ALTERNATIVE DISPUTE RESOLUTION IN BUSINESS
With the world leaning heavily towards digitalisation, especially in today's business environment, the world has had to shift from the traditional way of resolving disputes through courts to discovering other cheaper and faster alternatives. This is because time is money, and most businesses can not afford to spend the time, resources and even mental energy on court cases that may drag on.
This is even worsened by the reality of long pending cases before the courts, and the possibility of litigation costing more than any damages the court can award in favour of the business. More businesses now opt for Alternative Dispute Resolution (ADR) as a faster, more cost-effective solution.
However, first, what is Alternative Dispute Resolution (ADR)?
The Black's Law Dictionary, 10th edition, defines alternative dispute resolution as "Any procedure for settling a dispute other than litigation, such as by arbitration or mediation." According to the LexisNexis website, ADR is a process for resolving a dispute outside of a court of law, which usually involves a neutral third party who either assists the parties in reaching a negotiated resolution of their dispute or provides a determination of the dispute which is legally binding. The mechanism can lead to a binding resolution if provided in the agreement by which the parties agree to submit their dispute to ADR.
As the Black's Law Dictionary stated, ADR involves any procedure. Alternative Dispute Resolution (ADR) thus refers to a range of methods used to resolve disputes outside the formal court system. The most common types include:
1.Arbitration: The court in U.B.A. Plc v. Triedent Consulting defined Arbitration as "a procedure for the settlement of disputes under which the parties agree to be bound by the decision of an arbitrator whose decision is, in general, final and legally binding on both parties." Arbitration is the most formal type of alternative dispute resolution, and the closest to court litigation. In Nigeria, it is governed by the Arbitration and Mediation Act, 2023.
2.Mediation: Section 91(1) of the Arbitration and Mediation Act, 2023, defines 'mediation' as 'the process where parties seek the assistance of a neutral third party or parties to help them in reaching a mutually agreeable resolution for their dispute arising from a contractual or legal relationship'. Unlike Arbitration, where a binding decision is imposed, mediation places the power to resolve the dispute firmly in the hands of the parties and is less formal.
3.Negotiation: Negotiation is the most informal and flexible ADR process. Moreover, it is often the first step taken. It involves parties attempting to clarify issues and reach an agreement on matters in dispute directly or through their representatives. It is aimed at preserving the relationship between the disputing parties, but it has a drawback in that decisions or agreements reached are not binding and are easily broken.
4.Conciliation: Conciliation is a form of alternative dispute resolution (ADR) where a neutral third party (the conciliator) helps two or more parties in a dispute reach a mutually agreeable settlement. It is a voluntary, confidential, and flexible process where the conciliator facilitates communication and negotiation, rather than imposing a decision. It was formerly governed by the Arbitration and Conciliation Act, 2004, which has now been repealed.
ADR appeals to businesses because it is more private, flexible, and less adversarial than litigation.
REASONS WHY BUSINESSES PREFER ADR TO TRADITIONAL LITIGATION
1.Cost-Efficiency: Court litigation, while open to anyone, involves many costs, ranging from hiring a lawyer to getting expert witnesses and fees like filing and motion fees, all of which may cost even more than the damages the court can award. On the other hand, ADR is less expensive, as the services of a lawyer can be dispensed with, and other court fees are not applicable, which is notable, given that litigation may drag on for years, bringing up new expenses.
2.Time Efficiency: Many Nigerian courts are overwhelmed with cases, and add to this the constant adjournment and appeals, and most cases are likely to go on for years with no end in sight. On the other hand, ADR procedures, especially Arbitration, typically follow a timetable, making it possible for decisions (Arbitral awards) to be announced in weeks, rather than the years it would have taken a traditional court. This will save the business valuable time and provide closure rather than keeping it in suspense about its fate. Thus, in Sembcorp Eng. Pte Ltd. v. IPCO (WA) Holdings Ltd., the court held that, "The usual delays experienced through litigation in court are reduced to the barest minimum (through Arbitration.)
3.Preserving Business Relationship: The traditional court is often focused on who is right and wrong. Conversely, most ADR procedures seek to help the disputing parties find a common ground to settle their conflict – a win-win situation. This helps save relationships, which is important in business as the parties may have to work together.
4.Choice of an Arbitrator: Businesses prefer ADR because it allows them to choose their arbitrator, unlike in the traditional court, where any judge can sit on the matter. Thus, they can get an arbitrator who is well-versed in the field of the particular conflict, or someone who is an expert in business conflicts. This provides the much-needed expertise in resolving the conflict.
5.It provides for creative solutions: In the traditional court, the rules and laws are often set, and the judge, except in rare cases, has to follow those rules in awarding damages or giving judgments. On the other hand, in ADR, the parties are free to explore other solutions to their problem, without being restricted to watertight solutions that may be harsh and unyielding.
ADR in Business Practice
The following features now characterise ADR in business practice, showing how far ADR has evolved since its inception:
1.Digital Integration: ADR institutions now offer virtual hearings, document sharing, and online case tracking. This is done with the use of Online Dispute Resolution (ODR) websites and resources.
2.Contractual ADR Clauses: Many companies now embed ADR clauses in contracts as a default dispute mechanism. Thus, for most business contracts, Arbitration, not litigation, is their first point of contact in the event of any conflict.
3.Industry-Specific Arbitration Panels: For example, the construction and energy sectors rely on arbitrators with technical expertise. The ability to choose their arbitrator is now used by businesses to find arbitrators who have expertise in the field of conflict.
Preference for Alternative Dispute Resolution over litigation by businesses in 2025.
Alternative Dispute Resolution (ADR) is increasingly favored by businesses in 2025 due to its inherent cost-effectiveness and time-saving attributes. Organizations are drawn to ADR methods such as mediation and arbitration, which typically incur lower expenses compared to traditional litigation. This is primarily due to the streamlined procedures and shorter timelines associated with ADR processes, which help mitigate extensive legal fees and delays that often characterize court battles.
The notable shift towards ADR in 2025 can be attributed to various factors, including the flexibility it offers in dispute resolution and its ability to foster a collaborative atmosphere, which often preserves business relationships. Unlike the adversarial nature of court litigation, ADR encourages open communication and negotiation, allowing parties to tailor resolutions to their specific needs.
In 2025, businesses increasingly prefer Alternative Dispute Resolution over the old means of settling dispute that is, litigation, which is driven by the significant cost efficiency and time savings that ADR offers. This shift reflects a growing recognition of the benefits of mediation and arbitration in resolving disputes quickly and affordably without wasting anyone’s time or Resources, as organizations seek to minimize legal expenses and maintain operational focus amid complex commercial environments. Alternative dispute resolution (ADR) has gained traction as a preferred method for resolving business disputes, primarily due to its inherent cost and time efficiencies. And companies are increasingly recognizing that ADR mechanisms such as mediation and arbitration can significantly reduce litigation expenses and expedite the resolution process.
The advantages of ADR, such as reduced procedural costs and a streamlined discovery process, make it an appealing choice for companies unlike adversarial court proceedings, ADR allows parties to collaborate towards mutually beneficial outcomes, mitigating the negative impacts that litigation can have on ongoing business interactions.
As the world and businesses moves, they tend to navigate an increasingly complex landscape, the evolution of ADR practices reflects a broader shift toward prioritizing time and cost efficiency in dispute resolution. And by adapting to these changing needs and focusing on customized solutions, organizations are not only enhancing their ability to resolve conflicts effectively and quickly but also positioning themselves for sustainable growth in an ever evolving commercial landscape for both now or in the coming years.
Advantaged or reasons why Business prefer ADR over litigation in 2025
1.Cost Savings
2.Control Over Discovery
3.Preservation of Relationships and 4 Confidentiality
5.Evolving Practices in Dispute Resolution
Court-Compelled ADR
1.COST SAVINGS AND TIME MANAGEMNT:
One of the most compelling advantages of ADR is the potential for substantial cost savings. Traditional litigation can be fraught with expenses, including court filings, expert reports, and extensive motion practice. ADR minimizes these costs by eliminating many procedural steps, allowing disputes to be resolved more quickly and with less financial burden on the parties involved. For instance, arbitration hearings typically last only a day or two, whereas commercial trials can extend for weeks, leading to inflated attorney fees and prolonged employee downtime.
2.Control Over Discovery:
It also allows parties greater control over the discovery process. Unlike litigation, where extensive depositions and document exchanges are often standard, parties in ADR can mutually agree on limited discovery, focusing only on key documents and communications necessary for resolving the dispute.
3. Preservation of Relationships and Confidentiality:
Another major benefit of ADR is its ability to preserve business relationships and maintain confidentiality. The structured nature of mediation enables disputing parties to approach their conflicts as business problems rather than adversarial confrontations.
4.Evolving Practices in Dispute Resolution:
The landscape of dispute resolution is continually evolving, influenced by the need for greater efficiency and effectiveness..
5. Court Compelled and Support ADR:
Some jurisdictions and courts are now mandating ADR as a means to streamline case management and reduce overcrowded dockets and also help reduce frivolous cases in the court, as a result of
Cost-Effectiveness of Alternative Dispute Resolution over litigation
The financial advantages of ADR are significant, as it eliminates many of the costly elements of litigation, including court fees, attorney costs, and other related expenses. Many businesses now recognize that ADR does not only saves money but also offers a more predictable financial outcome, which is crucial for budget management.
Time Efficiency of Alternative Dispute Resolution
Time savings are another compelling reason for the preference of ADR over litigation. ADR processes generally facilitate faster resolutions, allowing parties to move past disputes more quickly and resume business operations. This speed is particularly important in sectors where ongoing relationships and operational continuity are essential.In contrast, the protracted timelines of traditional court cases can lead to significant delays, which can negatively impact a business's bottom line and stakeholder relations.
a part from the aforementioned reasons why businesses prefer Alternative Dispute Resolution over the traditional method of Resolution.
FACTORS INFLUENCING THE PREFERENCE FOR ADR
1. Flexibility and Control:
ADR processes provide parties with greater flexibility and control over the resolution process. Unlike litigation, where outcomes are determined by judges or juries, ADR allows disputants to actively participate in shaping the resolution of their conflicts.
2.Cost Efficiency:
One of the most compelling factors driving businesses to prefer Alternative Dispute Resolution over traditional litigation is its cost-effectiveness. ADR processes generally incur lower legal fees and administrative costs, resulting in significant savings compared to the often exorbitant expenses associated with court proceedings.
3.Time Savings:
In addition to being cost-effective, ADR also offers substantial time savings. Litigation can be a lengthy process, often extending over several months or even years, whereas ADR methods, such as mediation and arbitration, are typically designed to reach resolutions more swiftly.
4.Court Encouragement: Nigeria Legal frameworks increasingly encourage the use of ADR. For instance, rules within the Civil Procedure Rules mandate courts to consider and promote ADR in cases across various financial tracks. This judicial support for ADR not only enhances its legitimacy but also pressures parties to engage in these processes as a means of avoiding the pitfalls of litigation.
CHALLENGES AND LIMITATIONS OF ADR
Alternative Dispute Resolution (ADR) presents various advantages, but it also faces significant challenges and limitations that can affect its effectiveness in resolving disputes.
1.Suitability of ADR:
While ADR is beneficial in many contexts, it is not universally suitable for all disputes. Certain cases, particularly those involving complex legal issues or significant public interest, may require judicial intervention to ensure a fair and just resolution. For example, public policy issues often necessitate court rulings, which can limit ADR's applicability in such scenarios.
2. Power Dynamics:
Power imbalances between the parties can compromise the fairness of ADR processes. Situations where one party possesses more financial resources, knowl edge, or influence may lead to inequitable outcomes. These imbalances can under mine the collaborative spirit of ADR, making it less effective in achieving a mutually satisfactory resolution.
3.Enforceability of Decisions:
Another challenge facing ADR is the enforceability of its decisions. Although courts are generally reluctant to overturn ADR awards, there are instances where the validity of ADR methods comes into question. If one party fails to comply with the terms of an ADR agreement, enforcing the outcome can be problematic, particularly if the initial agreement lacked clarity or specificity.
CONCLUSION
It is important to note that ADR is not a one-size-fits-all mechanism for dispute resolution. Just like litigation, it has some cons such as unenforceability, limited right of appeal and the lack of a cohesive decisional framework.
However, more businesses across Nigeria and globally are beginning to turn to ADR, given that its ability to reduce costs and accelerate dispute resolution is essential in an often-competitive business environment. The field of ADR is still evolving, and as the frameworks become more robust with the court's judicial blessing, we are likely to see it become one of the most relied on alternatives to resolve disputes in business conflicts.
For companies and businesses willing to keep abreast with the advancement in the modes of doing things, ADR is not simply an option but the most viable solution
References
https://www.jdsupra.com/legalnews/litigation-trends-for-2025-what-will-2716872/
https://cardozolawreview.com/increasing-the-efficiency-of-resolving-commercial-disputes/
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https://www.awci.org/media/feature-articles/the-pros-and-cons-of-alternative-dispute-resolution/
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by Fajenyo Samuel Ifeoluwa
Will Simon
Benard iliya
And Joshua Drilsu
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