Mark Williams, barrister at Queensland bar, discusses the choices in alternative dispute resolution for commercial disputes.
While litigation before the courts is the main means of dispute resolution, alternative dispute resolution, or ADR as it is called more commonly, has for many years used as a supplement to, or substitute for, traditional litigation.
Of the three main methods, arbitration, binding (or advisory) expert determination and mediation (in all its various forms) each has features to recommend it, as well as drawbacks.
But how to choose?
Nowadays all the courts in Australia to some extent enshrine ADR as a supplement to their process. The enshrinement of court ordered mediation is a prime example common to all, but it does also extend to arbitration, reference to expert for enquiry and report, or interim case appraisal. However, regardless of what tools the courts may avail to themselves to promote the efficient conduct, and conclusion, of litigation, the final disposition of a dispute is still entrusted to an organ of the state.
However, while the courts will always have a place is the landscape of dispute resolution, in order to understand the advantages, and disadvantages of ADR, as opposed to the avenue of the courts to resolve disputes, one must first understand the key advantages and disadvantages of litigation. Traditional litigation is conducted:
- in accordance with published procedural rules which are applied consistently;
- by reference to established, consistent, legal principles; and
- for the most part, in the open gaze of the public.
Additionally, in all but the smallest of monetary jurisdictions, there is a right of appeal; whereby parties can have the opportunity to correct any contended error in an initial decision.
However, while litigation brings with it an established, and comprehensive, dispute resolution infrastructure,[1] this, by necessity, invokes formality which, from there, can lead to expense and delay.
Additionally, it is the public nature of litigation, and the fact that it is not final at the first instance, which leads many parties to commercial disputes to turn to ADR for resolution.
Of the three main methods of ADR, arbitration has the longest history, and one recognised in legislation.[2]
It is also that, because of that legislative framework, arbitration is the most formal method of ADR, and in practice, shares many of the outward features of litigation. Indeed it is often the case that an arbitral hearing is indistinguishable from a trial held in court.
This illustrates a key feature of arbitration that distinguishes it from other forms of ADR is that an arbitration must afford the parties to the process natural justice.[3]
However, unlike litigation before the courts, the parties to an arbitration have significantly greater freedom in how they structure the process.[4] That said however, in practice parties seem to choose a procedure that mimics the pre-trial procedures of the courts; though without all the bells and whistles.
However it would seem at least anecdotally that, for a while, arbitration fell out of favour to binding expert determination.
One of the reasons that this may have been so, was due to a perception that arbitration was still too subject to the intervention of the courts. While that may have never in fact been justified, it would nevertheless seem that expert determination, at least in relation to larger disputes, has fallen away in recent years with a swing back to arbitration. But why and is that justified?
Expert determination, whether binding or not binding, has been around almost as long as arbitration. However it has two distinct advantages over arbitration, the first is that as a procedure it is much more flexible than arbitration[5] as even with the new legislative scheme in arbitration’s favour, an expert’s decisions are less amenable to interference by the courts.
However at least from this perspective the main benefit of binding expert determination (as opposed to arbitration) lies in expert determination’s liberation from the (albeit lessening every day) strictures of arbitration: this is what gives it its greater flexibility.
For one example, while an expert called to decide a dispute must always be impartial, there is no need (unless the parties to the dispute so stipulate) for an expert to be independent: although more often than as one may anticipate readily this is, in fact, insisted upon.
But beyond that an expert, unless so constrained by the wishes of the parties, is not necessarily bound by the rules of procedural fairness. Indeed one of the advantages of expert determination (in the correct context) over arbitration, is that an expert may act inquisitorially. An arbitrator by contrast, must act judicially. Accordingly an expert may investigate, as well as decide. An arbitrator can only decide between what is heard from each of the parties to the dispute.
Expert determination however such, in another sense, offers a half-way house between determinative forms of ADR; between arbitration and binding expert determination, and purely consensual forms, such as mediation in all its many varied guises.
This is the device of non-binding expert determination. What basically this is, if one wants to be blunt is, a trial run for the actual binding determination[6] of the dispute wherein the parties will put fully developed cases forward.
With any form of evaluative, yet nevertheless non-binding form of dispute resolution, the parties in effect get a form of try before you buy. In other words they get the benefit of a determination but, if either party is dissatisfied, their right to seek a binding determinative resolution, either through litigation, arbitration, or some other means is preserved.
While there will be many who will sing the praises of such an approach the reality, is that the “non-binding” phase can often grow to be “bigger than Ben-Hur” with the attendant cost: thereby obviating the most commonly promulgated utility of the exercise; economy.
That only leaves for consideration the non-determinative forms of ADR in its purest form: mediation.
Often mediation is distinguished from other forms of consensual dispute resolution, sometimes called conciliation, or facilitation. Truth be told they are all variations on a theme, distinguished only by degree.
As mediation is only a process by way parties to a dispute attempt to reach their own resolution, it can be the subject of almost infinite variation in process. The cost at which this comes however is that the process is not determinative; it requires consensus to achieve a result.
However, if successful it is most likely to achieve a resolution at a significantly lesser cost than the more involved, but determinative, forms of ADR.
So back to how to choose?
Many commonly published contracts that parties can buy off the shelf and use (with as much or as little adaption as the parties may decide upon) will contain a dispute resolution provision. However, all too often attention is not directed to this part of the parties’ bargain; with the result they get a dispute resolution method by default.
Sometimes, in bespoke contracts, the pendulum swings to the opposite extreme, with elaborate ADR provisions that sometimes use in combination mediation, non-binding expert appraisal, to be followed by binding expert determination or arbitration depending on the parties’ fancy.
However, what really is required is a realisation that not every dispute that be amenable to any one form of dispute resolution. In other words it may not be a case of one size fits all.
Accordingly, parties, when they first begin to deal with one another should recognise that there is always a possibility of genuine dispute, and then go on to consider:
- where in their relationship is a dispute likely;
- what form might such a dispute take; and,
- how best might it be resolved?
With this in mind the choices are abundant.
[1] In other words, the statute, by which they are established and their own rules and practice directions.
[2] Currently, in the domestic realm it is the Commercial Arbitration Act (“CAA”), of each of the various States and territories. This is uniform legislation. For international arbitration it’s the Commonwealth International Arbitration Act 1974.
[3] Currently enshrined in section 18 of the CAA that:
The practice must be treated with equality and each party must be given a reasonable opportunity of presenting the party’s case.
[4] As made clear by section 19(1) of the CAA which provides:
Subject to the provisions of this Act, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings.
[5] As it is not the subject of a legislative framework.
[6] By whatever means.
Named in Doyle’s Guide for 2019 as a Leading Junior Counsel for Queensland in Construction & Infrastructure, Mark Williams is a barrister at the Queensland Bar, and has been so since 1995. He has, over the twenty-nine years of his post admission career, practised extensively in commercial litigation; with a heavy emphasis on building and construction, not only in Queensland, but in the Northern Territory and New South Wales as well. Holding the degrees of Bachelor of Laws with Honours, Master of Laws and Professional Certificate in Arbitration (with Resolution Institute Award for Highest Academic Merit), Mark is also a Sessional Academic & Unit Coordinator at the Queensland University of Technology, Faculty of Law where, as part of its Master of Laws programme, he teaches the subject Construction & Engineering Law. A registered and active security of payment adjudicator in Queensland, the Northern Territory, New South Wales, Victoria and Western Australia, Mark is also a Grade 2 Arbitrator, as well as an experienced and nationally accredited mediator. He has written and published extensively, including the book Building Contracts & Regulation Queensland as well as being a contributing author to the Lexis Nexis online service Lexis Nexis Regulatory Compliance – Building and Construction Module. Having been given a number of professional accolades over the years, Mark is also a member of a number of committees in his field, including the Bar Association of Queensland’s Building and Construction Committee. Email Mark at markwilliams@qldbar.asn.au.
