Alternative Dispute Resolution Mechanism [ADR]

As we know that court of law is a process of “expense” and “suspense”, with so many cases lingering around, and taking loads of time, there exists a good alternative for commercial contracts.

In cases of conflict in commercial contracts, there exists a mechanism called alternative dispute resolution mechanism(ADR). Following are the steps involved:

  1. Negotiations :Negotiation is a dialogue between two or more people or parties, intended to reach an understanding and resolve point of difference.
  2. Mediation: In case bilateral negotiations fail, then mediation comes in. Typically, a third party, the mediator, assists the parties to negotiate a settlement.
  3. Conciliation: Conciliation is an alternative dispute resolution (ADR) process whereby the parties to a dispute use a conciliator, who meets with the parties separately in an attempt to resolve their differences.In conciliation the parties seldom, if ever, actually face each other across the table in the presence of the conciliator.
  4. Arbitration: Arbitration is a proceeding in which a dispute is resolved by an impartial adjudicator whose decision the parties to the dispute have agreed, or legislation has decreed, will be final and binding. There are limited rights of review and appeal of arbitration awards.

Advantages of arbitration over courts:

  • Parties can choose their own judges
  • Judges are always uneven, both parties selecting same number of judges, and all judges selecting the final and neutral judge
  • Panel can be well versed with the domain
  • Anyone can be the arbitrator
  • The results are not open in public domain, until and unless both parties agree
  • It can be carried out anywhere and anytime
  • An arbitration can’t be challenged in the court after award is announced.

It can be challenged in courts only under two scenarios:

  1. Very conclusively prove that judges are biased
  2. In cases where Arbitration panel questions the law (Why is tax 30% or so.)

This comes under Indian Arbitration and Conciliation Act, 1996, which is exact copy of the International Law, and is universally acceptable.

Is a party doesn’t pay Arbitration Award, then the other party can go to the court. Court will not reopen the case, but will take the award as final, and get other party to pay.

Cost of arbitration can be shared by both parties, or final panel can award the cost to one party.

Lok Adalat is a form of arbitration.

[This blog is captured from “Managing Commercial contracts” class notes (by Prof S. Shankar . Some information referred from Wikipedia/other listed sites.]


2 Responses to Alternative Dispute Resolution Mechanism [ADR]

  1. Niranjan says:

    well written Gurpreet

  2. ngdinesh says:

    ADR Certainly a mode suitable for commercial disputes as an ADDITIONAL OR APPROPRIATE dispute resolution

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