Small Business and ADR
ADR (Alternative Dispute Resolution) is essentially any non-court method that is used to resolve a commercial dispute. Research by the Federation of Small Businesses (FSB) found that around 57% of the disputes its members were involved in were not able to be resolved informally or semi-formally. In those cases, going to court became a necessity. However, for the rest, other methods were available to help reduce costs and time spent on finding a solution. As the value of a dispute for the average small business is around £18,000 it often pays to invest in ADR to help avoid a full court situation. So, why don’t more businesses do it?
Benefits of ADR
There are many very good reasons to explore ADR to resolve a dispute – key among them is that it works. One Australian study highlighted ADR settlement rates of between 50% and 85%. ADR can salvage a business relationship, reduce the costs involved and considerably cut time spent on disputes. It’s private, flexible and allows for more expert insight than the court process.
Barriers to ADR
The main barrier to using ADR for small businesses has been identified by the FSB as a ‘knowledge gap.’ Many small businesses aren’t aware of ADR, its success rates, the different options involved and the advantages. At the moment only a few are reaping the benefits of working with a well-trained ADR professional (solicitor etc) to avoid disputes in a speedy and cost efficient way.
What are the main types of dispute resolution?
Mediation – this is the most widely recognised, and often used, of all the ADR processes. It involves a third party who helps the two disputing parties to come to a conclusion. No rulings are made and no settlement plans presented.
Adjudication – this is the process of ADR that is most like a court case, as it involves making arguments and evidence in support of your case. Once all arguments and evidence have been presented an adjudicator will make a decision about the dispute, which may be either binding or voluntary. There are no costs awarded in adjudication.
Conciliation – conciliation is a process much like mediation where an independent third party is called in to help find a resolution. The key difference with the conciliation method is that a settlement proposal is put forward by the conciliator for the disputing parties to agree.
Arbitration – a private type of ADR, arbitration involves an expert who is called in to review evidence and make a decision about the dispute. When the decision is made an arbitrator will make a ruling, which may be mandatory or voluntary.
Med-Arb – for those looking for a combination of ADR processes, Med-Arb brings together mediation and arbitration. Mediation is the first stage and, if that fails, the parties move into arbitration.
Ombudsman – dispute resolution via an ombudsman takes disputes rather out of the hands of the parties. The ombudsman has powers of investigation and will gather evidence. The type of resolution arrived at is up to the ombudsman – they may opt for mediation, a ruling or a combination of a number of different solutions.
There are so many benefits to ADR – and so many options to choose from – that it simply doesn’t make sense for small businesses that are short on time and resources not to take advantage of these processes.
To arrange a free initial consultation call John Sim or Richard Moore on 01539 723 757.