LA4034 - Alternative Dispute Resolution: A Critical Evaluation

This essay provides a comprehensive analysis of Alternative Dispute Resolution (ADR) methods, examining their advantages and disadvantages in comparison to traditional litigation. It highlights the benefits of ADR, such as time and cost savings, party autonomy, increased satisfaction, and confidentiality. However, it also addresses the drawbacks, including potential for unfair outcomes due to unequal bargaining power, limited enforceability, and the risk of unsuccessful resolution leading to additional costs. The essay references case law to illustrate the importance of good faith and mutual agreement in ADR processes, ultimately concluding that while ADR offers valuable benefits, its effectiveness depends on various factors and it may not always be a suitable alternative to litigation. Desklib offers a platform for students to access this and other solved assignments to aid in their studies.

Running head: BUSINESS LAW
Business Law
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1BUSINESS LAW
Disputes and disagreements are common wherever there exists a relationship whether
commercial or personal. These disputes are required to be addressed and a resolution is
required to be arrived at whenever such a dispute arises. Apart from the formal dispute
redressing and resolution such as litigation there exists other ways for resolution of disputes.
The alternative dispute resolution is an important and effective dispute resolution that can be
effectively applied to disputes in order to achieve a resolution. The alternative dispute
resolution comprises of various methods and techniques through which a dispute can be
resolved. It provides people with a way to avoid the hassles of going to a court whenever they
face a legal dispute. It has the objective of the resolution of disputes, which can be settled
outside the courts. In case of the alternative dispute resolution, a neutral and independent
third party is appointed by the disputing parties who strives to resolve the dispute by
narrowing down the extents of conflict (Sourdin, 2002). Generally, there are four forms of
alternative dispute resolution. These includes mediation, negotiation, arbitration and
conciliation. This essay will strive to analyse and discuss the different advantages and
disadvantages of the different methods of the alternative dispute resolution.
There are several advantages that suggests increased use of the alternative dispute
resolution and demands a more popular us of the same. The first advantage that can be
attributed to the alternative dispute resolution is the time reduction. The various techniques of
alternative dispute resolution provides a speedy and instant remedy to the disputing parties. In
case of litigation, the procedure is quite lengthy and time consuming. This will further have
the option of appeals and judicial review, which might take years or even decades to arrive at
a solution. However, alternative dispute resolution does not have such scope of further
appeals in most of the cases. Again, in case the decision arrived at in an Alternative Dispute
Resolution does not satisfies the disputing parties, there is a scope of internal appeals and
even judicial interventions to be availed with respect to the matter (Astor, & Chinkin, 2002).

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The alternative dispute resolution methods are economically convenient as a way of
dispute resolution. It takes a much reduced cost in comparison to the litigation. The
appointment of counsels, attorneys and the cost of the proceedings make the litigation much
expensive than the alternative dispute resolution processes. However, the cost of arbitration
generally comprises of the cost of appointing the arbitrator and the minimum price relating to
the proceeding (Callahan, 2006).
In case of the methods of the alternative dispute resolution, the parties have the liberty to
decide or choose, which laws they desire to apply to their dispute resolution. These methods
allows the parties to make choices about the set of rules they desire to apply and the way in
which they are willing to decide their case. Moreover, in case of these methods of dispute
resolution, the parties have the liberty to appoint the third party by whom they wish to resolve
their dispute (Fulton, 1989).
It has been conceived from the previous records of dispute resolution that the settlements
arrived through the methods of alternative dispute resolution are more apt and effective than
the litigation. The history of dispute resolution provides more favourable results to the
settlement arrived through dispute resolution than through litigation. The alternative dispute
resolution has the more escalated efficiency rate than the litigation (Astor, & Chinkin, 2002).
The disputing parties are seemed to be more satisfied with the results of the alternative
dispute resolution than the results of the litigation. The parties are free to decide the set of
rules applicable and the neutral third party they are willing to appoint. There exists a scope of
reliance that the parties feel towards the decision arrived at through the processes of the
alternative disputes resolution. Hence, the parties are more likely to find them satisfactory
and reliable than the decisions of the courts that are arrived at in case of litigation (Callahan,
2006).

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The reliability of the parties in the decisions of the alternative disputes resolution methods
are more compared to the reliability in the decision in litigation. This reliability and
agreement brings a sense of compliance among the disputing parties. The parties are more
prone to abide by the decision given by the alternative dispute resolution methods than by the
litigation. This compliance is ensured because of the satisfaction that the disputing parties
have conceived from the reliability that they have obtained from the dispute resolution
process (Sourdin, 2002).
Moreover, the neutral third party who has been appointed to carry out the decision making
process in case of the alternative dispute resolution, are more knowledgeable in the field of
the dispute. This also inculcates an essence of competence in the decision making process.
The third party is generally an expert or a person who is acquainted with the specialised
knowledge that the dispute requires. However, in case of litigation the judge who is appointed
to address and resolve a particular issue does not generally have the knowledge and
experience of the field of the dispute and is required to avail expert opinion for the resolution
of the dispute. However, in case of the alternative dispute resolution, the third party has the
knowledge of the subject and the acquaintance with the conditions and the nature of the
dispute as the neutral third party in most of the cases are appointed way before the disputes
has been arrived at (Astor, & Chinkin, 2002).
In case of litigation, the decision may be tainted with the opinion of the judge or jury
about the parties to the dispute. However, in case of the various methods of alternative
dispute resolution, the third parties are generally appointed by both the parties to the dispute
and this makes the decision more neutral and just than the decision arrived at by the courts in
case of litigation.

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The proceedings in case of the alternative dispute resolution are generally private
proceedings. This private nature of the proceedings makes it more confidential than litigation.
In case of litigation, the involvement of witnesses and press are more likely to make it more
public and exposed in nature. However, in case of the alternative dispute resolution, the
private nature of the same makes it more confidential and the reputation of the parties remain
intact. Moreover, the decisions arrived at in case of the alternative dispute resolution methods
are a result of negotiation and cooperation. It indicates more of an agreement than to declare
a winner or a loser. This makes the techniques of dispute resolution more apt and acceptable
for the parties to the dispute (Sourdin, 2002).
However, although the alternative dispute resolution methods are extremely advantageous,
they also suffer from a considerable amount of defects and are not preferred by the disputing
parties in most of the cases. The decisions of the alternative dispute resolution being achieved
by agreements, cooperation and negotiation, the same suffers from many flaws. In numerous
events, these processes of dispute resolution fails to generate a proper resolution of the
disputes owing to its approach towards the dispute and it non-authoritative nature. This
makes it evident that a proper and appropriate resolution is not guaranteed under this method
of dispute resolution (Fulton, 1989).
The decisions of these methods of dispute resolution are ultimate and an appeal does not
really lies from the same. This might create a sense of disagreement in the minds of the
parties without any choice of resolution of such disagreements. The decision of the arbitrator
who is a neutral third party cannot be subjected to an appeal. This makes the neutral third
parties to be more prone to be arbitrary and erroneous in their decisions. This leaves the
aggrieved party to either accept the defective decision or go for a litigation (Callahan, 2006).

5BUSINESS LAW
Moreover, arbitrations are mostly applicable in the disputes that involves monetary
transactions or the result or claim in which involves a monetary gain. Owing to its non-
authoritative nature, it does not have the right to try or decide cases, which are beyond the
scope of monetary damages. The crimes does not lies within the scope of the alternative
dispute resolution for its non-binding and negotiating nature. The alternative dispute
resolution cannot issue orders that can compel the parties to follow the same. The
authoritative nature of the litigation makes the decisions of the same to be more compelling
and acceptable to the parties and the compliance to the same is more probable in case of
litigation, which is not that probable in case of arbitration (Fulton, 1989).
The enforceability of arbitration has been ensured by different treaties. These treaties has
been entered upon to solidify the enforceability of the arbitral awards. The United Nations
Convention for the Recognition and Enforcement of Foreign Arbitral Awards of 1958
facilitates the enforceability of the arbitral awards. However, due to lack of punitive
sanctions, the enforceability of these awards through these treaties are not completely ensured
(Sourdin, 2002).
Moreover, in case of arbitration the results of the same has the option of being disobeyed
and not complied with. This may lead the aggrieved parties to avail the options of pursuing
litigation, which might incur an additional cost to the disputing parties. This makes the choice
of alternative dispute resolution more expensive and lengthy than litigation. This is because it
makes both the cost of alternative dispute resolution methods and litigation included in case
the matter cannot be aptly resolved with the help of alternative dispute resolution. This can be
illustrated with the case of Capolingua v Phylum Pty Ltd(1991) 5 WAR 137.
In the case of Aiton Australia Pty Ltd v Transfield Pty Ltd [1999] NSWSC 996, it has
been held that the enforcement of an clause of alternative dispute resolution is only available

6BUSINESS LAW
to the parties if the same has been carried out with a good faith to avail just and proper
resolution. In the absence of such a good faith the clause of dispute resolution cannot be
enforced.
In the case of Morrow v Chinadotcom [2001] NSWSC 209, it has been held by the court
that the alternative dispute resolution can only be useful or can bring desired results to the
parties, if the same has been opted for by both the disputing parties. In case any of the parties
are not willing or is not eager to rely upon the decision of the alternate dispute resolution
methods, the same cannot be enforced upon the parties. The methods of the alternative
dispute resolution is more of an agreement and cooperation between the parties and the same
cannot be enforced if any of the parties fails to embrace the same.
In the case of Harrison v Schipp [2002] NSWCA 27, the court has ordered for a litigation
over alternative dispute resolution because one of the parties to the contract has refused to opt
for the alternative dispute resolution. In this case, moreover, the court has conceived that
litigation will be more appropriate owing to the situation than other methods of dispute
resolution.
In the light of the above discussion, it can be concluded that, the various techniques of
alternative dispute resolution provides a speedy and instant remedy to the disputing parties. In
case of litigation, the procedure is quite lengthy and time consuming. However, in case of
arbitration the results of the same has the option of being disobeyed and not complied with.
This may lead the aggrieved parties to avail the options of pursuing litigation, which might
incur an additional cost to the disputing parties. This makes the choice of alternative dispute
resolution more expensive and lengthy than litigation. Again, the neutral third party who has
been appointed to carry out the decision making process in case of the alternative dispute
resolution, are more knowledgeable in the field of the dispute. This also inculcates an essence

7BUSINESS LAW
of competence in the decision making process. The third party is generally an expert or a
person who is acquainted with the specialised knowledge that the dispute requires. However,
the alternative dispute resolution can only be useful or can bring desired results to the parties,
if the same has been opted for by both the disputing parties. In case any of the parties are not
willing or is not eager to rely upon the decision of the alternate dispute resolution methods,
the same cannot be enforced upon the parties. The methods of the alternative dispute
resolution is more of an agreement and cooperation between the parties and the same cannot
be enforced if any of the parties fails to embrace the same.

8BUSINESS LAW
Reference
Aiton Australia Pty Ltd v Transfield Pty Ltd [1999] NSWSC 996
Astor, H., & Chinkin, C. (2002). Dispute resolution in Australia (No. 2nd). LexisNexis
Butterworths.
Callahan, R. (2006). Arbitration v. Litigation: The Right to Appeal and Other Misperceptions
Fueling the Preference for a Judicial Forum. bepress Legal Series, 1248.
Capolingua v Phylum Pty Ltd(1991) 5 WAR 137
Fulton, M. J. (1989). Commercial alternative dispute resolution. Lawbook Company.
Harrison v Schipp [2002] NSWCA 27
Morrow v Chinadotcom [2001] NSWSC 209
Sourdin, T. (2002). Alternative dispute resolution.
The United Nations Convention for the Recognition and Enforcement of Foreign Arbitral
Awards of 1958