What is Alternative dispute resolution (ADR)?

Alternative dispute resolution (ADR) schemes are processes that enable you to resolve a dispute you’re having with a company without having to go to court. We explain how they work.

In this article

What are the common types of ADR?

The two most common types of ADR are mediation and arbitration.

• Mediation is where an independent third party helps you and the company you’re in a dispute with to reach a mutually acceptable outcome. The mediator will add formal structure to the communication you and the company have with the aim of helping you to reach a voluntary agreement. The mediator cannot impose a solution.
• Arbitration is where an independent third party considers the facts and takes a decision that’s legally binding on you, the company, or both.

ADR schemes are independent third parties that act as a middleman between you and the company after your initial complaint couldn’t be resolved. Some ADR schemes are called ombudsman services .

Are all ADR decisions legally binding?

Mediation isn’t legally binding, but arbitration is.

• Mediation allows you and the company you’re in a dispute with to 'control' the outcome, rather than having it imposed on you. The mediator has no decision making power, which means the dispute will be resolved on the terms you and the company decide and isn’t legally binding until you all sign a legal agreement documenting your resolution.
• Arbitration is final and legally binding - it is enforceable in the same way as a court judgement. There will only be a limited number of cases in which either you or the company could appeal the final decision - for example, if you found the arbitrator had an undisclosed interest in the company you’re in a dispute with.

When can I use ADR?

You can get the help of an ADR scheme only after you’ve tried to resolve things amicably with the company you’re in dispute with.

This means you should have reached a stalemate with the company even after going through its customer services and internal complaints procedure.

If you’ve already tried to resolve things and are getting nowhere, that’s where ADR schemes can step in to help.

While participation in ADR schemes isn’t mandatory for companies, almost all businesses that sell directly to consumers are required to point you to a certified ADR scheme when they can’t resolve a dispute in-house.

They must also tell you whether or not they are willing to use that scheme. You should check if there are any costs associated. If there are, these tend to be lower than in the courts.

Can an ADR help me resolve a cross-border dispute?

When the UK was part of the EU, consumers could settle cross-border disputes using an online dispute resolution (ODR) platform run by the European Commission for Member States.

Now, UK consumers can still access ADR entities in EU countries, just not through the ODR platform, but by contacting the ADR directly.

Are ADR schemes common?

In the UK, the financial services, energy, telecoms and aviation sectors already have large and well-established ADR schemes.

• Financial Ombudsman Service (FOS) - deals with financial services providers.
• Ombudsman Services: Energy or Renewable Energy Consumer Code (RECC) - deals with energy suppliers.
• Communications Ombudsman - deals with communications providers.
• Parliamentary and Health Service Ombudsman - deals with NHS organisations and government departments and services.

Outside these regulated sectors, there are also voluntary ADR schemes which many businesses are members of.