Alternative Dispute Resolution, Definition, Types, Importance

Alternative Dispute Resolution is the process and mechanism used to settle disputes outside the traditional court system. It provides parties with a flexible, confidential and quicker method of dispute resolution. The primary ADR techniques include arbitration, mediation and conciliation. These methods help in reducing the mountain burden on the Indian judiciary, save costs for litigants and provide settlements that help preserve relationships between parties. In this article, we are going to cover all about Alternative Dispute Resolution, its importance, types and advantages. 

Alternative Dispute Resolution Importance in India

The Courts in India are mostly overburdened with millions of pending cases and a lot of them are the ones that can be resolved outside of formal litigation. 

• Alternative Dispute Resolution provides speedier justice and reduces the average time taken to resolve civil and commercial disputes. 
• This alternative mechanism provides cost-effectiveness, especially relevant for businesses and individuals who cannot afford long litigation processes. 
• Alternative Dispute Resolution is conducted privately and confidentially unlike the open court trials. 
• This process promotes amicable settlements that are crucial for maintaining business and personal relationships. 
• Hence, ADR is a complementary mechanism to the existing judicial process, making justice delivery more accessible and efficient.  

Alternative Dispute Resolution Types in India 

The process of alternative dispute resolution in India is of three types: 

1. Arbitration ADR

Arbitration is a process where disputing parties agree to submit their case to a neutral third party (arbitrator or arbitral tribunal), whose decision (called an arbitral award) is final and binding.

• Governing Law: Arbitration and Conciliation Act, 1996 (amended in 2015, 2019, and 2021).
• Features:
  • Requires a prior arbitration agreement.
  • Arbitrator’s award is enforceable like a court decree.
  • Limited scope for appeal/review.
• Advantages:
  • Speedy resolution compared to litigation.
  • Confidential proceedings.
  • Parties can appoint arbitrators with subject-matter expertise.
  • Flexibility in procedures.
• Disadvantages:
  • High cost if professional arbitrators are appointed.
  • Limited right of appeal (risk of unjust decisions being final).
  • Risk of stronger party imposing arbitration clauses on weaker parties.

2. Mediation ADR

Mediation is a voluntary, party-centric process where a neutral mediator facilitates communication and negotiation between disputing parties. Unlike arbitration, the mediator does not impose a decision but helps parties reach a mutually acceptable solution.

• Features:
  • Entirely voluntary; either party may withdraw.
  • The mediator only facilitates, cannot impose a solution.
  • Outcome is based on mutual consent.
• When Useful:
  • When parties wish to preserve business or personal relationships.
  • When disputes are more about communication gaps or emotions than legal rights.
• Advantages:
  • Quick, cost-effective, flexible process.
  • Maintains goodwill between parties.
  • Creative solutions possible beyond legal remedies.
• Disadvantages:
  • Non-binding unless parties sign a settlement agreement.
  • No legal authority to enforce outcomes.
  • May fail if parties are unwilling to cooperate.

3. Conciliation ADR

Conciliation is similar to mediation but involves a more proactive role of the conciliator, who may suggest or propose solutions. It is usually facilitated by a neutral expert or government officer.

• Governing Law: Part III of the Arbitration and Conciliation Act, 1996.
• Features:
  • No prior agreement required.
  • Conciliator actively proposes solutions.
  • Settlement becomes binding only if parties accept it.
• Advantages:
  • Flexible, confidential, less formal.
  • Cost-effective and quicker than litigation or arbitration.
  • Encourages amicable settlements.
• Disadvantages:
  • Non-binding unless voluntarily accepted.
  • Depends heavily on parties’ willingness to cooperate.

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ADR Mechanisms Comparisons 

Here is a comparison in between the three types of Alternative Dispute Resolutions in India: 

Alternative Dispute Resolution in India Advantages 

Opting for an Alternative dispute mechanism has the following advantages: 

• ADR helps clear out court blockages and reduce judicial burden. 
• Instead of years, disputes can be easily resolved in a short frame of time. 
• ADR is a cost effective process that helps lower expenses. 
• The process provides flexibility to parties to decide the procedures, rules and even experts. 
• Processes like arbitration and mediation have international acceptance that are recognised under treaties. 

Alternative Dispute Resolution Disadvantages in India

Despite its advantages, ADR also has a few disadvantages as well: 

ADR offers limited scope for complex issues that specifically require judicial interpretation. 

Processes like mediation and conciliation are non-binding in nature and totally depend on voluntary compliance. 

There are chances that sometimes stronger parties dominate weaker ones in Alternative dispute resolution proceedings. 

There are enforcement challenges especially in cross-border disputes without treaties. 

Hiring senior arbitrators can be very expensive as litigation. 

Alternative Dispute Resolution in India Recent Developments

There have been some developments in the ADR process in India over the years: 

• Lok Adalats: Set up under the Legal Services Authorities Act, 1987 to provide speedy justice for small disputes. Awards are binding and enforceable.
• Mediation Bill, 2023: Passed by Parliament to institutionalize mediation in India, making pre-litigation mediation compulsory for civil and commercial disputes (with certain exceptions).
• International Commercial Arbitration: India is increasingly promoting itself as an arbitration hub to attract global business disputes.