Alternative dispute resolution (ADR) refers to a process by which disputing parties agree to have the matter settled, in a non-judicial forum, by an impartial third party. The two most prevalent forms of ADR are arbitration and mediation. In an arbitration proceeding, the parties agree to present their dispute to an impartial arbitrator for decision.
As an alternative dispute resolution process, arbitration can be either binding or non-binding. In a binding arbitration, the parties must accept the ruling of the arbitrator, and, in the absence of fraud, his decision is final and recognized by most courts. Most binding arbitrations occur as the result of a contractual provision that requires the parties to arbitrate any disputes arising from the performance, or alleged breach, of the contract. In a non-binding arbitration proceeding, if one or both of the parties are dissatisfied with the decision of the arbitrator, they are free to resolve their dispute through civil litigation.
Since he must render a decision in the underlying dispute, an arbitrator serves in a quasi-judicial role, and, as such, he is obligated to remain strictly neutral between the opposing parties. An arbitrator’s duty in the alternative dispute resolution process entails hearing each side's case, and issuing a decision based on the evidence presented. During an arbitration, the parties are allowed to present evidence and cross-examine opposing witnesses. The specific procedural rules followed depend, to some extent, on the forum in which the arbitration is conducted.
In mediation, the parties agree to appoint a third party to assist them in resolving the controversy without litigation. Unlike an arbitrator, a mediator plays an active role in convincing the parties that it is in their best interests to resolve their differences through a negotiated settlement. The mediator will usually attempt to persuade the parties to settle based on his knowledge of the facts of the case, as well as the applicable law. It is not uncommon for a mediator to meet with both parties initially in order to facilitate his understanding of the facts of the case, and the issues in dispute. A mediator will generally then consult with the parties separately and strongly encourage them to find common ground on the issues that impede settlement.
In terms of the manner in which a controversy is typically resolved, through alternative dispute resolution, mediation and arbitration differ substantially. A mediator intercedes between the parties in a proactive manner by using his conflict resolution and persuasion skills to attempt to bridge the gap between the parties' initial bargaining positions. An arbitrator does not intervene between the parties in such a manner. Rather, the arbitrator’s role is to resolve the dispute by issuing a ruling in favor of one of the parties.