It typically involves a process much less formal than the traditional court process and includes the appointment of a third-party to preside over a hearing between the parties.
The advantages of ADR are speed and money: it costs less and is quicker than court litigation.
ADR forums are also private.
"Modern systems of alternative dispute resolution, commonly referred to as ADR, are designed to help parties solve disputes efficiently without resort to formal litigation and with a minimum of judicial interference."
The disadvantage is that it often involves compromise.
The concepts of ADR, and components of arbitration and mediation, are well set-out in 887574 Ontario:
"I think it fair to observe that a binding arbitration is a non-court equivalent to a court trial. In either case a neutral third party hears the case and makes his decision which (subject to appeal) is binding upon the parties.
"This differs from other forms of ADR in which the parties themselves are part of the decision-making mechanism and the neutral third party's involvement is of a facilitative nature: e.g. mediation, conciliation, neutral evaluation, non-binding opinion, non-binding arbitration. Of course, the simplest method - often overlooked - is that of non-involvement by a neutral: a negotiation between the parties. It is not unusual that ADR resolutions are conducted privately; more to the point, I suspect it would be unusual to see a public ADR session especially where the focus is on coming to a consensual arrangement.
"The parties need to have the opportunity of discussion and natural give and take with brainstorming and conditional concession giving without the concern of being under a microscope. If the parties were under constant surveillance, one could well imagine that they would be severely inhibited in the frank and open discussions with the result that settlement ratios would tend to dry up."
Some jurisdictions, such as the United States, exclude arbitration from what they term alternative dispute resolution. Rather, they distinguish arbitration, because of the binding nature of it, as a separate process. ADR is thus confined to the more "touchy-feely" forms of ADR such as mediation and such similar soft approaches to dispute resolution.
- Hilmond Investments v CIBC 1996 135 DLR (4th) 471 (1996, ONT Court of Appeal)
- Ontario v Pizza Pizza 35 CPC (3d) 323 (Ontario, 1994)