What is Alternative Dispute Resolution (ADR)?
What is Litigation?
A person, company or Government can be a party in civil litigation proceedings. A party may either be the complainant who is bringing forth an action to protect their civil rights or a defendant who will respond to the arguments raised by the complainant. During the court of civil litigation, each party will present their case to the court so that the judge can establish if either party has had their civil rights breached. After considering all evidence and hearing the arguments from both parties the judge will consider if there has been a breach of any civil rights. The judge will then apply the appropriate remedy or compensation to the party that has had their civil rights infringed. If the complainant is successful then judgment will be given in the complainant’s favour. The judge may also apply various court orders to either enforce a right, award damages or impose injunctions (to prevent or compel an act).
There are applicable cost orders that the judge may consider after deciding the outcome of the case. The judge may order that the losing party will pay the costs of the bringing the action to court to the winning party. This is usually for expenses that the party had to incur because of the whole process of litigation, such as for the preparation of the case and any solicitors or barristers fees. These costs tend to be separate from the amount that the judge will order the losing party to pay the winning party as a result of the judgment. The costs involved with the preparation of the bringing the case to court can therefore sometimes be substantial depending on the number of documents involved, the time spent and the complexity of the case. It is therefore important to bear this in mind when considering whether to bring a claim.
What is Alternative Dispute Resolution? – (ADR)
Civil litigation may therefore involve alternative dispute resolution. The cost of litigation can be significantly high depending on various factors involved in the case. There is therefore another form of dispute resolution known as ‘Alternative Dispute Resolution’ more commonly referred to as ADR. ADR is a method which aims to relieve the problems between the parties but seeks to minimise the costs involved by avoiding expensive court costs. ADR has therefore been used as a collective term for the ways in which parties can settle disputes and is an alternative to a formal court hearing or litigation. The most common forms of ADR include mediation and arbitration.
What is Arbitration?
Arbitration is a legal process which avoids the use of a court judge but at the same time still allows for the issuing of an award to the party who has had their civil rights infringed. The parties to a dispute are referred to one or more persons known as ‘arbitrators’. In arbitration, an arbitrator will assist the two parties in reaching some form of an agreement. The arbitrator will review the case and then impose a decision that is legally binding for both sides. Arbitration is therefore distinct from other forms of alternative dispute resolution that are not binding in nature. The process is similar to mediation in nature but the primary distinction is that the where the mediator aims to reach a compromise between the two, any decisions made are not legally binding.
Arbitration is governed by the Arbitration Ordinance (Cap 341). It is common that the parties have already agreed to this process under a clause contained in the commercial contract. Arbitration can only take place if the two parties agree to it, hence, in signing the contract, the parties have already agreed that their dispute will not be heard by judge in court but by an arbitrator. The decision of the arbitrator is final and can only be challenged in exceptional circumstances.
The Advantages of Arbitration
Arbitration is sometimes favoured over court proceedings because the process tends to be faster than if the case were to go to court. The arbitrator may also have a greater degree of expertise in the area that is under dispute. It is favoured as a form of dispute resolution because it tends to be cheaper and more flexible for the two parties that are involved. Arbitration also allows for matters to remain confidential and can sometimes preserve the business relations between the two parties.
The Disadvantages of Arbitration
Arbitration is in a way much like litigation in that final decisions are binding. However, much like litigation, the case can become highly complex. It can also be a slow process when there is a panel of arbitrators. Like litigation, it can also get costly when there are more arbitrators. An arbitrator may also make the award on the broad principles of ‘equity’ and ‘justice’ and not the rule of law or evidence.
What is Mediation?
Mediation is a form of alternative dispute resolution and it is the form of ADR that is recommended by the judiciary. Mediation is also completely voluntary. The process is also more flexible and it is for the parties to decide whether to settle and on what terms. A settlement after mediation produces an agreement as opposed to an enforceable award in arbitration. The mediator acts as a neutral third party that assists both parties whilst at the same time they remain in control of the whole process.
The Civil Justice Reforms in April 2009 placed emphasis on solving disputes without the need to go to court. This has therefore placed greater emphasis on the process of mediation. There have also been changes to both the rules of the High Court and rules of the District Court to reflect the new reform. Mediation is a favourable method of ADR because it tends to allow for a win-win situation, there does not necessarily have to be a winning and losing party in the dispute. The two parties may be happy with the outcome and able to maintain business relations with one another.