When is the right time for a binding ADR process?

A dispute may be ready for a binding ADR process at any time

• The contract provision or state law may require use of a binding ADR process

Binding arbitration may be most cost-effective following a mediative process

• Issues and differences can be narrowed and focused

A binding ADR process should be chosen when the parties have decided that they prefer not to settle the dispute, but do not want to go through the public court system. A binding ADR process can be initiated at any time.

A Dispute Is Ready For Arbitration When ...

Most commercial arbitration is triggered by a pre-dispute contract clause. The arbitration clause may determine when the arbitration can be initiated, and may specify a limitations period. Some contracts require preliminary dispute resolution steps, such as good faith negotiation or mediation, prior to the initiation of arbitration.

Without a contract requirement, the parties may jointly initiate arbitration by executing a private arbitration agreement. If a suit is pending, the agreement will usually provide for its termination because the arbitration will be final and binding.

If entering a private arbitration agreement, parties can and should consider what formal or informal discovery will take place prior to the arbitration hearing. Given the flexibility to write any necessary discovery into the arbitration process, the status of the discovery prior to the arbitration agreement need not affect the decision to proceed.

A Dispute Is Ready For Private Judging When ...

Some states' rules of civil procedure or practice contain authorization for a private trial. Sometimes the authorization may specifically provide for the means and timing of initiating the private trial. In those states in which there is no specific authorization for a private trial, the parties have more flexibility as to the means and timing of such a process. The same issues relevant to the timing of an arbitration should be considered.

The Time For A Binding/Adjucative Process May Be After Other Settlement Efforts

It is important to note that any binding ADR process can be initiated after a mediative process has taken place. For example, the mediative process may have succeeded in settling most issues in a dispute, or may have narrowed the gap between settlement positions. Rather than return to full-blown litigation, the parties can still agree to engage a binding process that is specifically tailored or streamlined to take advantage of the progress made in the mediation. In such a case, the parties could agree that only certain disputes or issues are to be arbitrated, could stipulate to bracketed limits, or could grant the neutral authority to choose from among the final settlement offers of the parties in mediation.