Conflict lies at the core of innovation.  – Emanuel R. Piore

 Being a startup is a challenge in itself. There is not a single arena that is not plagued by challenges (we should refuse to call them ‘problems’), and dealing with all the challenges can take a toll on everyone involved. Also, just like every other organization doing business, startups too get to deal with many people – employees, consultants, contractors, designers, suppliers, marketers, distributors – the list is endless. People within, and outside – startups are a hub of people and their ideas.

And, what usually happens with so many people around, and so many ideas and opinions around? Conflicts arise. Conflicts are but natural in all human relationships, and so is the case with business relationships. Every organization inadvertently gets to deal with those sore thumbs that stick out oddly, and that refuse to heal. Every organization does indeed suffer the obnoxiousness of people – be they from outside or inside.

And, when things go out of hand, they tend to take serious turns, the party on the other end would want to take legal recourse. But, the million dollar question is: Which legal recourse must be opted for? Litigation in courts, or the multi-pronged Alternate Dispute Resolution methods? Well, from a startup’s point of view, it is undoubtedly the latter that prove to be beneficial in every possible way concerned. You ask how? This is how:

What is Alternate Dispute Resolution (ADR)?

The system of ADR may simply be defined as those methods of dispute settlement/ resolution, that make use of out-of-court settlement techniques. Some very common examples of ADR mechanisms are Arbitration, Mediation and Negotiation. It is to be noted that these are not independent of each other, and each of them inadvertently involves one or the other mentioned forms of ADR mechanisms. Also, these are not the only forms of ADR mechanisms. There are a plenty of others, but the most commonly used by startups and business organizations tend to be these three. Let us understand them one-by-one.

Arbitration: This is a process whereby the parties to the dispute appoint a third impartial person, called an arbitrator, before whom they present their claims and settle the dispute. By so appointing an arbitrator all by themselves, they agree to be bound by the decision of the arbitrator and this decision (called the “award”) can be enforceable in the court of law. Thus, by doing so, money and time of the parties are saved. You are no longer at the mercy of the unending litigation at courts, wherein you wield absolutely no control over the process of litigation, and it is dragged on for years.

Mediation: This is a process whereby the third party, named the mediator, helps the parties to settle their disputes. Unlike an arbitrator who plays a disinterested role in the arbitral process, a mediator proactively takes part in the mediation process and makes sure that the parties arrive at a concomitant solution/ conclusion.

Negotiation: In Negotiation, there is no third party appointed. Rather, the parties themselves negotiate the terms across the table. Inevitably, every negotiation process involves elements of mediation. Negotiation is a very commonly used business term and you must have been into endless negotiations with various people on phone or in person, without even realizing that you are using an ADR process to settle issues!

Thus, you have seen that the ADR processes are far more cost and time effective when compared to litigation. Also, they can be effectively used as business strategies to achieve the results you want. There are no set criteria to appoint arbitrators and mediators (in case of business disputes). The only relevant legality involved is that, there has to be a valid agreement between the parties involved to the effect at all disputes would be referred to arbitration/ mediation as the case may be. Also, the name of the arbitrator/mediator may be specified in the agreement itself, if the parties so desire. And, there need not be a separate “Agreement” as such, rather, even a single ADR Clause specifying the kind of dispute settlement method that the parties desire to use, is more than sufficient.

Also, the parties have to make sure that a knowledgeable person, who is an expert in the relevant field needs to be appointed as the arbitrator/ mediator. For example, if the dispute is relating to a technological invention, it is to be made sure that a person in the know-how of the concerned technology has to be appointed, for the benefit of the parties themselves!

Thus, always, and on any given day, ADR is far better than litigation for startups! Do drop in your queries and/or criticisms as comments below!

Happy Startup-ing!

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