A New Model to manage Commercial Disputes
Prepared by Christopher Whitelaw[i]
The objective of the new model is to open up a new commercial disputes pathway or roadmap for business that –
– Allows the parties to the dispute to remain in control of the dispute and its management from start to finality, rather than divesting that control to others, such as their lawyers;
– Allows the parties to the dispute to manage the dispute with the assistance of a neutral expert in commercial disputes management and resolution who may or may not be a lawyer but who must be an accredited and experienced practitioner in alternative dispute resolution (“ADR”) under the Australian National Standard;
– Allows any party to the dispute to access appropriate legal advice when needed or necessary to help achieve early resolution of the dispute;
– Is structured in a way that aims to reduce legal costs incurred during the entire dispute resolution process;
– Is structured in a way to promote and facilitate quick and equitable resolution of a commercial dispute;
– Keeps the focus on the issues and matters that are identified as “central”, or “core” or “primary” or “critical” by the parties themselves to promote the early and just resolution of the dispute on acceptable commercial terms, rather than on legal issues, strategies and tactics that tend to alienate, antagonise, threaten, intimidate and polarize the parties, thereby exacerbating the risk of eventual litigation;
– Seeks to contain the losses to each party coming from lost productive time, being diverted from core business activities and planning, legal expenses, damaged commercial relationships and so on.
The new model is all about maximising the use of Alternative Dispute Resolution (ADR) pre-litigation, so that the costs and harm associated with litigation can to a large extent be eliminated and avoided.
ADR is a mindset, a philosophy and a set of strategies and tools. Its highest potential and maximum benefits lie in its pre-litigation use to achieve early and comparatively low cost dispute management and resolution. The parties, under expert assistance, have a unique opportunity to keep the focus on finding common interest and reasons to achieve quick resolution of the dispute and to salvage the relationship for mutual future benefit.
As soon as litigation is commenced the dynamic between the parties is changed because commencing litigation is a akin to a declaration of war with the lawyers then acting in the role of power brokers. It shifts the focus away from common interest, common cause and mutual benefit (i.e. “common sense commercial thinking”) to power based positional negotiation and tactical thinking and manoeuvres where the object is to use the law and evidence to demonstrate a superior position and “to win” so that the other “loses”. Litigation has a great tendency to wreak havoc all round, divert the protagonists attention, time and resources away from their core business and to destroy commercial relationships irrevocably.
This is a potential that is yet to be fully realised in most countries where ADR is now a well-accepted “tool” within the legal justice system. This is because over the last 10 years or so the legal “justice system” that is controlled by lawyers, judges and former judges now acting as mediators have succeeded in making the use of ADR an adjunct to the litigation model for dispute resolution. They have stripped the entire “ADR” skill set and tool box (set of strategies) down to just one thing – Mediation.
Further, they have created a mainstream model of mediation, used only within the litigation funnel (production line) that strips out of it almost all its transformative potential and converts it into something else – a hosted settlement conference where the parties, using their lawyers as their agents, simply barter for the price both parties are willing to settle their dispute for. They usually do this using what is now called the “shuttle ” style of mediation, where the parties have minimum face to face contact, hide behind their lawyers as their voice and spend most of their time during the so-called mediation ensconced in their separate rooms at the mediation facility with the mediator shuttling between the two enclaves trying, with the help of the lawyers, to broker a settlement.
Such hosted settlement conferences are usually scheduled just a few months out from the likely trial /final hearing date in order to put maximum pressure on “the clients” to settle their dispute or face the uncertainty of a judge or jury’s decision and the risk of being the declared loser. The loser not only loses any benefit of a favourable verdict or award after all the rigours and cost of the litigation, but is left to shoulder the burden of their own legal costs as well as the added burden of an adverse costs order from the court where they are ordered to pay the costs of the victorious party.
As soon as a dispute is drawn into litigation it becomes hijacked by the legal mindset and will become subject to the court based or tribunal based litigation model for resolving disputes via case management and adjudication. This model tends to polarise the parties and limit their thinking and perspectives on the dispute and how to resolve it to legal concepts that tend to focus on who has the stronger or weaker case based on legal principles and measuring sticks (legal issues, evidence and onus of proof etc.). The litigation model for dispute resolution is also very expensive.
If, on the other hand, the parties and their representatives were clued up on how to use early ADR right from the start (i.e. when a dispute first crystallizes) they might choose to adopt the following sequence of steps before even considering litigation –
Exchange their own Position papers regarding the dispute within an agreed timeframe and do this in an entirely non-confrontational and friendly way;
Respond as objectively and non-aggressively as possible to each other’s position statement within the agreed timetable; and with permission to express themselves frankly and without hiding emotions and feelings ignited by the dispute provided that an attempt is made to explain those emotions and feelings to help the other party understand them. This is what is called “transformative” ADR because it recognises that beneath most disputes resides a set of wants, needs, perceptions, beliefs, values, fears and convictions that unless properly recognised and allowed to surface and be expressed as part of the process, it will be hard, if not impossible, to resolve the dispute in a way that the parties will embrace and take full ownership of. Rather, if they do settle, they will settle for reasons and on terms that they resent, usually because they were not prepared to accept the uncertainty and risks of going to trial. Settlements achieved under pressure are very rarely transformative in quality and they hardly ever achieve any kind of rapprochement between the parties.
Each party then draws up a set of possible options for settlement and this is exchanged within the agreed timetable;
If this does not lead to resolution by an agreed date, the next step will be for the ADR specialist to draw up a blueprint to further manage the dispute and submit that to the parties for approval;
The ADR specialist works with the parties to help them manage and resolve the dispute as quickly and cost effectively as possible. The ADR specialist will design a process, methodology and strategies to suit the dispute and to suit the parties involved in the dispute. This can end up being a versatile and dynamic mix of strategies and methods rather than trying to apply a single model of mediation to all disputes.
Broadly speaking, whatever ADR model or methodologies are used, they will tend to assist the parties move through three phases – the exploration phase, the negotiation phase and the reaching a concluded agreement phase.
It is suggested that for most business owners adopting the above 8 steps pre-litigation, and with the aim of avoiding litigation if at all possible, makes not just good common sense but good commercial sense. Unless one or other of the parties in dispute has a private agenda that favours using litigation, or there is some other good reason to litigate (e.g. to obtain an important legal precedent to clarify the law in some important way for future commerce and trade), it might even be said that adopting the above 8 steps as the first response to deal with a commercial dispute is a “no brainer”. I mean – why wouldn’t you? The main reason why this is not the preferred model for managing most commercial disputes is simply because most business owners are not aware of it and most lawyers tend to favour the litigation model.
If you would like to gain further insight into “early ADR” and its inherent benefits to business as opposed to the litigious mindset and litigation model for resolving disputes, please visit www.australiandisputeresolvers.com.au. This is a blog set up exclusively to explore and explain the considerable benefits of ADR.
[i] Christopher Whitelaw is the Principal of the Commercial Disputes Management Centre, 102 Longueville Road, Lane Cove, Sydney. You can contact the Centre on 02 942 08213 or email cwhitelaw@chriswhitelaw.com.au.
7 Proven Strategies to Resolve Your
Commercial Disputes Fast Without Litigation
If you're in, or being dragged into costly and stressful litigation that could hurt you or destroy your business reputation...
Or you need to take urgent steps to avoid a potential dispute...
Download our free guide:
"How to Resolve Commercial Disputes Fast without litgation"
And we'll rush you your copy.
