ADR: Good, Bad, and Ugly

| Sep 15, 2020 | Business Litigation

Commercial disputes can be highly complicated and nuanced. And organizations have a lot on the line — from corporate resources, to relationships with employees, shareholders, and clients.

Thus, business owners confronted with a legal issue should examine all possible routes for resolving the matter. In some cases, avoiding litigation altogether is often the best decision for executives. However, determining there are benefits and drawbacks to alternative dispute resolution (ADR).

Benefits of ADR

Parties who resolve a commercial issue like breaches of contract, copyright infringement, or a real estate dispute without going to court can benefit in several ways.

    • ADR can yield faster results, as the process is streamlined, and company executives are not at the mercy of the court’s schedule.
    • Parties have more control over the outcome.
    • Fewer company resources can be tied up, leaving more money and people to continue operations.
    • Resolutions can be held in a confidential manner, thereby protecting sensitive business information.
    • The legal process is simplified, meaning the organization can spare resources, time, and energy that would be spent combating the legal threat.
    • Reaching amicable solutions can keep existing – and potentially strategic — relationships intact.
    • These benefits can be highly attractive to businesses that would prefer an expeditious, amicable, and less expensive outcome.

Drawbacks of ADR

Despite the many advantages of ADR, it is not always the best option. Consider the following drawbacks of ADR:

    • It can lack the finality of a court ruling.
    • It could ultimately look a lot like litigation despite the streamlined package it comes in.
    • If parties cannot agree on specific facts, it can be unsuccessful.
    • Both parties must agree to either arbitrate or mediate the dispute – choices are limited.
    • There may be no option to appeal the outcome.
    • Third-party neutrals, including arbitrators, may not be equipped to address complex, highly technical matters.

Depending on the details of a specific dispute and the goals of the parties, these drawbacks could outweigh the benefits of ADR.

Finding the right solution

If your company is involved in a legal dispute, it is crucial to work with an attorney to better understand the options you have for securing a resolution, including the various types of ADR and litigation.

It can also be crucial to consider these options when it comes to drafting agreements with partners, employees, and others so that you do not overlook dispute resolution guidance in these documents.