2.1 TYPES AND FEATURES OF ADR
ADR is basically a resolution where you can save lots of money against another dispute resolution such as litigation. ADR is generally classified as a resolution for disputing many forms of ADR into at least four types:
- Negotiation
- Mediation
- Collaborative law
- Conciliation
ADR can be used alongside existing legal systems.
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Negotiation: This is an indispensable step in any ADR process. It is a fundamental key to all consensual ADR activities and infact, the most satisfactory method of settling disputes. Usually, negotiation consists of a quid pro quo of a sort, i.e. giving up something in order to get something in return. It involves discussion or dealings about a matter with a view to reconciling differences and establishing areas of agreement, settlement or compromise that would be mutually beneficial to the parties or that would satisfy the aspiration of each party to the negotiation. Compromise here implies flexibility on both sides and flexibility derives from a genuine desire on the part of the parties to reach an agreement participation is voluntary and there is no third party who facilitates the resolution process or imposes a resolution.
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Mediation: Mediation is at the heart of ADR. It is a process through which parties who have failed to resolve a dispute themselves can settle it through an independent third party called a mediator. A mediator is therefore a person who is trusted and accepted by both parties to a dispute. His role is to assist the parties to reach an agreed settlement of the dispute. The procedure he adopts to achieve this is to meet each party privately so as to understand that party’s own side of the story. In this regard, he shuttles between the parties and discusses with them in separate meetings known as “caucuses”. He attempts to persuade each party to focus on his real interests rather than on what he thinks to be his contractual or legal right. Thereafter, he tries to bring the parties together so that they may themselves work out a compromise solution to the dispute. He does not himself suggest a solution to the parties and cannot compel them to reach a settlement.
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In conciliation however, the conciliator goes a step further than the mediator in that he would draw up and propose the terms of agreement that he or she considers to represent a fair settlement of the dispute.
- Collaborative Law: here, each party has an attorney who facilitates the resolution process within specifically contracted terms. The parties reach agreement with support of the attorneys who are trained in the process and mutually-agreed experts. No one imposes a resolution on the parties. However, the process is a formalized process that is part of the litigation and court system. Rather than being an Alternative Resolution methodology it is a litigation variant that happens to rely on ADR like attitudes and processes.
In recent years, the enforceability of arbitration clauses, particularly in the context of consumer agreements has drawn scrutiny from the courts in some jurisdiction.
Alternative dispute resolution is usually considered to be alternative to litigation. It also can be used as a colloquialism for allowing a dispute to drop or as an alternative to violence. In recent years there has been more discussion about taking a systems approach in order to offer different kinds of options to people who are in conflict and to foster appropriate dispute resolution.
2.2 BENEFITS OF ADR AND ARBITRATION
ADR and arbitration have been both increasingly used alongside and integrated formally into legal systems internationally in order to capitalize on the typical advantages of ADR and arbitration over litigation:
- Suitability for multi-party disputes
- Flexibility of procedure - the process is determined and controlled by the parties the dispute
- Lower costs
- Less complexity
- Parties’ choice of neutral third party and therefore expertise in area of dispute to direct negotiations/adjudicate
- Likelihood and speed of settlements
- Practical solutions tailored to parties’ interests and needs
- Durability of agreements
- Confidentiality
- The preservation of relationships
- The preservation of reputations.
CHAPTER THREE
ADR AND ARBITRATION IN CONSUMER PROTECTION UNDER THE AMERICAN ARBITRATION ASSOCIATION (AAA)
Recent years have seen a pronounced trend toward incorporation of out-of-court conflict resolution processes in standardized agreements presented to consumers of goods and services. Some of these processes involve third party intervention in settlement negotiations, others involve binding arbitration. Such processes have the potential to be of significant value in making dispute resolution quicker, less costly and more satisfying.
Yet because consumer contracts often do not involve arm's length negotiation of terms and frequently consist of boilerplate language presented on a take-it-or-leave it basis by suppliers of goods or services, there are legitimate concerns regarding the fairness of consumer conflict resolution mechanisms required by suppliers. This is particularly true in the realm of binding arbitration, where the courts are displaced by private adjudication systems. In such cases, consumers are often unaware of their procedural rights and obligations until the realities of out-of-court arbitration are revealed to them after disputes have arisen.
While the results may be entirely satisfactory, they may also fall short of consumers' reasonable expectations of fairness and have a significant impact on consumers' substantive rights and remedies.
In 1997, the American Arbitration Association (AAA) announced the establishment of a National Consumer Disputes Advisory Committee. The stated mission of the Advisory Committee is:
“To bring together a broad, diverse, representative national advisory committee to advise the American Arbitration Association in the development of standards and procedures for the equitable resolution of consumer disputes”.
This Advisory Committee sought to develop principles which would establish clear benchmarks for conflict resolution processes involving consumers while recognizing that a process appropriate in one context may be inappropriate in another. Fifteen principles were developed but for our present purposes, we will look at eight.
The principles are as follows:
Principle 1: Fundamentally-fair process
Principle 2: Access to information regarding ADR program
Principle 3: Independent and impartial neutral; independent administration
Principle 4: Quality and competence of neutrals
Principle 5: Small claims
Principle 6: Reasonable cost
Principle 7: Reasonably convenient location
Principle 8: Reasonable time limits
Principle 9: Right to representation
Principle 10: Mediation
Principle 11: Agreements to arbitrate
Principle 12: Arbitration hearings
Principle 13: Access to information
Principle 14: Arbitral remedies
Principle 15: Arbitration awards
PRINCIPLE 1: FUNDAMENTALLY-FAIR PROCESS
“All parties are entitled to a fundamentally-fair ADR process. As embodiments of fundamental fairness, these Principles should be observed in structuring ADR Programs”.
Users of ADR are entitled to a process that is fundamentally fair. Emerging standards governing consensual and court-connected ADR programs reflect pervasive concerns with fair process.
PRINCIPLE 2: ACCESS TO INFORMATION REGARDING ADR PROGRAM
“Providers of goods or services should undertake reasonable measures to provide Consumers with full and accurate information regarding Consumer ADR Programs. At the time the Consumer contracts for goods or services, such measures should include (1) clear and adequate notice regarding the ADR provisions, including a statement indicating whether participation in the ADR Program is mandatory or optional, and (2) reasonable means by which Consumers may obtain additional information regarding the ADR Program. After a dispute arises, Consumers should have access to all information necessary for effective participation in ADR”.
Consumers are entitled to know what tasks the neutral may perform and what tasks they are expected to perform in the course of a particular dispute resolution service. It is the responsibility of private programs offering dispute resolution services to define clearly the services they provide and provide information about the program and Neutrals to the parties. At a minimum, Consumers should be provided with (or have prompt access to) written information to explain the process. This should include general information describing each ADR process used and its distinctive features including:
- the nature and purpose of the process, including the scope of ADR provisions
- an indication of whether or not the Consumer has a choice regarding use of the process
- the role of parties and attorneys, if any
- procedures for selection of Neutrals
- rules of conduct for Neutrals and complaint procedures
- fees and expenses
- information regarding ADR Program operation including locations, times of operation and case processing procedures
- the availability of special services for non-English speakers and persons with disabilities
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the availability of alternatives to ADR.
PRINCIPLE 9: RIGHT TO REPRESENTATION
“All parties participating in processes in ADR Programs have the right, at their own expense, to be represented by a spokesperson of their own choosing. The ADR rules and procedures should so specify”.
The right to be counseled by an attorney or other representative is an important one that is frequently reflected in standard rules governing ADR proceedings.
PRINCIPLE 10: MEDIATION
“The use of mediation is strongly encouraged as an informal means of assisting parties in resolving their own disputes”.
The increasing popularity of mediation has been a primary impetus for the revolution in conflict resolution approaches. Mediation describes a range of processes in which an impartial person helps disputing parties to communicate and to make voluntary, informed choices in an effort to resolve their dispute.
The rapid growth of mediation may be attributed to its informality, flexibility, and emphasis on the particular needs of disputing parties. For this reason, mediation is uniquely adaptable to a wide spectrum of controversies.
PRINCIPLE 11: AGREEMENTS TO ARBITRATE
Consumers should be given:
- clear and adequate notice of the arbitration provision and its consequences, including a statement of its mandatory or optional character;
- reasonable access to information regarding the arbitration process, including basic distinctions between arbitration and court proceedings, related costs, and advice as to where they may obtain more complete information regarding arbitration procedures and arbitrator rosters;
- notice of the option to make use of applicable small claims court procedures as an alternative to binding arbitration in appropriate cases; and,
- a clear statement of the means by which the Consumer may exercise the option (if any) to submit disputes to arbitration or to court process.
Consumers should have clear and adequate notice of the arbitration provision and basic information regarding the process at the time of assent. The appropriate method of giving notice and providing essential information will vary with the circumstances. In addition, the Consumer should be given the opportunity to acquire additional information regarding the arbitration process.
PRINCIPLE 12: ARBITRATION HEARINGS
1. Fundamentally-Fair Hearing
“All parties are entitled to a fundamentally-fair arbitration hearing. This requires adequate notice of hearings and an opportunity to be heard and to present relevant evidence to impartial decision- makers. In some cases, such as some small claims, the requirement of fundamental fairness may be met by hearings conducted by electronic or telephonic means or by a submission of documents. However, the Neutral should have discretionary authority to require a face-to-face hearing upon the request of a party”.
2. Confidentiality in Arbitration.
“Consistent with general expectations of privacy in arbitration hearings, the arbitrator should make reasonable efforts to maintain the privacy of the hearing to the extent permitted by applicable law. The arbitrator should also carefully consider claims of privilege and confidentiality when addressing evidentiary issues”.
There is universal agreement that parties to arbitration are entitled to a "fundamentally-fair hearing." Although confidentiality of hearings may be considered an advantage of arbitration, there is no absolute guarantee of confidentiality. Unlike court proceedings however, the general public has no right to attend arbitration proceedings; if the parties agree, moreover, attendance at hearings may be severely restricted.
PRINCIPLE 14: ARBITRAL REMEDIES
“The arbitrator should be empowered to grant whatever relief would be available in court under law or in equity”.
As a general rule, arbitrators have broad authority to fashion relief appropriate to the circumstances. Their discretion is limited only by the agreement of the parties and the scope of the submission to arbitration.
PRINCIPLE 15: ARBITRATION AWARDS
- Final and Binding Award; Limited Scope of Review
“If provided in the agreement to arbitrate, the arbitrator's award should be final and binding, but subject to review in accordance with applicable statutes governing arbitration awards”.
- Standards to Guide Arbitrator Decision-Making
“In making the award, the arbitrator should apply any identified, pertinent contract terms, statutes and legal precedents”.
- Explanation of Award
“At the timely request of either party, the arbitrator should provide a brief written explanation of the basis for the award. To facilitate such requests, the arbitrator should discuss the matter with the parties prior to the arbitration hearing”.
Review of arbitration awards is very limited under modern arbitration statutes. Courts are very reluctant to vacate awards or to second-guess the decisions of arbitrators on matters of procedure or substance. Arbitrators can misconstrue contracts, make erroneous decisions of fact and misapply law, all without having their awards impeached.
While some members of the Advisory Committee expressed concerns regarding the current state of the law, it was generally agreed that finality was a primary objective of arbitration and that it would be inappropriate to recommend more rigorous judicial review for Consumer arbitration awards than for other arbitration awards. At the same time however, the Advisory Committee concluded that the rules should specifically direct arbitrators to follow pertinent contract terms and legal principles.
CHAPTER FOUR
ADR AND ARBITRATION IN CONSUMER PROTECTION LAW IN NIGERIA
The enforcement of consumer rights is a serious problem in Nigeria. Consumers are often reluctant to enforce their rights for a variety of reasons, including ignorance of their rights, poverty, and the judiciary's rigid adherence to strict legal rules that make it very difficult for consumers to prevail.
When a consumer alleges that the defects in a particular product are the result of negligence, for example, the consumer must prove the acts or omissions in the production process that constitute negligence. The issue is complicated by the defence of "foolproof system of production," which has become rather popular with manufacturers. The practice adopted by manufacturers is to demonstrate an impeccable system of production with a view to convincing the court that such a system is incapable of admitting any defect as alleged by the consumer.
Decided cases show judicial inclination to accept such "foolproof system" as a defence
Given this scenario, the establishment of State Consumer Protection Committees is seen by consumer activists as a development that has the potential to engender interest in the enforcement of consumer rights.
The Consumer Protection Council Act provides for the establishment of a Council at the federal level and a State Committee in each state of the Federation. The Consumer Protection Council is a Federal consumer enforcement agency with the mandate to provide redress to consumer complaints through negotiation, mediation and conciliation. Among other things, the Council has the power to apply to court to prevent the circulation of any product which constitutes an imminent public hazard. It supervises the activities of the State Committees.
Although the Act came into force in 1992, the provision relating to State Committees was not implemented until 2000/2001, when the first two State Committees were inaugurated. After a long break, the implementing authority (the Consumer Protection Council) resumed the exercise in 2005 and has so far established seven additional Committees in different States
The State Committees are empowered to receive inquiries into the causes and circumstances of injuries, loss or damage suffered or caused by a company, trade, association or individual and, where appropriate, recommend to the Council the payment of compensation by the offending person to the injured consumer.
The Committees adopt the system of negotiation, mediation and conciliation. Each State Committee is composed of representatives of designated ministries and agencies. The Committee is a non-judicial alternative compensation scheme.
The advantage of this procedure is that the consumer does not have to go through the rigours of litigation to obtain redress. He can simply lodge his complaints with a State Committee.
It is premature to assess the success of this procedure; but the general expectation is that it will encourage consumers to seek redress. The extent to which consumers will patronize the system remains a matter of conjecture.
CHAPTER FIVE
CONCLUSION AND RECOMMENDATIONS
5.0 CONCLUSION
From the above, we can conclude that the Consumer Protection Council Act encourages the use of alternative dispute resolution in the form of negotiation, mediation and conciliation.
However, the law is not comprehensive as compared to the principles under the AAA to provide protection to the consumers. It is doubted that this law will attract consumers who have been injured.
Another problem envisaged in this aspect is that the Laws on Consumer Protection have not been utilized largely due to the ignorance of the consumer. This ignorance stems from lack of formal education as well as insufficient critical awareness of educated consumers.
5.1 RECOMMENDATIONS
The law needs to provide for the important attributes of ADR, it is not enough to recommend ADR without providing a legal backbone for its existence. In this respect, the law needs to incorporate for example the autonomy of the parties, finality of the award and other essentials of ADR if it is to contribute to Consumer Protection.
The regulatory agencies as well as ADR advocates should embark on intensive enlightenment campaigns. This will make an average consumer aware of his rights and expose him to channels of redress.
European Mediation Directive (2008)
Totaro, Gianna., “Avoid Court at all Costs”. The Australian Financial Review No. 14 2008.
Rev. Fr. Dr. Edwin Obimma Ezike, Lecture Notes on Law of Arbitraton 1, p.3
Halsbury’s Law of England, 4th ed. Vol. 2, p.255
Orojo and Ajomo, Law and Practice of Arbitration and Conciliation in Nigeria, Lagos: Mbeyi and Associates (Nigeria) Ltd., 1999, p.4.
Dispute Resolution. Retrieved on 17/6/2011
Felicia Monye, Law of Consumer Protection, 1st ed. Spectrum Books ltd, 2003, p. 20
Rev. Fr. Dr. Edwin Obimma Ezike, Op cit., p.8
Schwartz, David S., “Mandatory Arbitration and Fairness”. 84 Notre Dame L. Rev. 1247
Lynch, J. "ADR and Beyond: A Systems Approach to Conflict Management", Negotiation Journal, Vol. 17, No. 3, July 2001, p. 213.
See “CPR Institute for Dispute Resolution”, ADR Cost Savings and Benefit Studies (Catherine Cronin-Harris, ed. 1994)
The arbitration agreement may be included in the “fine print” in a brochure of terms and conditions inside a box of goods.
Mark E. Budnitz, “Arbitration of Disputes Between Consumers and Financial Institutions”: A Serious Threat to Consumer Protection, 10 Ohio St.J. On Disp. Res. 267 (1995)
William W. Park, “When and Why Arbitration Matters”: The Commercial Way to Justice 73, 75 ( G.M. Beresfort Hartwell ed., 1997)
Schwartz, David S., “Enforcing Small Print to Protect Big Business”: Employee and Consumer Rights claim in an Age of Compelled Arbitration, 1997 Wis. L. Rev.33, 55-60
Permanente Review and Recommendations, p.28
Bowles Financial Grp Inc. v. Stiefel, Nicolaus & Co.(1994) 10th Cir. 1013
Thomas J. Stipanowich, “Punitive Damages and Consumerization of Arbitration”, 92 Nw. U.L.Rev. 1 1998
Prof. Felicia Monye, “Consumer Protection and ADR in Nigeria”. Available at . Retrieved on 30/6/2011
Boardman v Guinness (Nig) Ltd. (1980) NCLR 109 at 126; Okonkwo v. Guinness (Nig.) Ltd. (1980) NCLR at 130; Ebelamu v. Guiness (Nig.) Ltd. FCA/101/82)
Prof. Felicia Monye. Op. cit
Prof. Felicia Monye. Op. cit