Alternative Dispute Resolution Methods

The old Italian proverb that "a law suit is a fruit tree planted in a lawyer's garden" springs to mind when considering alternatives to the traditional "law suit". In the past, it has often been the only dispute resolution procedure used by lawyers in disputes.  Most lawyers are happy to apply a little judicious pruning to the fruit tree.  Over the last five or ten years lawyers and their clients have become convinced that litigation or suing people may not be the most effective way of solving disputes.

The Law Society is promoting the use of mediation to resolve disputes.  Lawyers are not interested in pushing litigation if there are more effective and loss costly processes available to resolve a dispute.

What are the methods of Resolving a Dispute

"ADR" or Alternative Dispute Resolution is a catchall phrase for any alternative to giving a dispute to a Judge for a decision or litigation.  The most common alternative procedures are:

• negotiation - including assisted negotiation;
• mediation;
• arbitration.

"Negotiation" needs no definition. It is the process most people undertake when entering a deal and often when resolving a dispute. Assisted negotiation involves a third party helping the parties to reach a resolution. The assistor is often a trusted friend or professional adviser, but there is no formal structure.

"Mediation" is a structured process involving an independent person, the mediator, appointed by the parties. The mediator will isolate the issues involved, assist in developing options to resolve them, and ultimately help reach agreement. Usually mediation is privately organised and voluntary. The parties reach an agreement acceptable to both of them. Often the mediator is a lawyer who has been specially trained in mediation techniques.  The success of the mediation depends on the skill of the mediator.  It is important that your mediator is trained and experienced.  Many lawyers have been trained by LEADR, Arbitrators and Mediators Institute or similar organisations and are available to mediate.

It is up to the parties to decide whether to take their own lawyers to the mediation. In many cases it is helpful for the parties to have their lawyers present. The role of the lawyers is to help present the client's position, provide legal advice and to advise on the implications of settlement options. They can also assist in drafting a formal settlement agreement when this stage is reached.

"Arbitration" is more akin to litigation than to mediation. An arbitrator acts as a judge although appointed by the parties.

An "arbitrator" may be a lawyer or other specialist who is appropriate to consider the issues, such as a valuer in a rental review arbitration.

Advantages of Mediation

In some areas the advantages of mediation were considered sufficient for the law to make it compulsory to try mediation before litigation. Under the Family Proceedings Act, family disputes, notably children's custody and access issues, must be mediated before a Court will hear the dispute. Under the Employment Contracts Act, the parties generally have to attend a mediation session with an employment mediator before the Employment Tribunal will consider the dispute.

However in most other disputes, mediation must be initiated by agreement between the parties, either when a dispute arises or as part of a procedure imposed by a contract.

The advantages of the mediation over litigation are summarised below.

In an extract from "Alternative Dispute Resolution" in the "Independent" (11/2/94), the time/lost comparison ratio for the procedures are:

Therefore mediation can be achieved at an average of 5% of the cost involved to litigate the dispute and in a fraction of the time. Experienced Court lawyers would say that this time estimate is conservative.

ADR In Contracts

Litigation is the quickest way to wreck a commercial relationship. In the United States many of the large corporations have set up Dispute Resolution Departments. Their aim is to resolve disputes with customers and partners before they escalate into issues which can't be resolved outside a Court.

For many years commercial construction contracts have required disputes to be dealt with by arbitration not litigation. International Conditions of Contract such as FIDIC (published by Federation Internationale Des Ingenieurs-Conseils) have long included arbitration and independent expert determinations as alternatives to litigation.

Some commercial contracts now also give the parties immediate resort to mediation when a dispute arises.

The health industry has embraced alternative dispute resolution in most contracts between providers and the Health Funding Authority.  These contracts incorporate the Mediation/Arbitration (Med-Arb) Rules, which prescribe mediation first and then arbitration.

Mediation is as appropriate for large commercial disputes as small ones. In Australia the Spedley mediation resolved a $A750m dispute. Spedley, a major player with the then highflying Bond Corporation and the merchant bank, Rothwells Limited, was involved in a case which had kept a large contingent of Australian Queens Counsel employed for months before the mediated settlement. Closer to home, the machinery to finalise the Waikato-Tainui Raupatu Land Settlements was set out in a Deed of Settlement between the Crown and Tainui. The Deed was sanctified in the historic Waikato Raupatu Claims Settlement Act 1995. This prescribes mediation then arbitration in resolving disputes. The mediation process seems to have been successful in the land claims dealt with so far - the latest being the multi million dollar settlement mediated between Tainui and AgResearch.

A word of warning - some disputes can't be resolved except by litigation!

Conclusion