Alternative Dispute Resolution

Business, Legal & Accounting Glossary

Definition: Alternative Dispute Resolution

What is the dictionary definition of Alternative Dispute Resolution?

Dictionary Definition

A catchall term that describes a number of methods used to resolve disputes out of court, including negotiation, conciliation, mediation and the many types of arbitration. The common denominator of all ADR methods is that they are faster, less formalistic, cheaper and often less adversarial than a court trial. In recent years the term Alternative Dispute Resolution has begun to lose favor in some circles and ADR has come to mean Appropriate Dispute Resolution. The point of this semantic change is to emphasize that ADR methods stand on their own as effective ways to resolve disputes and should not be seen simply as alternatives to a court action.

Full Definition of Alternative Dispute Resolution

Procedures for resolving legal conflicts between parties outside of the traditional court setting. ADR includes such processes as arbitration, mediation, and conciliation. The Civil procedure rules envisage an expanded role for ADR, and parties appearing in court have been penalised in costs for failing to take ADR seriously.

Alternative Dispute Resolution (ADR) is the name given to the process where parties in a dispute come to a compromise (or settle their dispute) without going to court. The main reason people use ADR is to save the expense of using the courts and solicitors.

There are four main forms of Alternative Dispute Resolution.


This is the simplest form of ADR. Where two people have a dispute they can negotiate a solution themselves. The advantages to the parties involved are that it is completely private and it’s fast and cheap.

Where parties to a dispute cannot settle it themselves they may instruct solicitors who will negotiate on their behalf. Even when negotiation fails at these early stages of a dispute and court proceedings start solicitors will usually continue to negotiate on their client’s behalf. This results in many cases being settled out of court.


This is where a neutral person (the mediator) helps the parties to reach a compromise. The job of the mediator is to consult with each party and see how much common ground there is between them. S/he should act as a facilitator, taking offers between the parties. The mediator doesn’t offer an opinion. Mediation is most suitable where there is some chance that the parties will co-operate. Mediation is not legally binding on the parties.

Mediation Services

There are a number of organisations that offer mediation services. One of the main ones is the Centre for Dispute Resolution Many companies use their mediation services to save £1,000s in legal fees. The only disadvantage of using mediation to settle a dispute is there is no guarantee that a settlement will be reached. This means that you still have to use the courts, so in effect failure at the mediation stage can result in extra delays and extra costs.

However, the Centre for Dispute Resolution reports that around 80% of the disputes they deal with are settled without the need for any court action.

There are now many mediation services offered on-line such as The Mediation Room and Mediate


This is similar to mediation where a neutral third party helps the parties to resolve their dispute, however, the conciliator plays a more active role in the process. S/he will be expected to suggest ways in which a compromise could be reached. Conciliation is not legally binding on the parties.

Conciliation Services

The Advisory, Conciliation and Arbitration Service (ACAS) is used by many employers and Trade Unions to settle disputes before (and sometimes during) industrial action takes place.

ACAS offers conciliation to both sides in unfair dismissal claims before the claim can be taken to an Employment Tribunal. Around 60% of unfair dismissal claims are settled without the need for a hearing at an Employment Tribunal.


Arbitration is the most formal of the methods used to settle disputes without using the courts. Arbitration is where the parties with a disagreement pass their dispute to a third party, who will make a judgment on their behalf. This judgment will then be legally binding on the parties.

The relevant law on arbitration can be found in the Arbitration Act of 1996.

The agreement to go to arbitration can be made by the parties at any time. It can be written into a business contract by what is called a Scott v Avery clause or the parties may just agree on arbitration when a dispute arises.

The parties can agree on the number of arbitrators who will hear their dispute. It could be three, two or just one person. The parties will normally appoint someone who is an expert in their particular area of business. There is also the Institute of Arbitrators who will provide trained arbitrators to parties who wish to settle a dispute.

The actual procedure to be followed in any arbitration hearing is left to the parties to decide. Therefore, arbitration hearings can take many forms. The parties can decide on a paper arbitration, which means the parties submit everything to the arbitrator in writing, who will then read everything and make a decision. However, the parties can also have a hearing at which they appear and give evidence and witnesses may be called.

The decision made by the arbitrator is called an award and is legally binding on the parties.

Advantages Of Alternative Dispute Resolution

  • Speed – Settling a dispute using ADR is usually much quicker than using the court system.
  • Expertise – A specialist from within a particular trade or industry is able to suggest a reasonable solution which will be acceptable to the parties involved. A judge is unlikely to have specialist knowledge, other than in the law.
  • Privacy – ADR is conducted in private, therefore avoiding publicity from the media. The public are also unable to attend. Parties may be able to remain on good terms – The aim of ADR is to find a compromise solution which is acceptable to both parties. Court proceedings create a winner and a loser. Using ADR to settle a dispute means businesses can remain on good terms and continue to trade with each other once their dispute is resolved.
  • Costs to the Parties – All forms of ADR are far cheaper than taking a case to court.
  • Costs to the State – Every case resolved using ADR saves the Government money.
  • Saving of Court Time – Every case solved through ADR stops the courts being overburdened with cases.

Disadvantages Of Alternative Dispute Resolution

  • Unequal Bargaining Power – In certain situations, one side is able to dominate the other, for example, employment and divorce cases, making the courts a better option for a weak party.
  • Lack of Legal Expertise – Where a dispute involves difficult legal points a mediator or arbitrator is unlikely to have the same legal expertise and knowledge as a judge.
  • No System of Precedent – It isn’t easy to predict the outcome of a dispute decided through ADR as there is no system of precedent.
  • Enforceability – Most forms of ADR are not legally binding, making any award difficult to enforce.
  • A Court action may still be required – If using ADR fails to resolve the parties’ dispute, court action may still be needed. This adds to the costs and delays compared to taking a dispute directly to the courts in the first place.

Synonyms For Alternative Dispute Resolution


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Alternative Dispute Resolution. Payroll & Accounting Heaven Ltd. August 01, 2021
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Alternative Dispute Resolution. Payroll & Accounting Heaven Ltd. (accessed: August 01, 2021).
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Definition Sources

Definitions for Alternative Dispute Resolution are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 22nd April, 2020 | 7 Views.