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Alternative Dispute Resolution – Part One

Over the past few weeks we’ve taken a look at the new pre-action protocol for debt claims which came into force at the beginning of this month.  Part One dealt with how creditors can comply with the new Protocol and this was followed by Part Two which covered what debtors will need to do in order to avoid court proceedings.  In cases where a settlement between the debtor and the creditor cannot be reached, the Protocol recommends an Alternative Dispute Resolution before resorting to court proceedings so, today, we’re taking a more detailed look at Alternative Dispute Resolution.

Alternative Dispute Resolution (ADR) is the collective name given to a range of techniques that may be used in order to collect a debt, though ADR can also be used to solve other issues, such as consumer complaints.  When it comes to debt, the court requires that both parties provide evidence that an alternative methods of resolution “appropriate and proportionate” to the case were considered. 

ADR has been traditionally used where the parties involved had an on-going business relationship that they were keen to preserve, while for one-off transactions it was used in order to avoid a costly and time-consuming court case. 

The benefits offered by using an ADR are many:

  • COST – while an ADR saves both time and money it may also reduce the emotional stress suffered by both parties as a result of the dispute.
  • PRIVACY – An ADR takes place in private and the details of the dispute and its resolution do not need to be publicly disclosed.
  • SPEED – The most common alternative used is mediation and this can be arranged in a short period of time, hopefully bringing the settlement negotiations to a close quickly.
  • CONTROL – Each party still maintains control of the dispute and its resolution because both parties design the settlement and agree upon it only if it is acceptable to them.  This is in comparison with the trial process in which the ruling of the court must be accepted by both parties.
  • SEPARATION – it’s often the case that during a dispute the personal feelings of either or both parties become confused with the legal issues involved and play a role in actually fuelling litigation.  The third party can help to separate the personal dimension from the issues involved in a dispute which reduces tension and makes the prospect of achieving a settlement much more likely.
  • INFORMAL – Because ADR is an informal process, the atmosphere is more conducive to a productive level of communication being achieved with the parties involved.  The process is much less likely to become adversarial and the reduction in stress can make it easier to reach an agreement.

Next week we’ll take a look at the different types of Alternative Dispute Resolution methods available here in the UK.  If you want to make sure you don’t miss it, then why not follow us on Facebook or Twitter where we alert our readers every time we publish a new post?