A short guide to the different forms of dispute resolution.
International dispute resolution (and dispute prevention) tools provide an alternative or a supplement to litigation within national legal systems which are sometimes perceived as biased in favour of the “local” party. Because of its international focus, adaptability, alternative dispute resolution (ADR) provides the flexibility and intercultural sensitivity that is needed to bring together parties from diverse cultures who may have differing expectations about laws and legal practice. In contrast to litigation, ADR also provides confidentiality, which can be important in business settings. ADR clauses are often included in cross-border transactions.
Being aware of the range of available alternative services (including negotiation mediation, conciliation, arbitration, adjudication, litigation and hybrid processes) reduces the uncertainty and cost of cross-border business transactions.
Litigation takes place in a court before a judge and parties are generally represented by a lawyer. Once the court has made a ruling the parties are bound by the decision although they may be able to appeal to a higher court.
In arbitration, the parties agree to abide by a decision made by a third party, usually a panel of three arbitrators or a single arbitrator. Arbitration works like an informal court consisting of a neutral arbitrator or a panel of arbitrators. When parties agree to settle their dispute by arbitration, the resulting decision is binding.
All parties come together or send a representative to try to come to an agreement. Distributive negotiation is sometimes compared to haggling at a market, each party attempting to get the best deal for themselves or their clients. Integrative negotiation tries to find and satisfy the underlying needs of each party.
A neutral third party (the mediator) listens to the arguments of all sides and then helps the conflicting parties come to an agreement. The mediator does not give input but steers the discussion to come to a solution.
Conciliation is similar to mediation in that it encourages parties to reach a solution through a structured dialogue. However it sets itself apart from mediation in that a conciliator will provide input and make suggestions to the parties as to how best to come to an agreement.
An adjudicator considers all the evidence and argumentation, including legal reasoning set forth by opposing parties or litigants to come to a decision which determines rights and obligations between the parties involved. Adjudication is often used to resolve disputes in the construction industry.
Unlike litigation, ADR methods such as arbitration, adjudication, conciliation, mediation and negotiation are confidential processes – this makes it easier for the parties to continue an existing business relationship. However, where parties cannot agree on the method of dispute resolution or they are unable to come to a conclusion through ADR this often remains the only option.