What is ADR Mechanism

What is ADR Mechanism

ADR Mechanism refers to private mechanisms of resolving disputes outside of the Court processes allowing parties to tailor their process in order to incorporate the needs of both parties. Alternative Dispute Resolution comprises all mechanisms for resolving legal disputes without resorting to litigation. In other words, under ADR Mechanism, any dispute between two parties is resolved outside of the Traditional Court System. ADR Methods such as Arbitration & Conciliation offer decisions which are legally binding & enforceable. Trials are not the only way to resolve the dispute. One of the best things about ADR is that it presents opportunities for Managers & Lawyers to be creative. Litigation, the most adversarial system, is based solely on legalistic evaluation in Dollar Terms. With the active involvement or management, ADR makes it easier to view disputes as a business problem and investigate business solutions contrary to the litigation where dispute resolution is viewed as a Lawyer’s problem. ADR Mechanism requires great participation by the disputing parties and responds to it more positively. A Manager’s investment or time & efforts will generate excellent returns in the long run. Unlike litigation where one party loses & the other wins, but in ADR Mechanism both parties through settlement reach to a win-win situation.
Below are the four basic methods:

Four Basic Methods

Arbitration is a process where parties agree to resolve the dispute by bringing the matter before a Neutral Third Party, i.e. an Arbitrator, for decision. During an arbitration hearing, both parties, with their respective Lawyers, will present their case to the Arbitrator. The Arbitrator will make a binding decision based on the merits of the case, i.e. the parties must obey the Arbitrator’s decision. One of the perceived advantages of Arbitration is that it gives a final & binding award.

Arbitration Rules are up to the Disputants to decide, but in practice mostly adopt either UNCITRAL Arbitration Rules or the procedures recommended by American Arbitration Association or other leading Trade & Commerce Associations, Arbitral Institutions. In essence, the parties to the dispute choose either a Single Arbitrator or a Panel of Arbitrators (usually 3) who then hear events & arguments from Attorneys and render a legal binding in enforceable decision. The advantages are relaxed discovery, relaxed rules of evidence, quicker hearings, quicker results & drastically reduced cost. In case of a Panel of 3 Arbitrators, they can each pick 1 Arbitrator and their chosen Arbitrators select a Neutral to Chair an Arbitration Panel. Arbitrators are not required to have legal background. In India, the Arbitration is governed by the Arbitration & Conciliation Act 1996. The Arbitration Act is largely based on the UNCITRAL Model Law. In India, the Law of Limitation that applies to a Civil Suit also applies to Arbitration.

Administered Arbitration

Arbitration conducted with the assistance of an Arbitral Institution, Trade Association or other Body. In Institutional Arbitration, the concerned Arbitral Institute takes on the role of administering the Arbitration Process. Such Institutions have their own set-of rules which provide a framework for the Arbitration and provide Administrative Assistance. In Institutional Arbitration, the Arbitration Agreement may stipulate that in case of dispute or differences arising between the parties, they will be referred to a particular Institution. Services provided in Administered Arbitration include the appointment of the Tribunal, monitoring the progress of the Arbitration, Scrutiny of Arbitral Awards, Managing Funds & Tribunal Fee Payment and determining any challenge to the Tribunal.

Ad-hoc Arbitration

It refers to Arbitration where the procedure is either by the parties or in the absence of an Agreement, the procedure is laid down by the Arbitral Tribunal. Thus, it is an arbitration agreed to and arranged by the parties themselves without seeking the help of any Arbitral Institution. In India, in Ad-hoc Arbitration, if the parties are not able to nominate Arbitrator(s) by consent, the appointment of Arbitrator is made by the High Court (in the case of Domestic Arbitration) and by the Supreme Court (in the case of International Arbitration).

Conciliation is a process where third party Neutral plays a proactive role. This involves building a positive relationship between the parties of dispute. The Conciliator is an impartial person that assists the parties by driving the negotiation towards a satisfactory agreement. Unlike Arbitration, it is much less adversarial proceedings. In Conciliation, the Conciliator plays a relatively direct, proactive & interventionist role in the actual resolution of a dispute and even advises the parties on certain solutions by making proposals for settlement. Conciliators make proposals and formulate & re-formulate terms of a possible settlement. Conciliation is a Court dispute resolution process for you and the other party in your case to resolve your dispute without going for a trial in Court. It allows you and the other party to seek guidance from the Judge during the conciliation session and tap on his experience and knowledge to come up with an optimal settlement for all of you. One of the perceived advantages of Conciliation, in India, is that its settlement has the same status & impact as if it is an Arbitral Award on agreed terms and is governed by Arbitration & Conciliation Act 1996.

Mediation is more a passive process in which a Neutral third party, i.e. a Mediator, facilitates and guides the parties in negotiating a mutually acceptable settlement to their dispute. The Mediator does not determine who is at fault in the dispute. Instead, he helps the parties to focus on finding solutions that meet their concerns, without forcing a decision on either party. A Mediator assists the parties in identifying and articulating their own interest, priorities, needs & wishes to each other.

Mediation differs greatly from Arbitration in that the Neutral Third Party, the Mediator does not impose a solution. The object of the Mediation to help the party to resolve their own disputes. Mediation has been used to settle conflicts of every kind Normally, a good Mediator might do everyone of the following things, in roughly the following orders:

  • • Urge Participants to talk to each other
  • • Help them to understand the nature & objective of Mediation
  • • Carry Messages
  • • Help the Parties Agrees on the Agenda or Failing that, Set an Agenda
  • • Provide a suitable environment for Negotiation
  • • Maintain Order
  • • Help Disputants understand their problems & the source of their conflicts
  • • Defuse unrealistic expectations
  • • Help Participants develop their own proposals
  • • Help them Negotiate
  • • Suggest Solutions
  • • Persuade them to accept a specific resolution

Neutral Evaluation is conducted by a Neutral Third Party, i.e. an evaluator, who will review the case and provide an early assessment of the merits of the case. During Neutral Evaluation, the parties with their respective Lawyers, will present their case and the key evidence to the Evaluator. The Evaluator will then provide his best estimate of the parties’ likelihood of success at trial. Neutral Evaluation is a service provided by the SCCDR where a Judge will be your Evaluator.