When you come across a dispute that doesn’t seem like it will ever come to an end, litigation might seem like the only option. However, there are a few other tactics that you can employ to find a middle road and collect the cash that is owed to you. These other options save you from the additional cash you would have to front in order to take the dispute to court and can help to keep the customer relationship from going too sour and harming your reputation. These other options are called alternative dispute resolution, or “ADR”.
WHAT IS ALTERNATIVE DISPUTE RESOLUTION
Alternative dispute resolution gives companies an alternative route to deal with the dispute without having to go to court. Taking a dispute to court often means exorbitant costs and time delays, all which have an effect on your ability to maintain cash flow. There are two very common alternative dispute resolution options; mediation and arbitration, each which are appropriate in different dispute situations.
Arbitration is held in a private courtroom in front of a panel of third-party arbitrators. Third-party arbitrators are often retired judges, who have handled disputes in court before and have an understanding of business disputes. Information from both sides of the argument is presented to the panel and they then make a decision on the best course of action. The arbitrators will take a vote and write an opinion which is often times a binding process. Their decisions must be followed by both parties.
Mediation differs from arbitration in a few ways. The first is the mediator is hired in a joint decision by the two parties. This person is often a retired judge, but has knowledge of the industry in which the dispute is occurring. The mediator will listen and hear both sides, however, they are not there to give a final decision. This is the big way that mediation differs from arbitration. There is no binding written opinion that is handed down by the mediator. Instead, the mediator is simply there to facilitate discussion. As a neutral third-party, they are there to help the two parties come together on an agreement on the dispute.
Often, mediation is a good way to get two parties to come to an agreement, even if litigation was not on the horizon. It allows both parties to air their grievances in a non-stressful and neutral zone, which can often help strengthen and keep the customer relationship in-tact, while allowing you to collect on your open invoices.
Both arbitration and mediation are good options for alternative dispute resolution. As stated, each has their time and place. You might have gotten too far into a dispute, or have a customer that is too difficult to work with, to use mediation and arbitration is your first option. On the flipside, you may be concerned about ruining a customer relationship and simply need a third party to help facilitate conversations around the dispute, in which case mediation would be the best option. Whichever you choose, both are a better way to approach a dispute if you are looking to avoid expensive court fees.