The Nexus of the Rule of Law and Alternative Dispute Resolution: Who Boosts or Sets Back Whom?

Abstract

This chapter examines the complex relationship between alternative dispute resolution (ADR) and the rule of law, and how each influences the other. Essential to democratic governance, the rule of law ensures legal certainty, judicial independence and the protection of fundamental rights, while promoting fairness and accountability. ADR has become popular, particularly in regions with underdeveloped legal systems, as a means of attracting foreign investment and resolving disputes more efficiently. This chapter highlights the work of the INVESTinADR project in North Macedonia, which has explored the impact of ADR on investment promotion. ADR offers a flexible and less adversarial alternative to traditional litigation, particularly in commercial and international disputes. However, it faces challenges such as rising costs, delays and power imbalances, which can undermine its effectiveness and alignment with the rule of law. The quality of ADR depends on the impartiality of mediators and arbitrators, and issues such as limited remedies and lack of appellate review are of concern. In addition, ADR decisions often lack precedential value, which affects continuity and legal certainty, and there are increasing calls for transparency, particularly in cases of public interest. The relationship between ADR and the rule of law is complex and varies by context, with no clear consensus on whether one strengthens or weakens the other. In developing countries, ADR can improve access to justice where formal systems are distrusted, but success depends on balancing local and external needs. Concerns about the privatisation of justice through ADR and the need for transparency are significant, although ADR could also drive improvements in traditional justice systems. Ultimately, ADR and the rule of law are interdependent and can be mutually reinforcing if effectively integrated.