Traditional litigation can run for extensive periods of time, incurring high costs while simultaneously polarising the parties involved. Fortunately, there are efficient and effective alternative dispute resolution processes that provide businesses with options that put them in control of resolving their dispute, making it in an increasingly popular alternative to traditional litigation.
Disputes on the rise and court lists busier
An inevitable consequence of the GFC has been a rise in instances of incomplete contracts and a frightening trend of unpaid bills for services rendered. A knock-on effect of this has been an increase in the issuing of proceedings, resulting in busier court lists and associated delays.
What is alternative dispute resolution (ADR)?
Alternative dispute resolution refers to a collection of processes which provide an alternative to our traditional court-based litigation system. These processes involve an independent third party who will guide and assist participants in their quest for a mutually satisfactory settlement. There are several ADR processes available, including:
- Mediation: A meeting of parties facilitated by an accredited mediator who encourages communication with a view to enabling the participants to reach settlement. Signed settlement agreements become enforceable contracts between the parties.
- Arbitration: Facts and evidence are presented by each side to an arbitrator who makes a determination based on what has been submitted. The arbitrator’s award is final and binding and can only be appealed in limited circumstances.
- Expert determination: Parties submit their dispute to an independent expert (e.g. an architect/engineer). Whether or not the decision is binding will depend of the terms of the expert determination agreement.
- Conciliation: A conciliator conducts separate meetings with all parties in a dispute, attempting to improve communication and lower tensions with a view to reaching a negotiated settlement.
- Facilitation: A facilitator (often a lawyer) will conduct assisted negotiations during which they use their expertise to assist – or "facilitate" – the negotiation of agreed terms.
Why is alternative dispute resolution preferable to litigation?
- Subject to the co-operation of the ADR practitioner, parties will have a say in the cost and speed of the process.
- The chances of a lasting agreement are extremely high because it is reached through mutual participation.
- ADR is held in private and unless an issue in the proceedings is referred to the courts, the details will remain in the private domain.
- ADR can be an educative process where the parties can learn about each other's interests and motivators.
- Where the dispute requires expert knowledge or experience to understand the facts at hand, an ADR practitioner's specialist knowledge is invaluable.
What are the drawbacks of ADR?
- ADR practitioners charge a fee for their time and services.
- ADR practitioners do not have the same full powers as a court.
- Previous ADR awards (being private decisions) cannot be used as precedents, making it difficult to predict potential outcomes.
How does ADR work?
Often, contracts and agreements will contain a specific ADR clause which compels the parties to pursue disputes through ADR. This does not mean that you can contract out of the right of redress through the courts.
However, where an ADR clause exists and one party attempts to bring the matter to court without utilising the specified mode of ADR, the approach of the courts has typically been to put a "stay" (a hold) on proceedings so that parties can use the interim to try to reach a settlement.
Even if there is no ADR clause, parties can still agree to try to resolve their dispute through ADR. The National Alternative Dispute Resolution Advisory Council (NADRAC) has recently released the publication Your Guide to Dispute Resolution. Additional information can be obtained from The Institute of Arbitrators & Mediators Australia (IAMA) and from the Australian Commercial Disputes Centre (ACDC).
Aoife Gallagher-Watson is a solicitor in the Melbourne office of Colin Biggers & Paisley.
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