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Advantages and disadvantages of alternative dispute resolution over litigation in international business - Assignment Example

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Alternative Dispute Resolution is a general term used to describe different methods employed to resolve arising disputes instead of filling for litigation.The fundamental principle of ADR is that disagreeing parties should always try to avoid litigation…
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Advantages and disadvantages of alternative dispute resolution over litigation in international business
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Download file to see previous pages According to the American Bar Association, ADR is an “an array of non-binding and binding dispute resolution methods that entail the application of third-party neutrals to help the parties in contract controversies through a systematic settlement process” (ABA, 1999).2 Similarly the United States Code in section 571 explains that ADR comprises of the following aspects, conciliation, facilitation, mediation, fact-finding, mini-trials, arbitration and ombudsmen, the above aspects can be combined in ADR. As noted by Shamir ADR is applied in different civil law policy situations, and not just in global Institutionalized in a lot of court systems and justice systems around the world.3 Though ADR is accepted by globally, it has some disadvantages, thus this paper aims at examining the advantages of ADR over litigation. For clarity of the issue, the paper will begin by giving an overview of the concept of ADR. Use and Cost of litigation According to Nolan-Haley litigation has been mostly used as a traditional way of resolving disputes, whether they are local or international business transactions.4 Prior to the introduction and development of ADR process such as arbitration, the only formal method or resolving disputes between two or more parties was litigation. In the same way equity was introduced in the English legal justice system which came in stages to control the ruthlessness and inflexibility of the common law, is the way ADR was introduced to control litigation. Litigation is a costly process for businesses, particularly in cases that involve significant issues such as patent, infringement, breach of important business contracts, antitrust laws and securities. In these cases, a lot of money could be lost by a company. For example Real Networks Inc, a public traded company in its 2004 annual press report indicated that it has used about 15,000,000 in only one antitrust litigation case.5 This goes on to show how costly litigation is, and this aspect of court cases is well known to companies. It is because of such cases that ADR methods have become more popular as a way of resolving disputes. Indeed, records from the American Arbitration Association indicated that in 2005 alone, the number of cases forward to the body was 142,000, an increase from 159,000 recorded in 2004. However, the most common ADR method used to resolve disputes is arbitration, which in the past ten years has been highly used by various companies in resolving their disputes. Shamir explains that, the high costs of litigations are caused by the long duration related with litigation. In many cases, litigation goes on for years before a conclusion is made.6 This occurs owing to the slow system of the courts and judges in completing cases and the many adjournments made. Therefore as the cases drags on, the costs also keeps increasing. In other cases, the net expenses of litigation can be impacted by other factors like the sum of money under dispute, the nature of the legal representative , the nature of the dispute (if its local or international) and the length of case. This means that the total cost of the litigation can not be predicated correctly and this makes budgeting for such a litigation to be a tough call. A good example is a case that involved AMOCO CATs7, which ended up as a high profile case. The amount of money spend on that case from the time the case started to the end of the case was 12 million pounds. Again, in another case of Amoco V. British American Offshore, the legal expenses of that case stood ...Download file to see next pagesRead More
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