Dispute Resolution: Adjicate, Arbitrate, Mediate, or Litigate?

“That’s the way to do it”, at least according to a recent article by Paul Carter Hemlin on Supply Management . com. In the article, he covered the four (primary) methods of dispute resolution that you can use to resolve disputes with your supply chain partners along with their advantages and disadvantages.

Adjucation

The parties agree on a single adjucator, who will be an expert in a particular sector, who will review evidence and arguments and make a decision without the need for a hearing.

  Advantages

  • Confidential
  • Quick Resolution
  • Cost-Effective
   Disdvantages

  • Immediately Enforceable
  • No Case Law
  • Can Be Used as an “Ambush” by a Party Who Spends Months Preparing a Case in Secret
  • Does Not Permit Counter-Claims

Arbitration

Disputes are heard by a lone arbitrator or a panel from an approved body, such as the Chartered Institute of Arbitrators, often using a mini-trial format, and are resolved according to agreed upon law(s) outside the court.

  Advantages

  • Confidential
  • Unlikely to be Overturned by a Court
  • Option for a Panel-decision
   Disdvantages

  • Lengthy and Expensive
  • Arbitrators Do Not Have to Give a Reason for a Decision
  • Limited Grounds for Appeal
  • All Matters Must be Concluded Before a Decision Can be Made

Mediation

A third party mediator can help the parties avoid legal action.

  Advantages

  • Quick, Cheap, and Less Adversarial
  • Confidential Outcome
  • “Without Prejudice” Process
   Disdvantages

  • Not Binding
  • Will Not Work When Parties are Entrenched
    (and Only Add Time and Cost)
  • Settlement is Voluntary

Litigation

The ‘traditional’ process for resolving legal disputes on civil matters where the party starting an action (the plaintiff), seeks a legal or equitable remedy.

  Advantages

  • Tried, Tested, and a Vast Body of Case Law
  • Final Decision that Parties are Obligated to Respect
  • Institutionalized
   Disdvantages

  • Lengthy and Expensive
  • Significant Management Overhead
  • Very Adversarial

Whichever method you choose, you should make sure it is specified up-front in the contract, which should also specify the dispute escalation process and timeframes in which both parties must take action or respond to a claim or counter-claim.