The development of technology has also contributed to complexities of dispute resolution, involving multiple jurisdictions, creating an environment far removed from the concept of national economy, identity legal system. With nations looking at free trade agreements and multilateral investment pacts, the alternate system of international dispute resolution has come to stay.
The non-territorial character of ADR makes it an attractive and effective option. Other than distrust for a foreign legal system litigation in a foreign jurisdiction can be time consuming, complex, and expensive: But the most accepted reason for favouring ADR is the favourable- time cost effectiveness. Modern business transactions represent complexities in technology and other high degrees of sophistication in the subject matter involved.
Judiciaries, even with specialised benches, are at best generalists. There is distinct advantage of having a neutral mediator or arbitrator with expertise on the subject of the dispute. The choice of such an arbitrator or a mediator is an advantage over a judge in an unknown jurisdiction, with no expertise or even a rudimentary knowledge of the subject. Further , once selected, the panel resolves the dispute in its entirety. On the other hand, in court proceedings, the case is handled at various stages by different judges with varying approaches. ADR makes it possible for the parties to resolve issues by persons who understand their business risks better, and are able to relate to their technical and business language.
Compared to lengthy court proceedings, ADR provides a more time effective method of resolving disputes. Backlogs and delays of litigation are not within the party's control, while ADR can be controlled by providing the time frame and procedure in the agreement, or while referring the matter for resolution.
While monetary costs of ADR are in reality no less, they do work out to be significantly lower than formal legal costs, when calculated in terms of time, particularly if filings, depositions etc. are permitted online.
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In litigation, the court is bound by decisions of the appellate courts, while under ADR, there is generally flexibility in procedure and subject to the governing law, the forum usually has autonomy of procedure. The parties under an ADR agreement have the opportunity to craft flexible parameters governing their disputes, which is not available to litigants.
Further, an arbitral tribunal is unfettered by the procedural restraints in determining the rules to be followed. The procedure are often shaped by the parties to the dispute as well as the arbitrators, while law courts are bound by the Code of Civil Procedure, Letters Patent and the entire gamut of forms and processes.
ADR methods are private processes. The possibility of the public or the press attending such proceedings is minimal. As such, it is less likely to attract publicity. With the trade secrets and similar information coming in the confidentiality domain, litigants not only wish to keep disputes out of the public eye, but also seek immunity from public comment, coverage and use. Very often, the confidentiality clause and the arbitration clause form part of the same relationship agreement, addressing situations warranting disclosure. Since most court proceedings and records are open to the public, there is no guarantee of privacy in litigation. On the other hand, in ADR the confidentiality of the dispute, the reliefs and the outcome in most cases is assured. However, the down side of privacy is very often an absence of transparency, which is why ADR does not work in consumer-merchant disputes.
All of the above represent the emerging concept of party autonomy, and choice of forum, rules, procedures, venue, and scrutiny. Parties themselves select most appropriate decision-makers for their dispute. In addition, they choose the applicable law, place and language of the proceedings and faster process.
That is not to say that ADR is not free from drawbacks. There is no guarantee that it will be a fair process. And in case of binding arbitration, parties are stuck with the decision with no scope of appeal. It is an additional valuable mechanism for resolution of disputes, which enables the court system to dedicate its time and resources to the core task of rendering justice, where ADR cannot operate.
Kumkum Sen is a Partner in Rajinder Narain & Co., and can be reached at kumkumsen@rnclegal.com