Financial Glossary Header Image

Alternative Dispute Resolution (ADR)

Updated on October 4, 2023

The concept of ADR in insurance is explained here.

Meaning of Alternative Dispute Resolution

Alternative Dispute Resolution (ADR) is a legal framework and approach aimed at resolving conflicts and disputes outside of the traditional court system. It offers an alternative avenue for individuals and organizations to seek resolution without the time, expense, and formalities associated with litigation in courts.

What are the methods of ADR?

Arbitration – In arbitration, disputing parties agree to present their case to an impartial arbitrator who then issues a binding decision, making it a preferred choice for swift and confidential resolutions in many Indian commercial contracts.

Mediation – Mediation, on the other hand, employs a neutral mediator to facilitate discussions between parties, helping them collaboratively reach mutually acceptable solutions without making decisions, commonly used in family and employment disputes, emphasizing relationship preservation.

What are the advantages of ADR?

Cost-Effective – ADR methods, such as mediation and arbitration, tend to be more cost-effective than going to court. Litigation can involve substantial legal fees, whereas ADR typically requires fewer resources.

Time-Efficient – ADR processes are often faster than court proceedings, which can be lengthy and subject to scheduling delays. This is particularly appealing to parties who seek timely resolutions.

Confidentiality – ADR proceedings are usually private and confidential, allowing parties to discuss sensitive issues without public scrutiny.

Customization – ADR allows for more flexibility and customization in crafting solutions. Parties have greater control over the outcome and can fashion agreements that meet their specific needs and interests.