Alternative Dispute Resolution: An Overview

Background

As the number of civil cases filed each year has increased and court resources have stretched further and further, parties have turned to solutions outside the traditional judicial system as a faster, simpler solution to resolve  disputes.  Alternative Dispute Resolution (ADR) is a series of processes that seeks to solve disputes among individuals without resorting to complex, time consuming, and expensive litigation.  Although non-judicial dispute resolution practices have existed for centuries, ADR has become drastically more popular in the United States and internationally over the last seventy years.

Since the 1950s, the United States and various international organizations have drafted laws and treaties that provide a framework for dispute resolution proceedings.  Most proceedings fall into one of three main categories:  negotiation, mediation (also called nonbinding arbitration), and binding arbitration.

ADR is especially significant to agricultural law.  For example, many contracts concerning agricultural products contain clauses requiring the parties to use a stipulated mediation or arbitration process to avoid litigation and quickly resolve disputes.

Statutory and Regulatory Framework

While most ADR proceedings are simpler than traditional litigation, ADR still has procedures to fairly resolve disputes in an orderly format.  State, national, and international laws ensure consistency and applicability in ADR.

While almost every state has enacted procedures  for ADR, those procedures vary from state to state.  Many have adopted a version of the Uniform Arbitration Act, while some have also adopted the Uniform Mediation Act.  Others have even specifically tailored ADR provisions for agricultural disputes. One common provision requires that individuals or creditors seek mediation before commencing any formal legal action against agricultural operations based on environmental concerns, non-payment of mortgages concerning agricultural property, or nuisance.

In 1925, the United States Arbitration Act, also known as the Federal Arbitration Act, ushered in the modern era of ADR in the United States.  Since then, the federal government has adopted ADR procedures to handle an array of disputes in agriculture, including disputes with  government agencies such as FSA, private entities such as crop insurance companies, and national agricultural groups.

ADR presents particular benefits in the international arena.  Because jurisdiction is often disputed in the international context, many parties rely almost exclusively on some variety of formalized ADR to solve conflicts.  Several treaties and agreements facilitate this growing need.  In 1958, New York City hosted the U.N. Conference on International Commercial Arbitration that led to the passage of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards and later to the Inter-American Convention on International Commercial Arbitration.  These Conventions established standards and mores of international arbitration that are still in use today.   Other trade agreements, like the U.S. Mexico, Canada Agreement (“USMCA”) also contain ADR provisions. The protocols established under these three agreements have facilitated a great deal of international mediation and arbitration, increasing ADR’s prominence as a viable method of problem-solving.

Forms of ADR

While ADR can take many forms, it generally takes one of three basic types of approaches.  It might be easier and more accurate to consider them not as separate and distinct forms but as different areas along a continuum, with significant overlap between the three areas.  On one end of the spectrum, is negotiation—the least formal and least expensive method of dispute resolution—on the other end is binding arbitration—the most formal and most expensive method. .  The approach chosen is left to the discretion of the parties, who must not only voluntarily consent to the use of ADR, but, in everything except binding arbitration, must further consent to the result that is reached. Businesses commonly include arbitration agreements in their contracts. These contract provisions designate a method of ADR to resolve disputes and sometimes predetermine the forum.

Choosing the correct ADR form is often a matter of strategy that should be carefully considered in light of the parties’ circumstances preferences for expense and formality.

Negotiation

The simplest and often the cheapest ADR form is negotiation.  While negotiations may become complex and time-consuming, they are often concluded quickly by thousands of people every day who do not even realize that they are participating in an ADR process.  Often, there is no involvement by a third party, and no formal written agreement results from the interaction.  All parties must agree to participate in the process, and all resulting agreements reached through the negotiation are voluntary and generally unenforceable through the court system.  Parties typically participate in a negotiation because they believe that they will obtain a more thorough agreement than they would acting independently.

Mediation and Non-Binding Arbitration

At the center of the spectrum are mediation and non-binding arbitration.  These two methods are similar in structure and identical in many cases.  In both, a third-party neutral helps resolve a dispute between two or more parties and the parties must voluntarily reach an agreement.  The third-party neutral does not have the authority to make binding decisions on the facts or issues in the dispute. Instead, it helps to direct the parties towards an agreement by asking questions, setting the agenda, or providing a way for the parties to air grievances.  The basic goal is to provide a neutral forum with a disinterested mediator in which each party can explain its situation.  These explanations help resolve the dispute without litigation.  In certain cases, depending on whether a confidentiality agreement is in effect, they may also provide information useful for future litigation if the mediation fails.  Because mediation is non-binding by nature, this form of ADR is popular for international disputes, including agricultural trade disputes.

Binding Arbitration

On the most formal  end of the spectrum stands arbitration.  Arbitration is a quasi-judicial forum through which conflicts can be resolved without resorting to traditional litigation.  While the forum itself may be similar to a judicial setting, the procedures and powers wielded by the arbitrator are quite different.  In a traditional legal setting, the powers of the judge are defined by law, while in arbitration, the powers of the arbitrator depends upon the authority conveyed by the parties. For example, a traditional legal setting provides an extensive framework for how parties may present evidence to the judge or jury at trial; in arbitration, such rules of evidence do not apply and parties may bring evidence freely. The parties can select professional arbitrators and standard arbitration procedures, and for the sake of speed and efficiency, most arbitration proceedings are conducted under those existing structures.  However, parties may also tailor the procedures to fit their unique situation and grant the arbitrator as much or as little authority as they deem necessary. Arbitration  also allows the parties to seek out an arbitrator with industry knowledge of the disputed subject matter instead of a judge.

Unlike mediation, the arbitrator does not facilitate an agreement but rather renders a legally enforceable decision on the dispute.  This decision is binding unless one party can show that the arbitrator exceeded its power or was biased.  An arbitration award between two United States residents reached in the United States may be enforced just like a judicial judgment after a judge certifies the arbitration award. On the international level, however, it is much more difficult to enforce an arbitration award because the home country of the losing party might refuse to honor it. As a result, binding arbitration has become more prevalent among commercial parties who include arbitration provisions in every contract.

Alternative Dispute Resolution in Agriculture

Agriculture has significantly increased in complexity over the past few decades.  The vast array of potential problems confronting agriculture create a need to settle disputes as quickly and fairly as possible.  ADR presents a flexible framework in which parties can work out difficult issues without waiting for the judicial system to decide them.  Contracts for the sale of seed, environmental disputes, production contracts for raising livestock, loan agreements, crop insurance, and global trade troubles are only a few of the complex issues confronting the agricultural industry.  Those same issues are also well suited for alternative dispute resolution.  For example,  crop insurance is heavily regulated by the federal government and includes a mandatory arbitration provision in virtually every contract.  As a result, a crop insurance dispute rarely makes its way into a courtroom.  As parties continue to seek efficient, flexible, and inexpensive solutions to the issues facing agriculture, they will likely rely more and more on ADR.

For further information on these issues, see the Crop Insurance, Production Contracts, Environmental Law, Finance & Credit, and International Trade Reading Rooms.