What is Alternative Dispute Resolution?
Alternative Dispute Resolution (ADR) is a general term encompassing the different methods of resolving a dispute before resorting to litigation. ADR is preferred by many commercial parties because it allows them to resolve their disputes quickly, confidentially. It may also save on considerable costs associated with litigation. ADR places greater emphasis on party autonomy and is considered to be more amicable than traditional litigation, thus potentially allowing parties more favorable conditions to preserve and continue their relationships after the dispute is resolved.
What are the Methods of Alternative Dispute Resolution?
ADR methods include arbitration, negotiation, conciliation, reconciliation, mediation, and adjudication.
Arbitration
Arbitration is the most developed form of ADR. It serves as an alternative to litigation which gives priority to the principle of party autonomy. It may be administered through an arbitral institution or arranged on an ad hoc basis. Some core aspects concerning arbitration in Austria will be elaborated on in the following chapter. For an in-depth guide into arbitration, please see our dedicated Arbitration Compendium.[1] In addition to arbitration, there are multiple additional methods of resolving disputes as will be discussed below.
Negotiation
Negotiation is a process of decision-making by two or more parties aimed at reaching an agreement. Negotiation does not involve a third party facilitating the discussion or adjudicating the dispute. It is voluntary and non-binding. Simply put, negotiation involves parties resolving and reconciling their different positions to achieve consensus and reach an agreement. Negotiation is a key feature of ADR, in enabling parties to directly share information privately and informally to avoid more formal dispute mechanisms. However, it requires good faith and may be more difficult where there is a disparity between the parties, in terms of their size and influence.
Conciliation
Conciliation is an out-of-court dispute resolution mechanism that is voluntary, confidential, and flexible. It features frequently in labor and consumer disputes. It utilizes a neutral third party who is appointed to resolve the dispute. The neutral third party in the conciliation is known as the conciliator. A conciliator differs from a mediator, in that they will use their judgment and recommendations to encourage the appointing parties to find a solution.
Parties to conciliation may reach an amicable settlement, which – as a contractual agreement – is binding as per the terms agreed on by the parties. The conciliator does not render this settlement in the way an arbitrator would render an arbitral award; rather, they merely help the parties arrive at the settlement. Depending on the chosen legal form (e.g. if concluded before a competent court or incorporated in a notarial deed), the settlement agreement may be directly enforceable.
Mediation
Mediation is a process of dispute resolution in which a mediator is tasked with facilitating and assisting the disputing parties in resolving their dispute. Mediation offers a structured environment that enables the parties to communicate their concerns and exchange information to identify the possible steps that can be taken to resolve the dispute.
Mediation is a non-binding procedure, meaning it will be up to the parties themselves whether or not to continue with the mediation after the first meeting. The outcome of the mediation is non-binding as well unless the parties voluntarily agree to conclude a settlement, which is frequently the case.
The Singapore Mediation Convention
The United Nations Convention on International Settlement Agreements Resulting from Mediation, also known as the Singapore Mediation Convention, is an international agreement that establishes an international system for the enforcement of settlement agreements. The Singapore Mediation Convention applies to settlements reached after the mediation of commercial disputes between international parties. As of November 2021, 55 states have signed the Singapore Mediation Convention.
Widespread acceptance of the Singapore Mediation Convention promises to increase the use of mediation to resolve international commercial disputes, as parties will be able to enforce their settlement agreements in states that have ratified the Convention. The streamlined enforcement scheme under the Singapore Mediation Convention has been compared to that of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention).
What is the difference between mediation and conciliation?
The key difference between mediation and conciliation is the mandate of the neutral third party assisting the parties to resolve their dispute. The conciliator has the authority to not only facilitate the dispute resolution but also to propose different solutions to the parties. By contrast, the mediator only facilitates the resolution and generally does not make any proposals to the parties.
Reconciliation
Reconciliation is a restorative form of ADR that focuses on resolving disputes while maintaining and/or restoring the relationships between the disputing parties. Reconciliation in ADR should not be confused with reconciliation in business and financial regulation. In the commercial context, there are several kinds of reconciliation. In Banking and accounting, reconciliation is used to ensure that the financial position of a given undertaking is accurately reflected in their bank balance and bank transactions. In financial regulation, reconciliation can ensure that companies can account for monies held on behalf of customer investments. In ADR, reconciliation differs from mediation, whereby the conciliator will take a more proactive role in proposing solutions and encouraging the parties to arrive at an agreement.
Adjudication
Adjudication is a contractual or statutory process of dispute resolution wherein a decision to resolve a dispute is made by an independent and impartial third party. In many countries like the UK, Australia, Hong Kong, Malaysia, and others, adjudication is limited to the resolution of construction disputes.
Who is an adjudicator?
An adjudicator is an individual vested with the authority to make an official decision in an adjudication proceeding. Usually, the adjudicator is a subject-matter expert of the dispute she/he is appointed to decide.
Arbitration
Arbitration is a method of dispute resolution which serves as the closest alternative to traditional litigation. An arbitration arises through the voluntary consensus of two or more parties and is typically facilitated through an agreement to arbitrate, either as a clause in a preexisting contract or as a standalone agreement. In arbitration, an independent and impartial individual known as an arbitrator is selected and given the mandate to judge specifically upon a dispute. A tribunal may consist of only a sole arbitrator, or be appointed as part of a larger arbitral tribunal typically composed of three independent arbitrators. An odd number of arbitrators ensures a majority rule in favor of a given party. An arbitral tribunal that has adequate jurisdiction over a given dispute will hear the pleas of multiple parties and render a final and binding judgment known as an award. An award can then be enforced in domestic courts.
What is Binding Arbitration?
Binding arbitration is an arbitration procedure that results in a binding and enforceable award. Generally, all arbitration is considered binding. However, since the arbitral process places greater emphasis on party autonomy, the parties may choose to make arbitration specifically binding or non-binding. Binding arbitration is not to be confused with mandatory arbitration, whereby arbitration is a legally enforceable requirement prior to litigation.
What is Non-Binding Arbitration?
Non-binding arbitration is an arbitration procedure that results in an advisory award that is non-binding and thus not enforceable. In practice, non-binding arbitrations may be used to establish the framework of ongoing settlement negotiations.
What is the Difference between Arbitration and Mediation?
The key difference between arbitration and mediation is the mandate of the neutral third party. In arbitration, an arbitrator adjudicates upon the dispute and renders a final, binding, and enforceable award.
In mediation, a mediator facilitates the resolution of the dispute by assisting with finding the most suitable solution. The solution reached through mediation is non-binding.
What is the Difference between Arbitration and Adjudication?
The key difference between arbitration and adjudication is the timeline. Adjudication is much quicker than arbitration. Additionally, most often adjudication emanates out of a statute, while arbitration emanates from parties’ consent. Moreover, an adjudicator cannot render a cost award. In other words, an adjudicator cannot order costs more than her/his fees. On the other hand, an arbitrator can order costs much more flexibly.
Awards
An award is the “judgment” of an arbitral tribunal. Where a court is said to “hand down” a judgment, an arbitral tribunal “renders” an award. There are multiple types of awards. Although awards generally cannot be substantively changed once rendered, their recognition and enforcement are subject to national litigation proceedings. The recognition and enforcement of awards are subject to the New York Convention in most jurisdictions. This Convention serves as the international framework for the recognition and enforcement of arbitral awards. Currently, 168 countries are party to the Convention.
Interim Awards
Also known as interlocutory or preliminary awards, an interim award is often rendered by a tribunal during the early stages of the arbitral process without bringing the process to an end. Interim awards are useful for a tribunal to bring clarity to both questions of procedure and the merits of a claim, set-off, or counterclaim. In matters of procedure, interim awards address the admissibility of a claim, as well as establish that the arbitral tribunal has jurisdiction to hear the case. As to the substantive merits of a given claim, partial awards are useful in establishing questions related to applicable laws, contract validity, questions of liability, and whether a given claim is barred by any domestic laws such as a statute of limitation in bringing a civil claim.
Partial Awards
Partial awards typically involve a tribunal deciding on aspects of the proceedings that are ancillary to the substantive merits of a given claim. Partial awards may for example address a decision on costs, or a declaration on a given factual claim.
Final Awards
As the name suggests, a final award is rendered by a tribunal on all claims and requests made by the parties including matters related to costs. A final award also has the procedural effect of terminating the arbitral proceedings between the parties.
Awards on Costs
The question of costs is important in any arbitration proceeding, especially where one of the parties is weaker, or insolvent. Therefore, while costs may be addressed in other awards, a specific award on costs may be used to resolve issues concerning the financial obligations of the parties. This is especially so if, in the early stages of the arbitral proceedings, one party’s costs have been paid by the other party to ensure that the arbitral proceedings go ahead.
Amendment (to) Awards / Additional Awards
In seldom cases, a tribunal may exercise its jurisdiction to issue an additional award in conjunction with the final award that it has already rendered to address matters which have arisen, matters which were raised, but left unaddressed, or to ensure that the award accurately reflects conclusions which the tribunal has already reached. Amendments do not amount to a new award but provide a remedy to matters that were heard but not fully addressed or addressed insufficiently in the original award. An arbitral award once rendered is final. A tribunal does not have jurisdiction to ‘have a change of heart’ in respect to what it has already decided.
Enforcement of Awards
Enforcement refers to the process by which an arbitral award may be recognized in a domestic court. As stated, a binding arbitration leads to the rendering of a judgment known as an arbitral award. In some cases, the parties will willingly accept and enact the requirements of the award without complication. Otherwise, a party may ensure its award is complied with by applying for it to be recognized by a domestic court through litigation to create a further domestically recognized legal obligation.
Recognition of an arbitral award by one or multiple domestic courts is streamlined through the New York Convention. Under this international treaty, an award that is recognized in one state will be recognized by the courts of every other state also party to the convention. This means that if a party to an arbitration seeks enforcement of an award in the state of the opposing party, it may do so by bringing proceedings in its own domestic state. As of October 2021, 168 countries are signatories to the Convention, with the most recent new signatories being Belize and Malawi (both in March 2021).
Setting Aside of Awards
In addition to enforcing awards, there may be grounds for a party to seek an award to be set aside. In such a situation, a party challenges the award with a claim for setting aside in the state in which the award was made or that considers the award to be domestic. Article 34 (2) of the UNCITRAL Model Law on International Commercial Arbitration is illustrative of common grounds upon which an arbitral award may be set aside:
-
- lack of an arbitration agreement or lack of arbitrability ratione personae;
- violation of a party’s right to be heard;
- the award is ultra petita;
- deficiency in the constitution of the tribunal;
- the subject matter of the dispute is not capable of settlement by arbitration under the law of the state; or
- violation of public policy.
The last two grounds are subject to ex officio review of the court.
Mediation-Arbitration
Mediation-Arbitration (Med-Arb) is a mediation process in which the mediator has the authority to render a final and binding decision if the parties were unable to reach an agreement. Med-Arb is gaining popularity among commercial parties because it allows them to first sort out their disputes without a binding award being rendered by an external third party. If they fail, they always have a chance to proceed to arbitration.
Online Dispute Resolution (ODR)
Online dispute resolution refers to alternative dispute resolutions that make use of digital telecommunications and the internet as the medium in which disputes are heard. The possibility of using the internet to facilitate ADR has been under discussion for several years. Some of the advantages of its adoption include the considerable savings of remote hearings, and the additional time saved by making travel unnecessary, and the time of hearing more flexible. However, associated disadvantages such as security concerns over hacking, confidentiality, procedural fairness in disparate time zones, and hidden costs. All of these considerations have until recently hindered the adoption of ODR.
Following the COVID-19 pandemic, concerns for public health and the prevalence of travel bans have prompted a rethink. One possible reason may be that the number of pending disputes rose significantly during the pandemic, owing to an increased number of contracts that were frustrated by COVID-19 regulations. Several arbitral institutions have adopted specific provisions within their institutional rules that expressly provide for remote hearings. Although these adoptions are recent, it is likely that they are also here to stay.
[1] https://oblin.at/knowledge/compendium/arbitration/commercial-arbitration/
Alternative Dispute Resolution (ADR) is a general term encompassing the different methods of resolving a dispute before resorting to litigation. ADR is preferred by many commercial parties because it allows them to resolve their disputes quickly, confidentially. It may also save on considerable costs associated with litigation. ADR places greater emphasis on party autonomy and is considered to be more amicable than traditional litigation, thus potentially allowing parties more favorable conditions to preserve and continue their relationships after the dispute is resolved.
ADR methods include arbitration, negotiation, conciliation, reconciliation, mediation, and adjudication.
Arbitration
Arbitration is the most developed form of ADR. It serves as an alternative to litigation which gives priority to the principle of party autonomy. It may be administered through an arbitral institution or arranged on an ad hoc basis. Some core aspects concerning arbitration in Austria will be elaborated on in the following chapter. For an in-depth guide into arbitration, please see our dedicated Arbitration Compendium.[1] In addition to arbitration, there are multiple additional methods of resolving disputes as will be discussed below.
Negotiation
Negotiation is a process of decision-making by two or more parties aimed at reaching an agreement. Negotiation does not involve a third party facilitating the discussion or adjudicating the dispute. It is voluntary and non-binding. Simply put, negotiation involves parties resolving and reconciling their different positions to achieve consensus and reach an agreement. Negotiation is a key feature of ADR, in enabling parties to directly share information privately and informally to avoid more formal dispute mechanisms. However, it requires good faith and may be more difficult where there is a disparity between the parties, in terms of their size and influence.
Conciliation
Conciliation is an out-of-court dispute resolution mechanism that is voluntary, confidential, and flexible. It features frequently in labor and consumer disputes. It utilizes a neutral third party who is appointed to resolve the dispute. The neutral third party in the conciliation is known as the conciliator. A conciliator differs from a mediator, in that they will use their judgment and recommendations to encourage the appointing parties to find a solution.
Parties to conciliation may reach an amicable settlement, which – as a contractual agreement – is binding as per the terms agreed on by the parties. The conciliator does not render this settlement in the way an arbitrator would render an arbitral award; rather, they merely help the parties arrive at the settlement. Depending on the chosen legal form (e.g. if concluded before a competent court or incorporated in a notarial deed), the settlement agreement may be directly enforceable.
Mediation
Mediation is a process of dispute resolution in which a mediator is tasked with facilitating and assisting the disputing parties in resolving their dispute. Mediation offers a structured environment that enables the parties to communicate their concerns and exchange information to identify the possible steps that can be taken to resolve the dispute.
Mediation is a non-binding procedure, meaning it will be up to the parties themselves whether or not to continue with the mediation after the first meeting. The outcome of the mediation is non-binding as well unless the parties voluntarily agree to conclude a settlement, which is frequently the case.
The Singapore Mediation Convention
The United Nations Convention on International Settlement Agreements Resulting from Mediation, also known as the Singapore Mediation Convention, is an international agreement that establishes an international system for the enforcement of settlement agreements. The Singapore Mediation Convention applies to settlements reached after the mediation of commercial disputes between international parties. As of November 2021, 55 states have signed the Singapore Mediation Convention.
Widespread acceptance of the Singapore Mediation Convention promises to increase the use of mediation to resolve international commercial disputes, as parties will be able to enforce their settlement agreements in states that have ratified the Convention. The streamlined enforcement scheme under the Singapore Mediation Convention has been compared to that of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention).
What is the difference between mediation and conciliation?
The key difference between mediation and conciliation is the mandate of the neutral third party assisting the parties to resolve their dispute. The conciliator has the authority to not only facilitate the dispute resolution but also to propose different solutions to the parties. By contrast, the mediator only facilitates the resolution and generally does not make any proposals to the parties.
Reconciliation
Reconciliation is a restorative form of ADR that focuses on resolving disputes while maintaining and/or restoring the relationships between the disputing parties. Reconciliation in ADR should not be confused with reconciliation in business and financial regulation. In the commercial context, there are several kinds of reconciliation. In Banking and accounting, reconciliation is used to ensure that the financial position of a given undertaking is accurately reflected in their bank balance and bank transactions. In financial regulation, reconciliation can ensure that companies can account for monies held on behalf of customer investments. In ADR, reconciliation differs from mediation, whereby the conciliator will take a more proactive role in proposing solutions and encouraging the parties to arrive at an agreement.
Adjudication
Adjudication is a contractual or statutory process of dispute resolution wherein a decision to resolve a dispute is made by an independent and impartial third party. In many countries like the UK, Australia, Hong Kong, Malaysia, and others, adjudication is limited to the resolution of construction disputes.
Who is an adjudicator?
An adjudicator is an individual vested with the authority to make an official decision in an adjudication proceeding. Usually, the adjudicator is a subject-matter expert of the dispute she/he is appointed to decide.
[1] https://oblin.at/knowledge/compendium/arbitration/commercial-arbitration/
Arbitration is a method of dispute resolution which serves as the closest alternative to traditional litigation. An arbitration arises through the voluntary consensus of two or more parties and is typically facilitated through an agreement to arbitrate, either as a clause in a preexisting contract or as a standalone agreement. In arbitration, an independent and impartial individual known as an arbitrator is selected and given the mandate to judge specifically upon a dispute. A tribunal may consist of only a sole arbitrator, or be appointed as part of a larger arbitral tribunal typically composed of three independent arbitrators. An odd number of arbitrators ensures a majority rule in favor of a given party. An arbitral tribunal that has adequate jurisdiction over a given dispute will hear the pleas of multiple parties and render a final and binding judgment known as an award. An award can then be enforced in domestic courts.
What is Binding Arbitration?
Binding arbitration is an arbitration procedure that results in a binding and enforceable award. Generally, all arbitration is considered binding. However, since the arbitral process places greater emphasis on party autonomy, the parties may choose to make arbitration specifically binding or non-binding. Binding arbitration is not to be confused with mandatory arbitration, whereby arbitration is a legally enforceable requirement prior to litigation.
What is Non-Binding Arbitration?
Non-binding arbitration is an arbitration procedure that results in an advisory award that is non-binding and thus not enforceable. In practice, non-binding arbitrations may be used to establish the framework of ongoing settlement negotiations.
What is the Difference between Arbitration and Mediation?
The key difference between arbitration and mediation is the mandate of the neutral third party. In arbitration, an arbitrator adjudicates upon the dispute and renders a final, binding, and enforceable award.
In mediation, a mediator facilitates the resolution of the dispute by assisting with finding the most suitable solution. The solution reached through mediation is non-binding.
What is the Difference between Arbitration and Adjudication?
The key difference between arbitration and adjudication is the timeline. Adjudication is much quicker than arbitration. Additionally, most often adjudication emanates out of a statute, while arbitration emanates from parties’ consent. Moreover, an adjudicator cannot render a cost award. In other words, an adjudicator cannot order costs more than her/his fees. On the other hand, an arbitrator can order costs much more flexibly.
An award is the “judgment” of an arbitral tribunal. Where a court is said to “hand down” a judgment, an arbitral tribunal “renders” an award. There are multiple types of awards. Although awards generally cannot be substantively changed once rendered, their recognition and enforcement are subject to national litigation proceedings. The recognition and enforcement of awards are subject to the New York Convention in most jurisdictions. This Convention serves as the international framework for the recognition and enforcement of arbitral awards. Currently, 168 countries are party to the Convention.
Interim Awards
Also known as interlocutory or preliminary awards, an interim award is often rendered by a tribunal during the early stages of the arbitral process without bringing the process to an end. Interim awards are useful for a tribunal to bring clarity to both questions of procedure and the merits of a claim, set-off, or counterclaim. In matters of procedure, interim awards address the admissibility of a claim, as well as establish that the arbitral tribunal has jurisdiction to hear the case. As to the substantive merits of a given claim, partial awards are useful in establishing questions related to applicable laws, contract validity, questions of liability, and whether a given claim is barred by any domestic laws such as a statute of limitation in bringing a civil claim.
Partial Awards
Partial awards typically involve a tribunal deciding on aspects of the proceedings that are ancillary to the substantive merits of a given claim. Partial awards may for example address a decision on costs, or a declaration on a given factual claim.
Final Awards
As the name suggests, a final award is rendered by a tribunal on all claims and requests made by the parties including matters related to costs. A final award also has the procedural effect of terminating the arbitral proceedings between the parties.
Awards on Costs
The question of costs is important in any arbitration proceeding, especially where one of the parties is weaker, or insolvent. Therefore, while costs may be addressed in other awards, a specific award on costs may be used to resolve issues concerning the financial obligations of the parties. This is especially so if, in the early stages of the arbitral proceedings, one party’s costs have been paid by the other party to ensure that the arbitral proceedings go ahead.
Amendment (to) Awards / Additional Awards
In seldom cases, a tribunal may exercise its jurisdiction to issue an additional award in conjunction with the final award that it has already rendered to address matters which have arisen, matters which were raised, but left unaddressed, or to ensure that the award accurately reflects conclusions which the tribunal has already reached. Amendments do not amount to a new award but provide a remedy to matters that were heard but not fully addressed or addressed insufficiently in the original award. An arbitral award once rendered is final. A tribunal does not have jurisdiction to ‘have a change of heart’ in respect to what it has already decided.
Enforcement refers to the process by which an arbitral award may be recognized in a domestic court. As stated, a binding arbitration leads to the rendering of a judgment known as an arbitral award. In some cases, the parties will willingly accept and enact the requirements of the award without complication. Otherwise, a party may ensure its award is complied with by applying for it to be recognized by a domestic court through litigation to create a further domestically recognized legal obligation.
Recognition of an arbitral award by one or multiple domestic courts is streamlined through the New York Convention. Under this international treaty, an award that is recognized in one state will be recognized by the courts of every other state also party to the convention. This means that if a party to an arbitration seeks enforcement of an award in the state of the opposing party, it may do so by bringing proceedings in its own domestic state. As of October 2021, 168 countries are signatories to the Convention, with the most recent new signatories being Belize and Malawi (both in March 2021).
In addition to enforcing awards, there may be grounds for a party to seek an award to be set aside. In such a situation, a party challenges the award with a claim for setting aside in the state in which the award was made or that considers the award to be domestic. Article 34 (2) of the UNCITRAL Model Law on International Commercial Arbitration is illustrative of common grounds upon which an arbitral award may be set aside:
- lack of an arbitration agreement or lack of arbitrability ratione personae;
- violation of a party’s right to be heard;
- the award is ultra petita;
- deficiency in the constitution of the tribunal;
- the subject matter of the dispute is not capable of settlement by arbitration under the law of the state; or
- violation of public policy.
The last two grounds are subject to ex officio review of the court.
Mediation-Arbitration (Med-Arb) is a mediation process in which the mediator has the authority to render a final and binding decision if the parties were unable to reach an agreement. Med-Arb is gaining popularity among commercial parties because it allows them to first sort out their disputes without a binding award being rendered by an external third party. If they fail, they always have a chance to proceed to arbitration.
Online dispute resolution refers to alternative dispute resolutions that make use of digital telecommunications and the internet as the medium in which disputes are heard. The possibility of using the internet to facilitate ADR has been under discussion for several years. Some of the advantages of its adoption include the considerable savings of remote hearings, and the additional time saved by making travel unnecessary, and the time of hearing more flexible. However, associated disadvantages such as security concerns over hacking, confidentiality, procedural fairness in disparate time zones, and hidden costs. All of these considerations have until recently hindered the adoption of ODR.
Following the COVID-19 pandemic, concerns for public health and the prevalence of travel bans have prompted a rethink. One possible reason may be that the number of pending disputes rose significantly during the pandemic, owing to an increased number of contracts that were frustrated by COVID-19 regulations. Several arbitral institutions have adopted specific provisions within their institutional rules that expressly provide for remote hearings. Although these adoptions are recent, it is likely that they are also here to stay.