Advantages and Disadvantages of Alternative Dispute Resolution

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April 16, 2018
Author: Lorman Education

There are many advantages, and some disadvantages, to using Alternative Dispute Resolution.

Advantages include the fact that it usually takes far less time to reach a final resolution than if the matter were to go to trial. Usually (but not always), it costs significantly less money, as well. Furthermore, in the case of arbitration the parties have far more flexibility in choosing what rules will be applied to their dispute (they can choose to apply relevant industry standards, domestic law, the law of a foreign country, a unique set of rules used by the arbitration service, or even religious law, in some cases).

The parties can also have their dispute arbitrated or mediated by a person who is an expert in the relevant field. In an ordinary trial involving complicated and technical issues that are not understood by many people outside a relevant industry, a great deal of time has to be spent educating the judge and jury, just so they can make an informed decision. This large time investment often translates into a great deal of money being spent. Both sides might have to call expert witnesses, who may charge very large fees for their time. If an arbitrator has a background in the relevant field, however, far less time needs to be spent on this, and the parties can get to the actual issues of the case much sooner.

There are some disadvantages, as well. Generally, arbitrators can only resolve disputes that involve money. They cannot issue orders requiring one party to do something, or refrain from doing something (also known as injunctions). They cannot change title to property, either. Also, some of the safeguards designed to protect parties in court may not be present in ADR. These might include the liberal discovery rules used in U.S. courts, which make it relatively easy to get evidence from the other party in a lawsuit.

Also, there is very limited opportunity for judicial review of an arbitrator's decision. While a large arbitration service could, if it so chose, have some kind of process for internal appeals, the decision is usually final and binding, and can only be reviewed by a court in limited cases. This generally happens when the original arbitration agreement is found to be invalid. Because both parties must voluntarily agree to arbitration, if the consent of one party is obtained by fraud or force, it will not be enforced. Also, if the decision of the arbitrator is patently unfair, it will not be enforced. This is a difficult standard to meet. The fact that the arbitrator made a decision that the court would not have made is not, by itself, a basis to overturn the decision.

A court might also overturn an arbitrator's decision if it decided issues that were not within the scope of the arbitration agreement.

It is important to consider these advantages and disadvantages before agreeing to arbitration, or any other kind of alternative dispute resolution. Chances are, you have already agreed to arbitration in many situations, without even knowing it. Many lease agreements and employment contracts have mandatory arbitration provisions, and they will usually be enforced, as long as certain standards are met (generally, they must not deprive a person of a constitutional right, and they should be reciprocal).

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