Alternative Dispute Resolution (ADR) utilizes techniques enabling disagreeing parties to reach an agreement upstream of litigation. These include negotiation, collaborative law, mediation, and arbitration. Each of these call on a neutral third party to enable those in conflict to reach an optimal resolution.
Online Dispute Resolution (ODR), the digital branch of ADR, uses arbitration as its primary method to resolve small claims disputes. Here are five things that can help distinguish arbitration from other methods of ADR.
- Outcome-driven: participation in arbitration is generally voluntary, and involves a third party, as does mediation. But while mediation does not impose a decision upon the two parties, arbitration does. This ensures that the dispute resolution process be quick and efficient, as opposed to letting both parties haggle endlessly. Arbitration will often occur after both parties sign a contract agreeing that any futher dispute will be resolved by arbitration. This is known as the "Scott Avery Clause."
- Binding: An arbitration award (the verdict given by the arbitrator) is legally binding for both parties and enforceable in the courts.
- Choice: Whereas traditional litigation does not allow for parties to pick their judge, arbitration does. This is crucial when the subject-matter of the dispute is particularly technical. By having the choice of their tribunal, both disputants can pick a third party that is highly specialized in the appropriate area. This characteristic ensures that decisions made by the third party are well-informed.
- As are most ADR tools, the process of arbitration and its results is often made confidential, as opposed to traditional court documents.
- Efficient: Much quicker than traditional litigation procedures, arbitration often operates via videoconference hearings, ensuring rapid (though thorough) resolution of disputes. Furthermore, opportunities to appeal arbitral awards are rare, which can be positive if it limits the duration of the dispute.
Though particularly efficient for the resolution of small claims disputes, arbitration's increasingly digital presence can, if it does not possess a regulatory legal framework, hinder the enforceability of arbitral awards and due process. Similar to traditional court systems, a winning party may have to resort to further judicial action to collect on their award, which would defeat the purpose of an online process.