Arbitration is another form of Alternative Dispute Resolution (ADR).
What is it?
It is where the parties to a dispute agree to submit their dispute to an appropriately qualified and skilled arbitrator, rather than the court, for adjudication and binding determination.
It is different to mediation.
With mediation, the parties retain the services of a trained mediator who sets up a protocol and process to assist them to resolve their own dispute. There are different models of mediation that the parties can choose for their dispute. They might only want a mediator to facilitate the management of their dispute by helping them communicate in better and more effective ways and to help them circumvent obstacles and road blocks to settlement; or they may want the mediator to do more – for example, to provide non binding evaluative opinions on certain issues that are within the professional expertise of the mediator (e.g. commercial law issues); or they may ask the mediator to be more directional, giving an indication to them of whether or not a certain option is sound or viable. Some mediators choose only to work within the facilitative model as they believe that this is all that a mediator should do. Others take a more dynamic and versatile approach.
It is always for the parties themselves to decide what sort of ADR they want to apply to their dispute.
This is why ADR is so attractive compared to simply opting into litigation right from the start of a dispute. Once parties engage in litigation they are, to a large extent, abdicating their personal influence over the way the dispute is managed, to their lawyers and to the legal process. In a democratic society, everyone has their inalienable legal rights to pursue legal remedies via the courts and tribunals. However, to pursue such legal rights via litigation in ignorance of possibly better and more effective ways and means to manage and resolve the commercial dispute is a great shame. I am sure that most litigants, if they were properly aware of and understood the distinct benefits of the alternative non-litigious options, and had a proper opportunity to weigh those benefits up against the litigation option, would choose the alternatives to litigation. Who would not want to spare themselves a great deal of distraction from their usual business and a great expenditure of money that they could put to better uses elsewhere? It is just common sense. It is sound commercial sense.
The sad fact is that many business owners and commercial entities resort to litigation without being made properly aware of alternative viable ways that they could manage and end the dispute on sound commercial terms they could live with.They end up paying a price that they would, had they been given the chance, have preferred to avoid.
Commercial arbitration differs from court proceedings in the following respects –
– It is governed by its own legislation – The Commercial Arbitration Act 2010;
– This legislation allows parties to any contract or commercial agreement or joint venture to insert dispute resolution clauses in their agreements to govern the way that disputes will be managed and dealt with when they arise.
– The parties to any commercial venture can decide to insert dispute resolution machinery into their contracts that require the parties to first go to mediation, and then if mediation fails to resolve the dispute, to appoint an arbitrator or arbitrators to adjudicate and determine whatever issues could not be fully resolved via mediation. They can agree to make such arbitral determinations binding on them, so that there is no room for any party to institute court proceedings regarding such disputes.
– The parties can decide on a mechanism for a third party organization to appoint an arbitrator for them if they cannot agree on choice of arbitrator.
– The parties can rely on provisions in their agreement and in the Commercial Arbitration Act to limit the length of time and cost involved in the arbitration proceedings.
– The parties can agree on placing certain limits or restrictions on rights of appeal from any arbitration determination and can also agree on what information and material used in the arbitration will be protected by confidentiality.
The key point to make here is that commercial arbitration clauses in commercial agreements can, if properly drafted and constructed, give the parties a large amount of flexibility in how their disputes are managed and ultimately resolved.
The parties can even agree, if they wish, to allow their choice of mediator to become their arbitrator if the mediation process fails to totally dispose of the all aspects of the dispute. This is called “Med-Arb”. It is a hybrid model of ADR. Not many elect to use this hybrid process, but it is available to be used if the parties so choose. It is specifically provided for in the Commercial Arbitration Act.
The potential advantage of using the hybrid process is that it allows the parties to keep up their momentum towards finality of the dispute without interruption.
Its use will depend very much on the parties relationship with the mediator/arbitrator and their confidence in the process.
The training, skills and experience required of the ADR professional to manage the hybrid process will of course be much more extensive and demanding than if they were only acting in one capacity or the other.
Christopher J Whitelaw
Barrister and Mediator
Commercial Disputes Management Center
612 94208213
cwhitelaw@chriswhitelaw.com.au
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