This article has been written by Adil Rashid Bhat, pursuing Diploma in Corporate Litigation and has been edited by Oishika Banerji (Team Lawsikho).
It has been published by Rachit Garg.
Alternative Disputes Redressal Methods (ADRM) are the possibilities found and utilised for redressal of disputes, contract breach, problems faced and other related issues of the business between Partners, Third Parties, Financers, Employees, Share Holders, etc, Alternative Disputes Redressal Methods usually are utilised to avoid direct court proceedings which are time consuming taking years of litigation process and also the information which has to be exchanged between. There are various ADR methods that are put to use from time to time on the basis of the circumstances. This article is a comparative analysis of the same with focus resting on pros and cons of each method.
Types of alternative dispute redressal methods
Types of alternative disputes redressal methods are:
Arbitration can be defined as a measure to settle the dispute between the parties by any third party involvement. Usually, an odd number of persons is present as arbitrators for settlement of any dispute, arising out of breach of contract, outside the courts. The same happens in a time bound manner without disclosing the facts and sensitive or critical information in front of the general public or competitors of business and solving the disputes in private. Arbitration clauses for resolution through any alternate remedy, can be part and parcel of the already existing agreement or can be mutually decided by the parties to the agreement to settle the matter through alternate remedy.
Ad hoc arbitration
Ad hoc arbitration is when there is no predefined arbitration clause in the agreement or if there is no agreement at all and therefore a procedure is laid down by the parties themselves to solve the dispute without insight to the arbitral institution at their own mutual understanding.
Institutional arbitration is when arbitration is carried out by rules and regulations defined and a framework given for settlement of disputes between the parties by any arbitrational institution under proper assistance from the arbitrational institution and then the disputes are settled between the parties, the same is referred to as Intuitional Arbitration.
Domestic and international arbitration
Domestic arbitration is an centuries old tradition of India, which has developed to the level, which level is referred to as Panchayat. Nowadays, Panchayats are governed by their own act and separate law has been formulated for meeting international standards of developing countries, in which councils of elected or selected people from any village, etc are being given recognition by law or by people of the area. The council consists of few members and a head who will settle any type of dispute outside the court without interference of the court of law and their decisions are bound upon the parties to the dispute and their heirs, representatives and successors.
India is a democratic country and is committed to its growth and development through concrete policies with respect to other countries law, As per Article 51(c) of Constitution of India, India shall try hard to achieve:
- Encourage the development of respect for international law,
- Treaty obligations in the dealings of organised peoples with one another; and
- Encourage settlement of international disputes by arbitration.
Mediation is a process wherein a person who is not the party to the dispute mediates between the parties to dispute and help them to reach a mutually agreed upon decision, mediator who takes the mediation process is a neutral person who only assists the parties to reach a solution to resolve the dispute. Mediation is a very fast and cost effective method to resolve the disputes by the parties even if the relationships between the parties after the mediation process does not come to an end but can be preserved even sometimes the bond can be stronger than the existing one between the parties to dispute.
Mediation process being a non binding and non coercive one in nature is a very confidential process which is not governed by any set rules to follow but can be done to secure the interests of individual parties through their own free will and choice, beside mediation is taking place in private without disclosing the facts and critical information before general people, a basic framework has been given in Part-3rd of Arbitration and Conciliation Act, 1996.
A conciliator is the main person in the conciliation process, conciliator utilises his expertise to make parties to the dispute to come to a settlement for which the conciliator takes individual efforts to meet all the parties to the disputes on one on one basis or together. The conciliator’s main role remains to motivate the parties to the dispute to settle the dispute amicably after improving communications or utilising other tools or methods to come out of the situation which has pushed the parties into the dispute and sour their relations. Conciliation like mediation is also a non-binding process upon all the parties to the dispute and also the process is a risk free process and very flexible as per convenience of the parties.
Negotiation is also a dispute resolution method used to negotiate between the parties and make them agree to resolve the dispute through the process of negotiation in which the third person who negotiates between the parties is called as negotiator who tries and implements different styles, methods and techniques to agree the parties to come on table of negotiation and settle the dispute amicable without involvement of court of law, it is also confidential process and parties and process of negotiation is not binding on the parties but they are at their liberty to file a case before any court of law.
Comparison between ADR methods
Comparison between different types of Alternative Disputes Redressal Methods:
|01||Proceedings are conducted by an Arbitrator||Proceedings are conducted by a Mediator/ Facilitator||Proceedings are conducted by a Facilitator/ Evaluator||Proceedings are conducted by a Facilitator|
|02||Award of compensation is binding upon parties to the dispute||Proceedings are not binding on Parties||Proceedings are not binding on Parties||Proceedings are not binding on Parties|
|03||Fixed time framefor proceedings||No fixed time Frame||No fixed time frame||No fixed time frame|
|04||Formal proceedings are taking place under proper rules||No formal proceedings will take place||Informal proceedings||Informal proceedings|
|05||Proceedings in private||Proceedings in private||Proceedings in private||Proceedings in private|
|06||Confident sharing of details and proceedings as per law||Trust-based confidentiality of proceedings||Confident sharing of details and proceedings as per law||Trust-based confidentiality of proceedings|
|07||Fruitful outcome of proceedings||No fruitful outcome||No fruitful outcome||No fruitful outcome|
Pros and cons of ADR methods
Pros of the arbitration process
- Arbitration process is very flexible in nature.
- Arbitrator is mutually selected by the parties to the dispute.
- There is a fixed time frame as compared to courts.
- Proceedings are confidential in nature, and
- Award of compensation is binding upon the parties.
Cons of the arbitration process
- Aggrieved parties cannot approach court directly if arbitration clause is present in the agreement,
- Scope of appeal is very low,
- There is no scope for interim applications for any interlocutory orders,
- Judicial sanction is required for execution of the award.
Pros of the mediation process
- Settlements are done as per wishes of the parties,
- Parties have control over the process of the mediation and its steps,
- Proceedings are private and confidential,
- Relationships are secured during mediation due to amicable settled guidelines
Cons of the mediation process:
- Due to control of parties over proceedings, settlements may be hard to achieve.
- No judicial support for its applicable, because settlement is not enforceable.
- No formal proceedings will occur but parties will decide the procedure.
- Main issue may not be resolved due to non revealing of critical information before the mediator.
Pros of the conciliation process
- Process is informal and flexible in nature,
- Conciliator sometimes may be an expert of the dispute matter which has be raised,
- Very economical process as compared to other methods.
- If parties are not satisfied with the proceedings, any party can approach the court of law for redressal of the disputes.
Cons of the conciliation process
- No proceedings are binding upon their parties.
- Sometimes parties may not arrive at any settlement of the dispute.
- No settlement is enforceable by law nor there is any provision of appeal.
Pros of the negotiation process
- Process is flexible and very much informal in nature,
- Healthy relations can be maintained and enhanced between the parties to dispute,
- Very flexible and confidential processes,
- It is a very quick process as compared to other ADR methods.
Cons of the negotiation process:
- Very less chances of settlement.
- Not enforceable before any court of law.
- Parties can protect their rights resulting in no settlement or no negotiation.
ADR methods are very useful tools for resolving disputes without direct or no interference from the courts at all. These methods are very economical in nature and should be adopted to resolve maximum disputes arising from breaches or contracts or otherwise. Alternative methods of dispute resolution are playing a great role in society by providing flexible, cost-effective, time bound procedures, and also decreasing the load of the courts and also helping businesses to maintain healthy relations thereby saving money and time and getting back to business as soon as possible.
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