From NSBA's Corporate Partner, the American Arbitration Association.
By: Angela Romero Valedon, Vice President of the American Arbitration Association
In the dynamic realm of business, disputes are inevitable. How businesses handle these disputes can significantly impact their success and relationships. Fortunately, resolving conflicts outside of traditional court proceedings is possible through Alternative Dispute Resolution (ADR) methods. The American Arbitration Association® (AAA®), with nearly 100 years of expertise, champions these methods, particularly mediation and arbitration.
Understanding ADR
ADR encompasses various techniques to resolve conflicts more efficiently, less formally, and more quickly than court litigation. The two primary forms of ADR are mediation and arbitration.
What is Mediation?
Mediation involves an impartial third party (mediator) who facilitates negotiations between disputing parties, helping them find mutually acceptable solutions. Unlike litigation or arbitration, mediation is typically non-binding. The mediator does not impose a decision but aids communication, identifies interests, and guides parties toward a collaborative resolution.
Success in mediation hinges on:
Identifying Goals: Determine whether the aim is issue resolution, relationship reconciliation, or both.
Non-Negotiables: Recognize essential elements for resolution and distinguish them from negotiable ones.
Managing Emotions: Address negative emotions beforehand to avoid obstacles during mediation.
Willingness to Compromise: Approach mediation with an open mind and commitment to finding a "win-win" solution.
Mediation preserves valuable business relationships and offers a cost-effective, confidential alternative to traditional litigation.
What is Arbitration?
Arbitration involves a third-party neutral arbitrator who makes a binding decision regarding the dispute. This less formal process can be more cost-effective and quicker than traditional court proceedings.
Benefits of arbitration include:
Expedited Process: Limited discovery and fewer motions result in a faster process.
Party Control: Parties can select or have a choice in their arbitrator, schedule flexibly, and customize the process.
Privacy: Arbitration proceedings can remain private. In contrast, court proceedings are typically open to the public, which means that details about a business could become part of the public record.
Finality: Decisions are binding with limited grounds for challenge, providing closure and allowing parties to move forward swiftly.
Including ADR in contracts
A well-drafted ADR clause is advantageous for resolving disputes with partners, vendors, customers, and other parties. Businesses can specify in their contracts the ADR process or processes they will use to resolve conflicts instead of litigation.
To simplify drafting these clauses, the American Arbitration Association offers ClauseBuilder® and ClauseBuilder AI (beta), free online tools that guide you through creating a customized ADR clause. The tools cover options like the scope of disputes covered, applicable rules, number of arbitrators and method of selection, location, and administrative procedures, making them useful across various industries and contract types.
AAA's Commitment
AAA is dedicated to educating and supporting businesses in resolving disputes. For more information on our services, visit adr.org. To draft arbitration clauses, utilize our ClauseBuilder tools at clausebuilder.org and clausebuilder.ai or contact us at SBE@adr.org for further information.
ADR methods such as mediation and arbitration provide efficient, cost-effective, and flexible solutions for resolving business disputes. Embracing these alternatives can save time, money, and stress, allowing businesses to focus on growth and success.
This was written with the assistance of GenAI.