Alternative Dispute Resolution (“ADR”) refers to any means of settling disputes outside of the courtroom. ADR typically includes early neutral evaluation, negotiation, conciliation, mediation, and arbitration. As burgeoning court queues, rising costs of litigation, and time delays continue to plague litigants, more states have begun experimenting with ADR programs. Some of these programs are voluntary; others are mandatory.
While the two most common forms of ADR are arbitration and mediation, negotiation is almost always attempted first to resolve a dispute. It is the preeminent mode of dispute resolution. Negotiation allows the parties to meet in order to settle a dispute. The main advantage of this form of dispute settlement is that it allows the parties themselves to control the process and the solution.
Mediation is also an informal alternative to litigation. Mediators are individuals trained in negotiations, who bring opposing parties together and attempt to work out a settlement or agreement that both parties accept or reject. Mediation is used for a wide gamut of case-types ranging from juvenile felonies to federal government negotiations with Native American Indian tribes. Mediation has also become a significant method for resolving disputes between investors and their stock brokers.
Arbitration is a simplified version of a trial involving limited discovery and simplified rules of evidence. The arbitration is headed and decided by an arbitral panel. To comprise a panel, either both sides agree on one arbitrator, or each side selects one arbitrator and the two arbitrators elect the third. Arbitration hearings usually last between a few days to a week, and the panel only meets for a few hours per day. The panel then deliberates and issues a written decision, or arbitral award. Opinions are not public record. Arbitration has long been used in labor, construction, and securities regulation, but is now gaining popularity in other business disputes.
Title 9 of the U.S. Code establishes federal law supporting arbitration. It is based on Congress’s plenary power over interstate commerce. Where Title 9 applies, its terms prevail over state law. There are, however, numerous state laws on ADR. Forty-nine states have adopted the 1956 version of the Uniform Arbitration Act as state law. The act was revised in 2000 and subsequently adopted by twelve states. The arbitration agreement and award is now enforceable under both state and federal law.
In 1958, the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards was drafted to aid in the enforcement in domestic courts of awards granted in foreign countries. As of August 2007, there were 142 countries participating in the convention. In 1970, the United States joined the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
Robbins, S. P. & Judge, T. A. (2011). Organizational behavior (14th ed.). Upper Saddle River, NJ: Pearson/Prentice Hall.
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