The PMA Dispute Resolution Program that Philip Tamoush covered in the February 2002 Newsletter provides a way to avoid expensive and upsetting litigation. This is also the aim of the American Arbitration Association, which has developed Alternative Dispute Resolution (ADR) clauses that PMA members can use in contracts with their contractors.

ADR techniques, such as arbitration and mediation, are becoming increasingly popular because they take less time and cost less money than litigation. Also, the proceedings are private, confidential, and less adversarial. Often they offer opportunities for innovative solutions and allow parties to maintain working relationships.

Furthermore, ADR allows parties to select neutral arbitrators or mediators with discrete industry expertise, thereby avoiding the necessity of educating a judge or jury. Many of those on our roster are attorneys, business professionals, and former judges.

Arbitration agreements and awards, governed by the Federal Arbitration Act or by state arbitration laws, are legally binding and enforceable in virtually every jurisdiction.

Options

The best-known ADR technique is “arbitration,” in which a dispute is submitted to one or more impartial persons, usually an industry expert, for a decision. In this process, both parties agree to abide by the ruling prior to the start of the hearing.

“Mediation”

is a nonbinding and less formal process. Here thees tties submit their dispute to an impartial third person who assists them in reaching their own settlement; it is also widely used. Mediation, like arbitration, is private and confidential.

There are also other alternative methods of dispute resolution coming into wider use. In

“factfinding,”

a complaint is investigated by impartial neutral parties who examine the issues and facts for a nonbinding report. And a “mini-trial” is a structured dispute resolution process in which senior executives of the parties involved in legal disputes meet in the presence of a neutral adviser. After presenting the merits of the arguments on each side, the senior executives attempt to formulate a voluntary, nonbinding settlement.

Procedures

ADR provisions are regularly incorporated in a variety of agreements, covering matters that involve property, licensing, employment, partnerships, franchises, joint ventures, and loans, among other things.

As you design your agreements, you can control the range of issues to be resolved, the scope of the relief to be awarded, the qualifications of the neutral arbitrator or mediator, and many of the procedural aspects of the process. Standard ADR clauses provide that American Arbitration Association procedures and rules will govern if a dispute arises. Parties may also agree to voluntarily submit a dispute to a neutral third party for resolution, even if their contract made no provisions for it.

Hearings may be held in one of the American Arbitration Association’s 36 offices throughout the United States or at a neutral location designated by the parties. The Association also administers cases involving international disputes–for example, licensing or franchising agreements–at hearing locations throughout the world.

While alternative dispute resolution techniques cannot guarantee that a small business owner will always come out a winner in a dispute, they do provide a more efficient and inexpensive way of resolving conflicts.

Robert Williams is Vice President of the American Arbitration Association. For further information about the AAA, its education programs, and dispute resolution services, contact him by mail at 1633 Broadway, New York, NY 10019; phone (212/484-4034); or e-mail

(williamsro@adr.org).