative dispute resolution methods are becoming preferable due to the need to move away from crowded courtrooms, increasing litigation costs, and the delays experienced in courts before judgment is delivered. These reasons have compelled many people across the states to favor alternative arbitration programs. Some of these programs are voluntary while others are mandatory.

One of the most informal processes used is mediation. In this form of informal litigation, mediators pair the opposing sides and try to control the process. Mediators are trained personnel who are trained to work out settlements and tries to influence accept or reject decisions. This process is also favored since the parties agree amongst themselves and come up with a resolution unlike a court where a judge is influenced by many factors.

Arbitration on the other hand is a basic model of trial that has limited detection and the rules of evidence are simplified. An arbitral panel regulates the process and makes the final decision. Both sides under dispute appoint the arbitrary panel members. The two sides may decide to appoint one person to serve as an arbitrator or they may appoint two people to represent each side and then the two people select a third person to the arbitrator. Arbitration hearings are quite longer than mediation hearings. A typical hearing can take from two days to a week. During that period, the panel convenes a few hours a day to deliberate on matters discussed earlier. After all facts have been delivered based on the arbitration standards, the panel delivers its verdict in a written decision or through an arbitral award. Opinions in this case are not treated as public records.

Arbitration is mostly used in place of industrial courts to solve matters in industries such as construction and securities regulation.3 The process is gaining popularity and more people are adopting it to solve their disputes. Arbitration agreements are enforceable under federal and state laws. The agreements and awards derive their powers from Title 9 of the U.S. Code. The code bases on Congress plenary power that oversees interstate commerce. Title 9 on itself is more superior to state law. A substantial number of states, approximately forty-one in the United States have adopted the Uniform Arbitration Act. The original version was formed in 1956, while the revised version was done in year 2000.

Amendments to Alternative Dispute Resolution Process
Every year, many transactions take place in the construction scene. Intermittently, some disagreements arise in the course of this transactions hence the need for arbitration since litigation may cost both parties significantly. This is in addition to the privacy, fairness and promptness of the process.4 When a dispute occurs, the opposing sides may submit their grievances for arbitration. The arbitrators are supposed to be impartial and any conflicts of interest are unethical. According to the American Arbitration Association, the arbitration process has four major rules: the regular track procedures, the procedures for the resolution of disputes through document submission, and the procedures for large complex construction disputes. These rules provide guidelines whenever there is a dispute particularly in the construction sector.

The best way to avoid intervention by the courts as much as possible is to employ institutional arbitration, which provides a framework that can establish an arbitral tribunal and activate the process despite any disagreements or problems that arise. Thus, the institution can appoint arbitrators, make decisions on disqualification, see to the smooth operation of the procedure and the meeting of deadlines, set arbitrator compensation (which is a very tricky undertaking when the parties deal directly with the arbitrator without going through an institution) and set parameters for the award, as required and in accordance with pre-established conditions.

Initially, the United States Code governed alternative dispute resolution processes. It was amended in 1998 to provide for some features due to the advent of time. The amendments allowed all districts to adopt the provisions of the Act under Section 2071 (a). The amendment also gave powers to neutral evaluation, ministerial, mediation, and arbitration as means of solving civil cases. This was provided under Section 654 to 658 (Clare, 2003). The Act provides for a new statutory payment regime, which introduces a right to interim or periodic payments and a final payment and requires an adequate mechanism in a contract for determining what will become due and when. Default provisions are provided for, which automatically apply in the event that no adequate mechanism is provided in the contract and requires the payee to give a ‘payment claim notice’ to the payer of what is to be paid and how it is calculated not later than five days after the payment date.

The payer may not reserve funds unless it has given a rejoinder (akin to a pay-less notification) to the payment request notice, stating the amount it intends to delay from the sum due and the reasons for doing so not later than 21 days after the repayment claim date as stipulated in the contract or the Schedule. Receivers may suspend enforcement when the sum due is not paid by the closing date for payment. Consequently, there is a prohibition on contractual terms that make payment subject upon the payer being reimbursed from a separate source (‘pay when paid clauses’). Persons to whom the Act touches will need to be cognizant of the truth that if the agreement does not provide for a sufficient mechanism for payment when the statutory default payment provisions will apply.

One goal of a ‘pay when paid’ clause usually used in the construction business was to exempt the contractor from liability to compensate the subcontractor until the employer had settled it. The outcome of this kind a contractual condition was to enable the contractor to pass the danger of default by the employer to its subcontractors further down the construction chain. The application of these clauses is now forbidden by section 3(5) of the Act. The only exception to this ban is in case that there is a related bankruptcy event in a construction contract. In cases where the employer is solvent, a ‘pay when paid’ clause in a contract between contractor and subcontractor will not permit the contractor to withhold payment from the subcontractor. While the legal validity of such terms may be questionable in practice, engineers and architects acting for employers have been required to observe them.

Suspension for Non-Payment
Persons not receiving payment in full now have a new statutory right to suspend work under the Act, provided proper notice and particulars are given. The provisions appear to entitle a payee to suspend performance of any or all of its contractual obligations related to the work. There are hopes that the right to suspend will be limited to the actual construction obligations or also, for example, extend to suspension of the right to insure the works or suspension of works in related areas connected with the payment in dispute. Partial payment will not suffice to render suspension unjustified. It will be important to make sure that any seven-day advance notice is clear and served in accordance with the Act’s requirements.

Works can be suspended, but only up until such time as where the payment dispute is referred to adjudication or where full payment has been made of the amount due. Much weight will have to be given to the fact that contracts may also need redrafting to allow payees to suspend in accordance with their entitlement under the Act. The Act expressly states that the period of suspension is to be disregarded for the purposes of contractual time limits. To ensure that the contract provisions and time for completion are not thwarted by the operation of the Act, a review of current contractual conditions is strongly advised.

For the first time, the Act has introduced a statutory settlement procedure for the settling of payment disputes. Both parties will be permitted to discuss a payment dispute under the agreement to a mediator, whose judgment is required within 28 days (which period may be extended by a further 14 days by agreement between the parties).14 This is not the case in the UK, alternative dispute resolution under this Act will only apply to a payment dispute. The Act does not exactly describe what institutes a payment dispute and it is well known that it is stated in the Act to be “any dispute relating to payment”. It will be motivating to see how this will function in practice and if guidance is given in the Code of Practice concerning payment disputes once the Code is published.

The Act specifies that the arbitrator’s award is obligatory until reversed by another formal process. The opposing parties are required to conform with the decision of the arbitrator, even if they plan to go to court or arbitration proceedings. This will aid in avoiding any deferral to payment. Certainly, the Act provides for a further right to suspend in situations where one party fails to honor (within seven days) any sum due pursuant to the decision of the adjudicator. The opposing parties in such legal proceedings by this means may remove any implied confidentiality or ‘without prejudice’ can depend upon the judgment of the intermediary protection as would say relate to the intermediation process. Definitely, this will have an impact on a verdict by a party on whether to refer the issue on to arbitration or to the courts, if it is likely that a court or arbitrator would be unwilling to obstruct the arbitrator’s judgment unless justified in the circumstances.

In fact, the Act specifically agrees the arbitrator to use his or her “ingenuity in determining the facts and the law”, if he or she so wishes. An arbitrator’s judgment will be requisite even if it is wrong and the Act explicitly provides that an arbitrator may not reconsider or re-open any characteristic of the decision. It is therefore significant to defend parties that settle on all important terms and conditions in your contracts clearly and in advance in order to reduce the potential for any payment dispute arising at the outset.

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By
Brad Spangler

June 2003

What is Alternative Dispute Resolution?

"Alternative dispute resolution" (ADR) is a term generally used to refer to informal dispute resolution processes in which the parties meet with a professional third party who helps them resolve their dispute in a way that is less formal and often more consensual than is done in the courts. While the most common forms of ADR are mediation and arbitration, there are many other forms: judicial settlement conferences, fact-finding, ombudsmen, special masters, etc. Though often voluntary, ADR is sometimes mandated by the courts, which require that disputants try mediation before they take their case to court

Brief History of ADR

Although mediation goes back hundreds of years, alternative dispute resolution has grown rapidly in the United States since the political and civil conflicts of the 1960s. The introduction of new laws protecting individual rights, as well as less tolerance for discrimination and injustice, led more people to file lawsuits in order to settle conflicts.[1] For example, the Civil Rights Act of 1964 outlawed "discrimination in employment or public accommodations on the basis of race, sex, or national origin."[2] Laws such as this gave people new grounds for seeking compensation for ill treatment. At the same time, the women's movement and the environmental movements were growing as well, leading to another host of court cases. The result of all these changes was a significant increase in the number of lawsuits being filed in U.S. courts. Eventually the system became overloaded with cases, resulting in long delays and sometimes procedural errors.[3] Processes like mediation and arbitration soon became popular ways to deal with a variety of conflicts, because they helped relieve pressure on the overburdened court system.

Basic ADR Processes

Today, ADR is used to settle a variety of disputes in American institutions, including the family, churches, schools, the workplace, government agencies, and the courts.[4]

ADR is not widely used in cases of intractable conflict until those conflicts seem to become ready (some say "ripe") for resolution. This sometimes happens when the conflict reaches a hurting stalemate -- a situation where it becomes clear that neither side can win; yet, they are being substantially hurt by continuing the struggle.

Ripeness is crucial for ADR processes to work effectively, and ADR has been used in appropriate cases. For example:

  • Arbitration and negotiation have become common ways to resolve difficult international business disputes;
  • Mediation and arbitration are now commonly used to settle labor-management disputes that often used to seem like intractable situations (See the essay on formerly intractable conflicts.);
  • International mediation has been used to resolve difficult international and ethnic conflicts, with varying degrees of success;
  • Consensus building has become a popular process for dealing with public-policy disputes, especially intractable environmental disputes.

General Advantages and Disadvantages of ADR

For many reasons, advocates of ADR believe that it is superior to lawsuits and litigation. First, ADR is generally faster and less expensive. It is based on more direct participation by the disputants, rather than being run by lawyers, judges, and the state. In most ADR processes, the disputants outline the process they will use and define the substance of the agreements. This type of involvement is believed to increase people's satisfaction with the outcomes, as well as their compliance with the agreements reached.[5]

Most ADR processes are based on an integrative approach. They are more cooperative and less competitive than adversarial court-based methods like litigation. For this reason, ADR tends to generate less escalation and ill will between parties. In fact, participating in an ADR process will often ultimately improve, rather than worsen, the relationship between the disputing parties. This is a key advantage in situations where the parties must continue to interact after settlement is reached, such as in child custody or labor management cases.[6]

ADR does have many potential advantages, but there are also some possible drawbacks and criticisms of pursuing alternatives to court-based adjudication. Some critics have concerns about the legitimacy of ADR outcomes, charging that ADR provides "second-class justice." It is argued that people who cannot afford to go to court are those most likely to use ADR procedures. As a result, these people are less likely to truly "win" a case because of the cooperative nature of ADR.[7]

Similarly, critics believe that ADR encourages compromise. Compromise can be a good way to settle some disputes, but it is not appropriate for others. In serious justice conflicts and cases of intolerable moral difference, compromise is simply not an option because the issues mean too much to the disputants. Another concern is that ADR settlements are private and are not in the public record or exposed to public scrutiny. This could be cause for concern in some cases. For example, using ADR to settle out of court could allow a company to resolve many instances of a defective product harming consumers, without the issue getting any public exposure. On the other hand, a court ruling could force the company to fix all problems associated with the bad product or even to remove it from the market. [8]


[1] Stephen B. Goldberg and others, Dispute Resolution, 3rd ed. (Boston: Little, Brown and Company, 2012). <http://www.beyondintractability.org/bksum/goldberg-dispute>.

[2] Ibid., 4.

[3] Ibid., 4.

[4] Ibid., 4.

[5] Ibid., 8-9.

[6] Ibid., 12.

[7] Ibid., 9.

[8] Ibid., 9.


Use the following to cite this article:
Spangler, Brad. "Alternative Dispute Resolution (ADR)." Beyond Intractability. Eds. Guy Burgess and Heidi Burgess. Conflict Information Consortium, University of Colorado, Boulder. Posted: June 2003 <http://www.beyondintractability.org/essay/adr>.


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