Apart from strong command over core business operations, entrepreneurs also require some level of mastery or familiarity with business and administrative law since this will guarantee the legal safety of a company’s future. It’s the very reason why corporations and household brands spare no expense when building and shaping their legal teams because litigation and lawsuits are commonplace in the business world, no matter how defensive or risk-averse companies try to be.
However, taking cases to court and proceeding with further legal action isn’t always the most beneficial next step. Considering that not every business shares the same partners, financial capabilities, and expertise, litigation may create more problems than it solves. This is why Alternative Dispute Resolution (ADR) systems have become increasingly popular over the past decades. While many corporate entities experience different outcomes, those on the positive end of the scale have shown that results tip in their favor.
Privacy, Speed, and Preservation of Commercial Relationships
There’s no denying that due legal process through traditional government systems has its advantages. However, when this approach is replaced with ADR systems, it’s much better at maintaining privacy, maximizing speed, and preserving commercial relationships. Specifically, businesses that follow the ADR approach often experience considerably less time-consuming resolution processes, need not worry about back-breaking legal expenses, and suffer little to no disruptions to ongoing operations.
Considerably Less Time-consuming
Lawsuits are infamously known for experiencing long delays and pushbacks, and in a business context, it’s no secret that some companies use this tactic underhandedly to squeeze opposing parties’ budgets dry. Furthermore, the degree of urgency and level of importance can variably affect how long settlement even becomes part of the conversation. While most expect around two years’ time, it’s not impossible to go over. In contrast, ADR systems conclude much faster since these focus on compromise and avoid repetitive processes.
Does Not Impose Cost Constraints on Either Party
While the length of time associated with a lawsuit affects accrued legal expenses, that’s not to say upfront costs are by any means agreeable. As a result, some companies can’t simply afford to take things to courtrooms because cost constraints make it financially unsound and hurt performance. In the case of ADR systems, the concept of compromise also covers minimizing legal expenses incurred by either party, a more viable option during these uncertain times for the global economy.
Reduced Disruptions to Ongoing Operations
Last but not least, since the ADR approach values the preservation of both commercial relationships and brand image, these processes do their best to limit any possible disruptions to ongoing operations. And, unlike the traditional litigation process, companies won’t have to reallocate precious resources and people into areas that don’t directly influence business growth. Thus, while it may seem inconsequential on paper, the benefits are far more cumulative when considering the time and exposure risk that could’ve occurred otherwise.
However, ADR Systems Are Far From Perfect
Nevertheless, all the benefits mentioned above are not to convince you that ADR systems are perfect; in fact, their effectiveness still varies from situation to situation, and some circumstances will demand that taking things further into court is necessary. Namely, some of the disadvantages you can expect with ADR are that you cannot compel participation nor create binding resolution and that it will lead to unnecessary struggles when neither party refuses to compromise.
Cannot Compel Participation Nor Create Binding Resolution
Unlike the traditional litigation process where you can serve a subpoena and duly request a summons to appear in court under obligation, most ADR systems depend on both parties’ cooperation. As a result, you cannot compel participation nor reach a binding resolution because everything depends on negotiations, arbitration, or the stipulations with your mediation. Therefore, the conclusion you may reach will not necessarily satisfy the objective you’re trying to achieve.
When Neither Party Refuses to Compromise
Although ADR systems can offer reduced legal expenses, when neither party refuses to compromise and aims to reach a far more advantageous outcome, the process will end up costing just as much and maybe even more than litigation. And if it lasts much longer than expected before you consider the official switch to a more traditional approach, you end up costing even more time and doubling the expenses incurred.
ADR Systems Are Built on Voluntary Action
Overall, while ADR systems can be beneficial, it requires voluntary action from both parties to work effectively and produce better results than litigation. Apart from the process itself, investing in proper leadership training is imperative to avoid any problematic legal troubles in the first place.