ADR can encompass several legal processes that are used to resolve disputes and come to agreements between parties without the need for litigation. These processes include negotiation, mediation, and arbitration.
Negotiation is longstanding: parties settle cases. Mediation may also be informal. In this process, a third party neutral (the mediator) works with all parties to come to an acceptable resolution, typically through email, phone calls, and other written correspondence. Like negotiation, mediation leaves the final resolution up to the parties involved. A mediator hears all sides of the issue and offers suggestions to help reach an acceptable agreement. Mediation is often preferable when the parties have a strong desire to preserve their relationships, such as family members, friends, or business partners. Mediation can help parties communicate effectively.
Finally, arbitration is the most formal ADR process. An arbitrator serves as an impartial third party who -- like a judge -- hears evidence and argument from both sides of a dispute. Arbitration decisions are issued by the arbitrator, much like a judge in a trial. By pre-dispute contract, parties can choose arbitration to be binding (giving up the right to pursue a trial if they disagree with the decision) or nonbinding (reserving the option to pursue litigation if they disagree with the decision).