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The American Arbitration Association a public-service, not-for-profit
organization, has been the leading advocate of alternative dispute
resolution since 1926. ADR (Alternative Dispute Resolution) is a term
that refers to a variety of techniques for resolving disputes without
litigation. In keeping with its mission, the AAA is in the forefront of
efforts to create alternative systems that respond to the needs of
parties involved in disputes.
Two of the better known methods of ADR are mediation (in which the
parties to a dispute reach a voluntary settlement with the help of a
skilled facilitator) and arbitration (in which the parties choose a
disinterested neutral to whom to present their case for a legally
binding ruling). Many specialized rules and procedures have been
developed in cooperation with interested organizations and industries to
facilitate these dispute resolution processes.
Brief descriptions of some of ADR systems follow.
Arbitration is submission of a dispute to one or more impartial persons
for a final and binding decision. The arbitrators may be attorneys or
business persons with expertise in a particular field. The parties
control the range of issues to be resolved by arbitration, the scope of
the relief to be awarded, and many of the procedural aspects of the
process. Arbitration is less formal than a court trial. The hearing is
private. Few awards are reviewed by the courts because the parties have
agreed to be bound by the decision of their arbitrator. In some cases,
it is prearranged that the award will only be advisory.
Mediation involves an attempt by the parties to resolve their dispute
with the aid of a neutral third party. The mediator's role is advisory.
The mediator may offer suggestions but resolution of the dispute rests
with the parties themselves. Mediation proceedings are confidential and
What do these techniques have in common? Control. Think of dispute
resolution as a continuum with maximum control at one end and minimum
control at the other. An example of maximum control might be thought of
as any relationship in which disputes never arise (not a very common
occurrence). Minimum control would be a solution that is imposed upon
the parties to a dispute by the public courts. ADR consists of every
alternative in between.
The ADR band within that continuum is marked by varying degrees of party
control over the outcome. In negotiation, the parties achieve an
agreeable outcome without the need for the involvement of any neutral
party. In dispute avoidance strategies, like partnering, a neutral is
involved to help parties anticipate likely sources of future disputes in
order to prevent them. In mediation, a neutral party is again involved,
this time after a dispute has arisen. The mediator is called in to help
facilitate the parties' own settlement process. In arbitration, the
neutral provides the parties with a binding ruling after hearing each
side argue its case.
Although the degree of control over the outcome varies from one method
to another, in all methods the parties control the process. They will
agree to the procedures and to the individuals who will assist in the
dispute resolution process. The parties can agree to fashion a process
or combination of processes especially well suited to the dispute
ARBITRATION AND THE LAW
Many of the cases that the AAA handles stem from the inclusion of an
arbitration clause in a contract between the parties. Rules applicable
to specific types of disputes are available from the AAA free of charge.
Arbitration awards are legally binding and enforceable in most
jurisdictions. The US Arbitration Act provides for enforcement of
arbitration agreements and awards in interstate-commerce and
Most persons do not want to become involved in lawsuits. Litigation can
entail lengthy delays, high costs, unwanted publicity, and ill will.
Appeals might be filed, causing further delay, after a decision has been
rendered. Arbitration, on the other hand, is usually faster and less
expensive, and it is also conclusive.
Based on nearly 70 years of experience, the AAA processes each case so
that it moves smoothly from initiation to resolution. If problems arise,
a case administrator will assist the participants. Each dispute is
handled with confidentiality and integrity. Professionalism is the key
to the AAA's services, which explains why so many parties bring cases to
SOME OF THE ADVANTAGES OF ARBITRATION INCLUDE:
SPEED. Despite the best efforts of our court systems to improve
processing time of civil disputes, the burdens of criminal cases, tight
budgets, and other factors still create delays of years to bring a case
to court in many jurisdictions. Appeals extend the time required to
reach a final result still further.
In ADR there is no "docket" - no line in which to wait for your day in
court. The only elements governing speed are the eagerness of the
parties to end the dispute and the complexity of the cases to be
resolved. Most mediations processed by the American Arbitration
Association are completed in a few weeks; most arbitrations are decided
within a few months of filing. The Association offers expedited services
for disputes where the parties agree that speed is of the essence or
where the claims are not large or complex.
CHOICE AND EXPERTISE OF IMPARTIAL NEUTRALS: Parties who resolve their
disputes through ADR enjoy the assistance of neutrals who are already
expert in the subject matter of their disputes. The AAA's panel consists
of expert and knowledgeable neutrals from many professions and
For example, parties to a construction industry dispute might select an
architect, a contractor, or a lawyer with a lifelong practice in
construction law to serve as their mediator or arbitrator. The "subject
matter expertise" of the neutral reduces the time typically required to
attempt to educate a judge or jury about the technical elements of a
dispute, and raises the confidence level of the parties that the result
of the process will be well-informed. The Association maintains a panel
of more than 20,000 individuals with a expertise in a broad array of
businesses, technology, insurance, labor relations, and many other
INFORMALITY and FLEXIBILITY: Alternative dispute resolution is conducted
in a manner that is more business-like than litigation. Each party tells
its side of the story to the arbitrator in an atmosphere that is less
formal than a court proceeding.
For example, where a court must apply complex rules of evidence, and the
decision of the trial judge can be overturned for admitting evidence
that should have been excluded, arbitrators have a duty under law to
admit any evidence which might be relevant. Arbitrators will of course
discount questionable testimony and evidence, such as obvious hearsay,
but the relaxed rules of evidence do allow each side to present their
case in a more informal manner. The parties better understand the
process and feel confident that they had the opportunity to present
their whole story.
Since the parties control the process, they enjoy tremendous
flexibility.Hearings might take place at the site of the dispute or
during evening hours. Testimony might be taken by telephone.
The Association even offers case administration via private online
computer chat rooms on Lexis Counsel Connect.
PRIVACY: Arbitration, Mediation and other forms of ADR are not open to
public scrutiny like disputes settled in court. The hearings and awards
are kept private and confidential, which helps to preserve positive
ECONOMY Time saved is money saved. ADR processes are designed to be
faster, more streamlined, and more informal than litigation. Many of the
costly procedures associated with formal court processes, such as filing
appeals and motions can be eliminated.
FINALITY: AAA arbitration awards are final, binding, and legally
enforceable, subject only to limited review by the courts. The court
does not second guess the arbitrator's decision as to the facts or the
law. Of course, parties may also agree in advance that awards will be
WHO ARE THE NEUTRALS?
More than 20,000 individuals in diverse fields and professions are
listed on the AAA's national panel of arbitrators and mediators. These
neutrals represent a broad spectrum of expertise. Many are nominated to
the panel by leaders in their industry or profession. Others are invited
directly by the AAA.
Participation by business executives and professionals as arbitrators is
vital to the system. Because of their specialized knowledge and
experience, the parties are not required to spend time educating the
arbitrator about relevant industry practices and customs. In labor-
management relations, impartial experts arbitrate disputes arising out
of the application and interpretation of collective bargaining
Biographies of neutrals, describing their occupations, qualifications,
and availability, are maintained in the AAA's computerized network for
submission to the parties.
HOW IT BEGAN
The movement toward ADR in the United States began after World War I,
and reached its first milestone with the passage of the first modern
arbitration statute in New York in the mid 1920's. Since then the
movement has grown steadily, achieving explosive growth since 1980.
Today, ADR methods have achieved broad acceptance by the America's
business, labor-management, and legal communities. The annual ADR
caseload processed by the American Arbitration Association alone has
surpassed 60,000 cases--a figure equivalent to one fourth of the cases
now handled each year in the Federal Courts. In fact, our courts have
recognized the value of ADR. Today in many state and federal
jurisdictions around the country there are mandatory and voluntary
court-sponsored ADR programs to divert cases which might be settled
WHO USES ALTERNATIVE DISPUTE RESOLUTION?
Virtually every sort of dispute that can be litigated can be mediated or
arbitrated. The American Arbitration Association's caseload includes
disputes involving business, insurance, labor relations, environment,
public policy, family, securities, technology, employment, international
trade, and many other areas.
Business controversies arise from millions of commercial contracts
containing clauses that provide for arbitration of disputes. Even if a
clause has not been included in a contract, parties can agree to use an
alternative dispute resolution method administered by the AAA.
The construction industry is a major user of the services of the AAA.
The AAA's Construction Industry Arbitration Rules are designated in most
building contracts. The industry is an active participant in alternative
dispute resolution through the National Construction Dispute Resolution
Committee (NCDRC), which is composed of representatives from 14 major
industry organizations. Claims involve cost overruns, changes in
specifications, and delays.
In international commerce, many firms incorporate arbitration clauses in
their contracts to avoid litigating in a foreign court.
The Association a source of information on international arbitration. In
addition to administering such cases under its own International
Arbitration Rules, the AAA will administer under any other system
selected by the parties.
The AAA promotes New York City as an attractive site for international
arbitration. On the West Coast, the AAA's Asia/Pacific Center for the
Resolution of International Business Disputes provides information on
international commercial arbitration in the Pacific Rim.
Labor-management disputes can also be resolved using the Association's
procedures. Labor contracts usually contain provisions calling for the
arbitration of grievances that cannot be settled. The disputes
arbitrated involve issues in such areas as discipline, discharge,
demotion, promotion, productivity, pensions, and seniority.
Insurance claims are also administered by the AAA under its arbitration
and mediation rules.
Claims arising out of automobile accidents involving uninsured or
underinsured motorists can be filed under the AAA's accident claims
rules. Uninsured-motorist coverage protects motorists against financial
loss from personal injuries inflicted by uninsured drivers. No-fault
insurance claims can be arbitrated in those states-New York, New Jersey,
Minnesota, Hawaii, and Oregon-that have no-fault legislation providing
for arbitration of unresolved disputes regarding personal injuries.
Securities arbitration is an area of steady case growth. Disputes
arising out of contracts between stockbrokers and customers are
generally handled under the Association's Securities Arbitration Rules.
An important feature of these rules is the requirement that the majority
of arbitrators on a panel be people who are not affiliated with the
Trade associations and professional societies in many specialized fields
use the AAA's services to resolve disputes. Procedures and rules are
developed to meet their needs. Panels of neutrals who are familiar with
the field and the technical questions involved are recruited and
trained. The Arbitration Rules of the General Arbitration Council of the
Textile and Apparel Industries, for example, provide a standard
procedure for settling disputes involving cloth and yarn mills,
converters, dyers and garment manufacturers.
For a list of other specialized rules and procedures, contact your
nearest regional office.
WHERE CAN I GET MORE INFORMATION?
In a sometimes too litigious society, it makes sense to recognize the
potential for disputes in every relationship and to develop a strategy
to avoid disputes by anticipating how they might arise, and to plan for
the most effective methods to resolve conflicts once they occur. A
simple one sentence ADR clause in your agreements can ensure that your
disputes will stay out of court.
To learn more about how ADR might benefit your business or law practice,
the Association invites you to call, visit, or send e-mail to one of its
nearby regional offices.
This file was prepared from material copyrighted by, and is posted with
the permission of, the American Arbitration Association. For more info
visit the AAA's web site at http://www.adr.org
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