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What is Alternative Dispute Resolution (ADR)

Updated: Jan 16



ADR is a system to resolve disputes between parties without having recourse to formal resolution through the court system.


The main types of ADR are:

  • Negotiation between the parties;

  • Facilitated negotiation between the parties (Mediation) and

  • Determination through a private decision maker or decision makers (Arbitration).


 

What is negotiation?


Simply put, in the case of disputes, this is where the parties, realising they are in dispute, attempt to resolve their differences without either assistance or resorting to any form of adjudication including adjudication by a mediator, adjudicator arbitrator or through the official court system of a country.


Negotiation has the advantages of:-

  • being inexpensive,

  • quick and

  • giving the parties the satisfaction of resolving their own disputes.

Negotiation is often overlooked but negotiation is an important and effective member of the ADR family which must be properly prepared.


It is important that this type of negotiation is entered into in good faith by all the disputing parties.


 

What is Mediation?


As defined by the Federal Court of Australia “Mediation is a structured negotiation process in which an independent person, known as a mediator, assists the parties to identify and assess options and negotiate an agreement to resolve their dispute.


The Australian Mediation Association states: “Mediation is a process by which a neutral third party called a mediator helps people in conflict negotiate a mutually acceptable agreement. The parties to the mediation control the outcome."


A mediator:-

  • facilitates communication;

  • promotes understanding;

  • assists the parties to identify their needs and interests and uses creative problem-solving techniques to enable the parties to reach their own agreement.


Unlike court or arbitration, in mediation no-one imposes a solution on a party. If all the parties do not agree to the proposed result, the dispute remains unresolved. Mediation gives parties much more control over the way their dispute or difference is dealt with and also over the outcome.


If negotiations have so far failed, mediation provides an alternative to pursuing arbitration, litigation or other more formal processes. The scope for solutions is usually greater than the remedies available in courts and tribunals, or even in prolonged negotiation.”


A successful mediation will enable parties in dispute to settle the dispute themselves without having the decision taken out of their hands and imposed on them by a Judge, Arbitrator or other decision maker.


Resolution of a dispute by mediation is:-

  • generally quicker:

  • less expensive and

  • more satisfying to the parties

than resolution by a court or tribunal. Even though resolution reached by mediation is non-binding a high majority of disputes which have been mediated are resolved to the satisfaction of the parties. Depending upon the mediator's availability one may be available to assist with the resolution of your dispute within a few weeks or even less.


The majority of uncomplicated mediations are concluded within half to one day of negotiation with the cost being in the region of Aus $2,000 to $6,000, depending upon the complexity of the dispute The costs are bourne equally by the parties.


Very frequently the courts require disputing parties to attend mediation before taking their disputes to trial. It is therefore worth considering mediation of a dispute prior to instigating formal legal action as it may save paying both the costs of the mediation plus the legal costs which would be wasted in the event of successful resolution by Mediation.


For the information of prospective disputants/litigants the following is an excerpt of the standard costs of a two day trial from a reputable Brisbane legal firm for one party to the litigation:


"Standard costs, for a two-day trial in the Magistrates Court of Queensland, with a barrister, and with at least one appearance at court before the trial:

  • range between about $6,000.00 and $8,000.00, for claims between $2,501.00 and $5,000.00. This means that, almost invariably, the legal costs associated with carrying a matter to trial, exceed the amount that is sought to be recovered at trial"(therefore not worth litigating); "and

  • range between about $12,000.00 and $15,000.00, for claims between $20,001.00 and $50,000.00. This means that the legal costs associated with the trial, are a significant portion of the amount that is sought to be recovered at trial.

"Generally speaking, litigants should budget for the following amounts for legal fees for the following steps associated with litigation:


Amount

Activities

$2,000.00 to $3,000.00

Initial advice, including review of documents, development of basic chronology, and written advice on current position

$5,000.00 to $10,000.00

Comprehensive initial advice, including written opinion from a Junior barrister, detailing the nature and amounts of any claim, strengths, risks, costs, and timing

$6,000.00

Commencing court proceedings for an amount under $150,000.00

$10,000.00 to $15,000.00

Commencing court proceedings for an amount between $150,000.00 and $750,000.00

$10,000.00 to $20,000.00:

Commencing court proceedings for an amount greater than $750,000.00.

$25,000.00 to $60,000.00

One day trial for an amount under $150,000.00

$70,000.00 to $150,000.00:

Two day trial for an amount between $150,000.00 and $750,000.00

$120,000.00 to $250,000.00

Two day trial for an amount greater than $750,000.00.

As may be seen from the above, there are quite large sums in legal costs which may be saved by settling a dispute through mediation. Often the fact that that there is a dispute resolution clause in a contract or terms of trade, particularly mediation, acts as an incentive for parties to focus on settling disputes amicably rather than having to head to the courts to litigate.

 


What is Arbitration?


Arbitration is a method of dispute resolution, alternative to litigation in court, that provides a final and binding outcome. A valid agreement to arbitrate should either be included in in the parties’ contract/terms of trade or agreed on an ad hoc basis between the parties once a dispute arises. It is always more difficult to agree after the dispute arises as the parties may have become immovable from the stances they have adopted.

The agreement to arbitrate enables courts of otherwise competent jurisdiction to refuse to hear disputes falling within the scope of that agreement unless required to support the conduct of the arbitration.. In arbitration, a dispute will be referred to an appointed decision-maker, either a single arbitrator or a panel of arbitrators, called the arbitration tribunal, by those in dispute or by an appointing body. The agreement should cover the number of arbitrators, the seat of the arbitration and the procedural rules that will govern the arbitration. The tribunal will generally render its decision (Award) following a full consideration of the documents or a hearing during which each party will have the opportunity to present its position. An arbitration on the documents alone will only be conducted if specified in the arbitration agreement or if set out in the agreed arbitration rules as an option for the arbitrator. Generally, the tribunal will decide the dispute in accordance with the law stated in the relevant contract/terms of trade containing the arbitration agreement.


It is always sensible to have a formal dispute resolution clause included in any contract or the terms of trade under which your business operates.





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