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Wholehearted Commitment is Necessary to make Alternate Dispute Resolution Work
Alternate Dispute Resolution (ADR) is now gaining pace with the advent of globalization and a correlated increase in the number of commercial transaction and contracts between people and businessmen from around the world but Alternate Dispute Resolution has now become concerned with procedure much like litigation and this mutation can be attributed to the rise in domestic as well as international commercial arbitration[1]. The elaborate procedural rules and the engagement of lawyers in the process has led to a deviation of the system from one based on coordination and cooperation between parties to one that can be likened to the traditional judicial route of litigation that fosters animosity and empathizes the importance of “winning” over attainment of justice[2]. So far Alternate Dispute Resolution is still considered to be an alternative to litigation and it still stands in the periphery of the judicial system with a lack in awareness and a lack of overall commitment from those who would benefit from methods of ADR, such as arbitration, the most: companies.
It has been repeatedly proven in many articles and by many successful research hypotheses that the key to ensuring that Alternate Dispute Resolution works and provides the best result, for companies, is the wholehearted and complete acceptance as well as adoption of the ADR system by the top management board or group of the company. As proof to this conclusion, here is a story of two large electronics manufacturers, Company A and Company B, who worked together until a dispute arose and then attempted to settle their dispute through arbitration but failed due to lack of commitment. More than 15 years ago, Company A, which manufactures computer support products, licensed Company B to manufacture a new device for them and this arrangement aimed to expand the market by offering a second source of the product. The device was extremely successful and riding the wave of this success, Company A improved the product by further developing the technology behind it but refused to allow Company B to manufacture the new device. Company B feared losing profits and threatened a lawsuit but as it was to no avail, the Company replicated the design and began manufacturing a similar device of their own and this time Company A threatened a lawsuit. Both companies decided that instead of litigation they would honour the arbitration clause in their agreement and a process that should ideally take about 2 months extended to a whopping 5 years with testimonies dragging on for almost 5 days a week.
The arbitrator by-passed procedure and spent a considerably longer time on analyzing evidence and studying discovery, and the lawyers did no better because they pretended that they were in a courtroom by conducting numerous “depositions” fueled by a fierce need to win and prove the other party wrong[3]. Finally, the arbitrator ruled in favour of Company B, but Company A was angered by this decision and filed an appeal. Now, both companies are still battling it out in court through litigation spending a considerable amount of time and money, $25 million a year, to keep the legal battle going[4]. This story is a classic example of how a method such as Alternate Dispute Resolution, which was formulated to reduce time and expenditure of money, can be reduced to a failed attempt merely by a lack of commitment to and engagement in the process[5]. In this case, the long struggle could have easily been avoided by a change in ingrained attitudes and belligerent corporate cultures that held both companies back from listening to each other and cooperating to come to an amicable solution.
This story is, however, not the norm because there are always exceptions and in this case the exceptions are companies like NCR, Toyota and Chevron who have been reaping the benefits of ADR such as low costs and time efficiency simply by committing to the process[6]. Chevron, for example, has an in-house ADR-based mediation board which spends about $25,000 is settling a dispute compared to the $700,000 that they would have to waste on an expert from outside the company or the $2.5 million they would have to spend on litigation in the court[7]. At Toyota’s U.S subsidiary, a Reversal Arbitration Board was set up to ease disputes between the company and its dealers and this commitment has resulted in a reduction in the number of cases from 178 cases in 1985 to 3 in 1992.
In conclusion, companies that dedicate time, attention and policy to ADR are able to realize its power to reduce time spent, money wasted, and relationships lost but companies that cannot let go of old habits are still stuck with the difficult process of litigation.
[1] Anubhav Pandey, All you need to know about Alternative Dispute Resolution (ADR), iPleaders, (May 9, 2017, 11:37 AM), https://blog.ipleaders.in/adr-alternative-dispute-resolution/.
[2] Editor, Explain the Advantages and Disadvantages of Alternative Dispute Resolution, LawyersnJurists, (Apr. 9, 2020, 8:59 PM), https://www.lawyersnjurists.com/article/advantages-disadvantages-alternative-dispute-resolution/.
[3] Todd Carver, Alternative Dispute Resolution: Why It Doesn’t Work and Why It Does, Harvard Business Review, (Jun. 4, 1994, 9:15 PM), https://hbr.org/1994/05/alternative-dispute-resolution-why-it-doesnt-work-and-why-it-does.
[4] Advice Services Alliance, Why use ADR? Pros & Cons, ASAUK, (Apr. 30, 2020, 8:37 PM), https://asauk.org.uk/wp-content/uploads/2013/08/Why-use-ADR.pdf.
[5] Supra note 1.
[6] Steven Sack, Using Alternative Dispute Resolution, EdwardLoweFoundation, (Mar. 13, 2001, 3:14 PM), https://edwardlowe.org/using-alternative-dispute-resolution-2/.
[7] Supra note 3.
- Alternate Dispute Resolution
- Commitment
- Failure of ADR
