Litigation 101: alternative dispute resolution

Commercial disputes come in a variety of forms – and so too do options for trying to resolve those disputes. This article provides an overview of the main Alternative Dispute Resolution (ADR) methods and issues to think about when deciding what type of ADR method best meets your needs.

What is ADR?

ADR refers to processes where the parties seek to resolve disputes as an alternative to the formal litigation process. ADR may be used to resolve a dispute before it ever proceeds to court, or to help the parties reach a settlement once proceedings have commenced.

While there are a variety of methods of ADR, the main methods are:

• negotiation;
• mediation;
• arbitration; and
• expert determination.

ADR methods

Negotiation

This process allows the parties to communicate with each other on a without prejudice basis regarding the issues in dispute, in an attempt to reach a resolution. Negotiation is a process open to parties at any stage of a dispute, however parties may also have contractual obligations that require them to confer when a dispute arises and to use their best endeavours to resolve a dispute.

• Negotiation is the most cost-effective way of resolving a dispute. Parties that are looking to have an ongoing relationship often benefit from adopting this ADR process, as it avoids litigation and encourages the parties to look at commercial options for a mutually acceptable outcome.
• The downside of this ADR process is that parties do not get the opportunity to fully understand each other’s legal positions through pleadings, evidence or discovery, but there will be many cases where parties are happy to forgo this in order to resolve their disputes quickly and efficiently.

Mediation

This method may be voluntary, court ordered or required as part of a contract. It involves a confidential process whereby the parties might attempt to negotiate a settlement by allowing an independent third party mediator to assist the parties in dispute to:

• identify the issues in dispute;
• help clarify the issues and suggest ways to discuss the dispute;
• help the parties develop options for resolving the dispute; and
• reach agreement where appropriate to resolve their issues.

The mediator will not take sides or give legal, financial or other expert advice and cannot make or impose decisions and a settlement will only occur if the parties agree to resolve the dispute.

Conciliation is also often referred to in the context of ADR. It is similar to mediation, though conciliations often occur to resolve disputes that arise in a statutory framework, and a conciliator may therefore have professional expertise in the subject matter in dispute and be slightly more involved in the process, to achieve outcomes consistent with the relevant legislation.

• Mediations allow the parties to explore all options for what may be offered as part of a settlement. That is, the parties are not constrained to the remedies a court would be able to order if that matter were to proceed to a hearing.
• Mediations are without prejudice and private & confidential. Parties also typically agree for mediations to take place on a without prejudice basis, and to keep matters discussed during a mediation private and confidential. This means that the terms of any settlement will also remain confidential.
• Mediations can occur at any stage of a dispute, with courts often ordering the parties to mediate prior to a hearing.
• Careful consideration needs to be given to the choice of mediator. Different mediators will bring different approaches. Some will facilitate the parties to agree on an outcome themselves whereas others may be more involved and express views about the merits of a party’s case and give an indication of how the dispute may proceed were the matter to proceed to a hearing.

Arbitration

This method involves the parties agreeing to present their arguments and evidence about a dispute before a suitably qualified practitioner who makes a determination which is enforceable. On many levels, presenting arguments before an arbitrator is similar to a court hearing, except that the parties can agree for it to be confidential and can agree to a process that meets their particular needs.