1. What is Alternative Dispute Resolution (ADR)?

1. What is Alternative Dispute Resolution (ADR)?

Given that the cost of litigation is normally high, the Hong Kong judicial system has provided some other means of dispute resolution in the form of ADR that seek to minimize the costs of dispute resolution by avoiding expensive court costs.

Alternative Dispute Resolution is a dispute resolution process whereby the disagreeing parties can come to an agreement short of litigation. The idea is that using ADR can minimize the time and costs involved in litigation. The most common forms of ADR are arbitration and mediation.

Arbitration

Arbitration is a legal process which results in the arbitrator(s), instead of a court judge, issuing an award to the aggrieved party. Arbitration awards are final and binding on the parties involved and the parties can only challenge these awards in very exceptional circumstances. An arbitration award has a status similar to a court judgment and is enforceable in a similar manner. Arbitration awards made in Hong Kong are enforceable through the courts of most of the world's trading nations.

Arbitration is a binding form of dispute resolution, equivalent to litigation in the courts, and is entirely distinct from the various forms of non-binding dispute resolution such as negotiation, mediation, or non-binding determinations by experts.

For an arbitration to take place, the disputing parties must agree to take their dispute to arbitration. In practice, this agreement has often been made before any dispute arises as companies will often include arbitration clauses in their various business contracts. By signing a contract with an arbitration clause in it, the parties are agreeing that any dispute arising from the contract will not be heard by a court, but will instead be heard by a private individual or a panel of several private individuals. If the parties have agreed to arbitration, they will generally have to proceed with an arbitration rather than litigation since courts will normally force the parties to honour their agreement to arbitrate.

You may also refer to Hong Kong Legal System.

Mediation

Mediation involves the appointment of a third party to help disputing parties reach a settlement. The mediator is not given any power to impose (or force) a settlement. The mediator will encourage the parties to reach an agreement during mediation so that the parties will not have one imposed upon them by an arbitrator or a judge.

In contrast to an arbitrator, a mediator will attempt to bring the parties to a mutually accepted settlement. A party is not legally required to accept the terms of a settlement proposed in a mediation. A mediation settlement takes effect as an agreement, rather than as an immediately enforceable award.

You may also refer to Hong Kong Legal System.