The Different Types of Alternative Dispute Resolution

The main types of alternative dispute resolution are:

• Arbitration;
• Mediation; and
• Expert determination.

Each of the types named above approach dispute resolution in slightly different manners.

Mediation

Mediation involves a structured and guided negotiation process. This negotiation process is facilitated by a mediator. A mediator is an impartial and neutral third party who assists parties to negotiate and ultimately reach a mutually acceptable agreement. It is important to remember that the role of the mediator is not to act as the decision-maker, nor to take sides. The mediator should instead be thought of as the facilitator, which creates an environment where parties feel comfortable discussing their issues and concerns. 

The process of mediation is a valuable tool, as it assists parties to better communicate with each other; identify and understand the key issues and concerns they may have; it allows for a better understanding of the interests of the other party; it encourages parties to develop solutions and consider alternatives; and guides the parties to reach an outcome which is beneficial for those involved.

Mediation focuses on the interests of the parties, rather than simply on their legal rights. This means that certain additional factors may be taken into consideration, such as commercial pressures, personal emotions, and other surrounding circumstances.

Even if the process ultimately proves to be unsuccessful, such that an agreement or settlement is not reached, it may still assist in narrowing the issues in dispute; considering the costs and risks associated with the dispute if it is to be litigated; and potentially allow for communication lines to be re-established between the parties. 

Arbitration

Arbitration differs from mediation, in that the dispute is submitted to and determined by the arbitrator. This means that the arbitrator is the decision-maker and will possess the power to impose a binding decision on the parties involved. The arbitrator in this sense can be likened more to a judge than a mediator. In fact, arbitration is often thought of as a direct substitute of litigation. However, it allows the parties to minimise publicity that may impact their reputation and proves more beneficial for maintaining a business relationship afterwards. By agreeing to arbitrate, the parties are bound by the decision of the arbitrator. Though the decision is binding, the parties may appeal the award. However, the arbitrator’s award may be appealed on limited grounds and recourse to the courts for setting aside the award is rather narrow.

With the increase of globalisation, arbitration has become a valuable tool within the international arena. For example, cross-border investment and trade may mean that the parties are in different jurisdictions. This is likely to make litigation difficult. Arbitration allows for a neutral forum to be selected by the parties. Often, parties will prefer not to submit to arbitration in the jurisdiction of the other party, but rather prefer for the dispute to be resolved by a neutral forum.

Expert Determination

Expert determination involves an independent expert making a decision about the dispute. The parties will usually agree beforehand whether or not they will be bound by the decision of the expert. This process is particularly useful where the matter is complex in nature and requires a certain degree of knowledge to understand the issues that are central to the dispute. This is particularly relevant in the commercial sphere. For example, the dispute may be in relation to financial records, possibly making it a technical dispute within the accountancy sector.

It is also important to note that the term “expert” in this context must not be confused with its more common association of an expert witness. The expert is not a witness here.

The parties should include an expert determination clause if they intend for an expert to be the decision-maker in the event of a dispute. The clause should typically cover the issue to be determined, the relevant expert’s qualifications and their appointment and payment of the expert’s fees. 

There is some disagreement as to which disputes should be referred to expert determination. It seems that expert determination is not appropriate for all disputes. For instance, there may arise issues if the dispute involves questions of credibility, as the expert does not have the ability to determine this. It is therefore important to be mindful of the possible issues that may arise.