Merits and Demerits of the Alternative Dispute Resolution System

Scottish proverb: ‘Law’s costly ... tak’ a pint and ‘gree’

International arbitration is about settling disputes between businesses, occasionally between businesses and States or State entities. International arbitration itself is a business, possibly too much so. Arbitration is often about money. Many claim that mediation is a more cost effective and time efficient process than arbitration to resolve international disputes. Since one would assume that companies will choose the fastest and cheapest way to resolve their disputes, it should therefore follow that the number of mediations should grow more than the number of arbitration cases in resolving international commercial disputes. Our paper tests this very nature of idea and lets out whether international mediation is useful to corporations, whether it is growing as the international resolution method of choice, and considers the reasons behind that growth.

This paper will analyze the traditional way in which these suits or anti-suit injunctions, a well-known maneuver in common law systems, are issued, as per the wish of a party, that the other party be enjoined from initiating or from scheduled with a legal action in a different dominion. Courts in civil law realms are progressively willing, in certain surroundings, to enjoin a party to append or terminate an action gotten in another country. These measures are commonly entreated to preclude parasite litigation of a disagreement before a different court, whether because the first law court seized has issued a ruling or since its decision is pending. Defilements of such injunctions may effect in heavy penalties coupled to the notion of disapproval of court. The court that recollects its jurisdiction or awaits that it will do so thus pursues to protect its jurisdiction or, more commonly, the dominion of the forum it deems to be the most apposite.

The paper shall also focus on the well-known international arbitration institutions that provide mediation as they administer as part of their alternative dispute resolution (ADR) services. This paper deals with relevant sectors where important changes have taken place and also the major (as well as minor) loopholes.

Introduction

Law is the command of the sovereign. It controls the working of public policies, it regulates the working of each and every known organization, it provides statutes for the lubricated and friction-less working of the state departments, it codifies the way and the correct/ dignified path to the resolution of personal matters as well. However people consider law as an object of scorn and fear, the try to shun courts, they would rather live with their problems instead of moving to any said court for seeking justice. The following are the main reasons so as to why people tend to vary from the idea of addressing their problems in a court of law: -

1. That, the legal proceedings are costly and time consuming, the so-called justice is delivered after mass of, hopelessly complex, procedures are followed.

2. That, legal cases often tend to differ from the main idea or the main issue involved in a dispute.

3. That, legal practitioners are more concerned about their fees and winning the case instead of being concerned about finding the truth or solutions to the said issues and problems.

4. That, the legal procedures often tend to increase the areas of conflict between the parties instead of resolving the issues placed in front of them.

The aforementioned reasons tend to force people to find alternate ways of addressing their problems and therefore they follow the Alternate Dispute Resolution System of Arbitration, Mediation and, or Conciliation.

Alternate dispute resolution system, as the name suggests, is an alternate way of resolution of disputes, issues in some cases, which a person/ legal person/corporation may encounter.  

Alternate dispute resolution system (herein after referred to as ADR) is defined in various ways. The National Alternative Dispute Resolution Advisory Council (herein after referred to as NADRAC, headquarters of which are in Melbourne, Australia) has defined ADR as an ‘umbrella term for processes, other than judicial determination, in which an impartial person assists those in a dispute to resolve the issues between them’. There are a variety of ‘alternative’ means by which judicial officers may involve independent third parties to assist in the resolution of cases that are being litigated. ADR techniques may be used to determine some or all of the legal and factual issues in dispute. Some ‘hybrid’ ADR methodologies may involve a combination of different techniques or processes. In cases, which are the subject of litigation in courts, ADR may be employed by agreement between the parties, at the suggestion of the court or by direction or order of the court. Sometimes the term ADR includes approaches that enable parties to manage and resolve their own disputes without outside assistance.[1]

ADR is increasingly referred to as ‘appropriate dispute resolution’, in recognition of the fact that such approaches are often not just an alternative to litigation, but may be the most appropriate way to resolve a dispute’.[2]

The NADRAC have very prominently classified dispute resolution processes as facilitative, advisory, determinative or hybrid.[3]

Facilitative processes: the dispute resolution practitioner assists the parties to a dispute to identify the issues in dispute, develop options, consider alternatives and endeavor to reach an agreement about some issues or the whole of the dispute. Facilitative processes include negotiation, facilitation, conferencing and mediation.[4]

Advisory processes: the dispute resolution practitioner considers and appraises the dispute and provides advice as to the facts of the dispute, the law and, in some cases, possible or desirable outcomes, and how these may be achieved. Advisory processes include expert appraisal, case appraisal, case presentation, mini-trial and early neutral evaluation.[5]

Determinative processes: the dispute resolution practitioner evaluates the dispute (which may include the hearing of formal evidence from the parties) and makes a determination. Examples of determinative dispute resolution processes are arbitration, expert determination and private judging.[6]

Hybrid Processes: the dispute resolution practitioner plays multiple roles. For example, in conciliation and in conferencing, the dispute resolution practitioner may facilitate discussions as well as provide advice on the merits of the dispute. In hybrid processes, such as mediation-arbitration, the practitioner first uses one process (mediation) and then a different one (arbitration).[7]

Position of ADR in Australia.

Mediation is the main form of ADR used in Australian Courts (Victorian). The Victorian Courts refer cases to conferences, which are normally pre hearing conferences, conciliation and sometimes arbitration. Mediation is a process in which the conflicting parties discuss, formulate and reach to a conclusion with the help of a mediating person known as the mediator.  The mediator does not decide or advise, he has no advisory role in the proceedings. He, however, does advise on determining the process of mediation. Mediation can be followed voluntarily, by the order of the Hon’ble Court and or existing contractual agreement.[8]

The Supreme, the Magistrates’ and the County Courts have the right to order any part of the proceeding or all of the proceeding to mediation, with or without the consent of the parties.[9]

Position of ADR in California.     

The California Code of Civil Procedure sets out extensive provisions regarding the appointment of a referee, including when and how a referee is appointed and how referees are paid.

When the parties to a contract have voluntarily agreed that any dispute between them will be resolved by judicial reference, the court will appoint a referee ‘[t]o hear and determine any or all of the issues in an action or proceeding, whether of fact or of law’ and to issue a decision. [10] A referee may also be appointed by agreement between the parties or, if they cannot agree, by the court.[11] The parties may choose a referee. If chosen by the parties, the referee can be any person mutually acceptable to them and does not need to be a judge or a lawyer. If the court is required to select a referee, it must obtain up to three nominees from each party and then choose from among those nominees one that a party has not objected to.[12]

Position of ADR in India.

Section 89 of the Code of Civil Procedure, 1908 talks about “Settlement of disputes outside the court”. The contents of the said section are as follows:

[13]Where it appears to the court that there exists elements of a settlement which may be acceptable to the parties, the Court shall formulate the terms of settlement and give them to the parties for their observations and after receiving the observations of the parties, the court may reformulate the terms of a possible settlement and refer the same for-

(a) arbitration;

(b) conciliation;

(c)  judicial settlement including settlement through Lok Adalat; or

(d) mediation

Merits and Demerits of the ADR System

ADR can be termed as an effective means to solve disputes by the help of a neutral third party.[14] As popularly stated since time immemorial “Every coin has two faces”, the said methodology of resolving disputes through alternative means also has some pros and cons.

The following section will vividly discuss the merits of the Alternate Dispute Resolution System.  

 Merits of the ADR Scheme

· It saves a lot of time by allowing the parties to resolve their differences/ disputes/ issues in a short period of time as compared to the excessive stint taken by the Hon’ble Courts in resolving the very same issues.

In an era, like our very own, where the population is humongous, there are a innumerable sectors from where cases and disputes arise, not all of them can be brought to the court, as only important issues ought to be dealt with there. The saying, “justice delayed is justice denied” can be sacked through this system. The unnecessary burden upon the courts can be removed and hence elongation can be avoided.[15] Moreover these processes can commence at any point of time, unlike anticipating the stipulation of dates as and when pleased by the court.

· It saves a lot of money that is disbursed on lawyers and other miscellaneous expenses that one has to undergo in the process of litigation.

The most elementary benefit of the ADR system is saving costs, giving control to the disputants and thus avoiding the vicious litigation process. Such process (like ADR) results in substantial savings of court fees, lawyer’s incentives, and other costs because they do not include time consuming and expensive discovery that is quite prevalent in different courts. Other such elaborate practices are also deemed redundant.

· It puts the parties in control by giving them opportunities to discuss their case by giving them a forum to put forth their own views and thereby giving them a chance to put themselves on a clean slate.

The parties have the opportunity to air their own views and ideas directly in the presence of the other party. There are no mind games involved because the victimized party addresses the opposite party/ parties directly. This process thus provides a catharsis for the mindset of parties that can endanger a willingness to resolve differences between them in courts. Moreover since they are heard in the presence of a neutral authority figure, the parties often feel that they have had “their day in the court.”[16]

· Access to justice is much easier and much faster in case of ADR, because it allows people, who cannot afford fees or cannot afford to lose time, to acquire a remedy without getting into the sweat breaking system of the court.

People solving their disputes through the ADR have the benefit of solving their own cases themselves, and hence are representing themselves per se. Generally court litigation can be very difficult for the per se litigant, who is unable to navigate himself through the court proceedings and trial. With the downturn in the economy, studies show that fewer parties are represented by the counsel, and that lack of representation negatively impacts the per se litigant’s case.[17] Thus is this manner access to justice is much faster and more number of people are encouraged to solve the issue through ADR mechanism.

· It focuses on the issues that are important to the people instead of just stressing upon the legal rights and obligations.

Resolutions through these systems are brief and brisk. Avoiding the unnecessary litigated outcomes, the parties involved can just acquire the result they want and are comfortable with. The 3rd party involved efficiently handles this plan. i.e. (mediator, arbitrator, conciliator etc.) they identify and frame the relevant interests and issues of the parties, help them to access the quantity of risk, suggest relevant options and hence lead them to a particular and appropriate solution. This is accomplished by meeting with the parties separately and hence suggesting to them the issues upon which they have to focus rather than just going by the rules stated in the black words on a white paper.

· It leads to more flexible remedies than in court, i.e. the people make agreements that the court cannot order or enforce upon.

There must be certain cases where the arbitration is required by contract. The parties to the same can initiate proceedings to suit their needs, such as location of arbitration, scope of discovery and the number of arbitrators involved. Once the process is started, a party seeking more streamlined and less expensive process will be better to achieve than in courts. The parties can also schedule the hearing time. This can even take place in any time as decided by the parties. Since one of this type can be can be conducted more quickly, and less expensively, there is less emotional burden on the individuals involved than proceedings in a stressful trial.

· It keeps the disputes that are private as the same.

There is no public announcement of the arbitration/ mediation/ conciliation or any of the ADR processes for that matter. The case is held in a confidential manner by keeping the private matters as private. Full secrecy is maintained. While mediation can take place in the formal court system, arbitration can be administered on a secretive basis. Here the parties involved and the arbitrator or the mediator is invited who can solve the case within four walls of the said arbitration/ mediation room. They are moreover barred from disclosing any information.[18]

· It produces good results by reducing stress upon the people and satisfying them by giving them the desired results and by preserving good relationships between them.

The process of litigation that is traditionally followed can be stressful and personally excruciating. At the end of the litigated process the parties are generally not in good terms with each other, and are unable to start any relationship afresh. However, in case of the resolution of disputes through alternative means, other than litigation, the parties maintain cordial, business and personal relations with each other. The reason of the aforementioned fact is that the parties are given a rightful chance to express themselves and are suggested remedies consequently, they both agree to the same by reaching to a common conclusion. They negotiate amongst themselves or the 3rd party helps them by suggesting remedies. There are no winners or losers here. The 3rd party has no authority to impose any advice or remedy atop the parties. The said resolutions are solely voluntary and on the sole discretion of the parties. Here the parties retain their options.

· ADR provides finality

In courts, during the proceedings, the parties generally have a chance to appeal the decision of the judge or the verdict of a jury. In contrast to this, the grounds for court review of an award received through arbitration are very much limited. There is lesser chance for the award of arbitration to be challenged. It is final and binding on the parties thereof.

Time to flip the coin as we go through the demerits of the said system. The following section of the paper will discuss the demerits of the ADR system.

Demerits of the ADR scheme.

· Compatibility in this blistering era of disputes.

Alternative dispute resolution system may not be suitable for each and every dispute. Agreed that cases do pile up in the Hon’ble Courts of law all around the world, but the judge cannot always refer a case to arbitration/ mediation/ conciliation. Some cases are to be dealt in the court of law; there is no other ‘informal’ means of solving the said cases. Many a times, one of the parties is not comfortable with the idea of ‘alternative’ means of resolutions being used to tackle their issues so they prefer appearing in the court of law.

· Wastage of time/ money if the case is not resolved.

A recent survey done by a prominent law database website suggests that nearly 90% of the cases, which are dealt through the ADR system, are solved but the remainder, i.e. the remaining ten percent, of the cases go unresolved, the parties to the unresolved cases have no choice but to file a law suit thereby wasting same, sometimes more, amount of time and money in the proceedings of the legal system.

· The possibility of bias.

The possibility of bias, though negligible, or a conflict of interest or at least the appearance of impropriety, may arise if a neutral in ADR gets a good deal of repeat business from the same institution.

· Compromisation of Confidentiality.

Prima facie, confidentiality of the proceedings seems to be a boon for such a dispute, however, in practice, it might prove to be a double edged weapon, as it might lead to certain difficulties and obstructions. In the proceedings confidential it may be difficult for the parties to use the award or any other part of the arbitration in later proceedings. In many a cases, it is necessary to disclose the time/ date and place of the said arbitration proceedings to the third parties and or patent officers and thereby compromising the confidentiality of the system.[19]

· Limited Judicial Review.

Another everlasting problem faced by parties taking recourse to the ADR system is the power of limited or negligible Judicial Review An arbitral award is final and binding on the parties and excluded to appeal to the courts in connection with it. The court review of arbitral awards is quite limited.[20]

· Informal, more oppurtunity of abuse of power.

Though very uncommon, power abuse sometimes is something to worry about in case of Alternative Dispute Resolution systems. Since the mediator/ arbitrator/ conciliator does not have to follow any formal code of prescribed text, he sometimes goes out of the way to make things good or sometimes even worse for the parties to the dispute. Though not into practice, abuse of power due to lack of formality sometimes gets to crack the bone of the whole system.

· Lack of power to establish legal precedents.

The remedies established, or given out to the parties in dispute, in case of ADR cannot be binding on future cases, i.e. the remedy of one case cannot be taken as the guiding stone for another or it, the remedy, cannot be taken as a legal precedent.

· Unfamiliarity with the procedure and Lack of awareness .

Last but not the least, one of the most glaring difficulties faced by the alternative methods of dispute resolution is that most of the people, be it the patentee or the companies or the attorneys, are unfamiliar with the processes since this is a fairly novel concept. It is the lack of knowledge and awareness with respect to the various methods for dispute resolution that more often than not discourage parties from considering this option seriously.

Conclusion

We attempted to demonstrate in this article that the legal system, with respect, needs a sidekick to keep it running smoothly and consequently ADR proves to be the best alternative. The Saga of Burnt Njal prevails in such times, a story of a mediator who was so successful that he eventually threatened the local power structure. The saga ends in tragedy with the unlawful burning of Njal thriving in his home, the escape of a friend of the family, a mini-war and the ensuing ending of the dispute by the intermarriage of the two stoutest survivors. It illustrates that mediation was a powerful development in Iceland long before the era of kings.

Due to the increased amount of workload in the various courts all around the world, people are turning towards an easy and cheap (in some cases expensive yet feasible) system, which would resolve their dispute i.e. towards ADR. Sometimes at the disposal of the judge and sometimes due to some contractual agreement, people do turn their backs onto the courts and move in direction of the ADR system.

The ADR system is more of a gratifying system, it has already enunciated its roots in the various legal systems of the world, so much so that there is an individual international body governing the procedures of resolution of disputes through alternative means.

A proper structured transformative mediation wing is maintained in the United States of America. The African customary legal structures mainly rely on mediation and conciliation. In many countries, these traditional mechanisms have been integrated into the sanctioned legal system. In Benin, specialized ‘tribunaux de conciliation’ hears cases on a broad range of civil law matters. Results are then conveyed to the court of first instance where either a prosperous conciliation is confirmed or the higher court assumes jurisdiction. Similar panels also operate, in varying modes, in other francophone African nations.[21]

The [Harvard] Program on Negotiation (PON) is a university consortium dedicated to developing the theory and practice of negotiation and dispute resolution. As a community of scholars and practitioners, PON serves a unique role in the world negotiation community. Founded in 1983 as a special research project at Harvard Law School, PON includes faculty, students, and staff from Harvard University, Massachusetts Institute of Technology and Tufts University."[22]

The City University of New York Dispute Resolution Consortium (CUNY DRC) serves as an intellectual domestic to dispute-resolution knack, staff and students at the City University of New York and to the diverse dispute-resolution community in New York City.

“Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser-in fees, and expenses, and waste of time.”  –Abraham Lincoln.