Alternative Dispute Resolution - Is Talk Cheap?

Introduction

As anybody who has been involved in litigation will tell you, litigation usually involves huge expense, delay and stress for the parties concerned and can often be commercially counter productive. For business people, such litigation usually consumes considerable amounts management time which could more profitably spent attending to the core business and can often end commercial relationships. That being so is there not a justifiable reason for exploring the alternatives?

Alternative Dispute Resolution (ADR) has evolved over many years, particularly in the last ten years, mainly due to the perceived and actual defects in the litigation process and as an alternative to the more adversarial court process. ADR is designed to provide potential litigants with a speedy and responsive mechanism that allows the dispute to be dealt to the satisfaction of both parties.

ADR comes in many forms and is constantly developing. It includes methods such as arbitration, conciliation, mediation and ombudsmen.

Essentially with ADR the parties to the dispute embark on an agreed procedure in order to have the matters between them resolved amicably with the aid of an expert third party rather than having a decision imposed upon them by the courts. Below is a brief summary of the main forms of ADR and of some of the subtle differences between each of them.

ARBITRATION

Arbitration, as a form of dispute resolution is often an agreed term in commercial contracts. Usually it is provided that the nomination of the arbitrator will either be agreed between the parties or in default by and agreed third party, typically the President of a particular professional body if one exists in the particular area in question.

When a matter is referred to binding arbitration, there is normally no means of appeal to the courts if one of the parties feels that the arbitrator failed to decide correctly on questions of fact. Such appeals can only be taken on a question of law. The principle advantage of arbitration is that the arbitrator is normally a person who has relevant professional qualifications and will be knowledgeable in the acceptable standards of the industry or sector in question.

In Ireland, one such method, arbitration, was established on a statutory level by the Arbitration Act, 1954 which was amended by the Arbitration Act, 1980. The Arbitration (International Commercial) Act, 1998 (which adopted the model law of the United Nations Commission on International Trade Law) further reinforced and consolidated arbitration as an alternative form of dispute than the Courts.

However, over time following the enactment of this legislation and the body of case law which has developed since the its introduction, arbitration has lost much of its appeal because it is often as time consuming and costly as court proceedings.

MEDIATION

Mediation has developed as another means of resolving disputes where the agreed third party mediator works to help both sides to narrow the issues between them and to come to an agreement which each considers acceptable. Usually mediation will take place in a location where the mediator can meet both sides separately and then together. When agreement is reached, the terms of the agreement will normally be written down and both parties will sign the document as evidence of their acceptance of the outcome.

CONCILIATION

Conciliation is very similar to mediation but the conciliator will normally take a more proactive role than a mediator. Although he will point out the various strengths and weaknesses of each parties case, he will also suggest possible solutions in order to reach a compromise. Conciliation aims to find a particular solution to the dispute which allows both parties to achieve a workable solution to their difficulties and as with mediation it also has the added benefit of perhaps saving a commercial relationship which might otherwise be lost.

With both mediation and conciliation it is normally up to the parties to decide between themselves as to whether or not the finding of the mediator / conciliator will be binding on them. Usually the parties do not agree that such findings are binding.

The terms of reference of the mediator / conciliator will be agreed by the parties prior to submitting the dispute to him and he will normally write to both parties detailing how he intends to proceed.

Each side will prepares a written statement on the issues in dispute as they see it and will be asked to provide copies of any supporting documentation to assist the mediator / conciliator form a clear view of the issues in the dispute.

The mediation / conciliation takes place in a location where each side are provided with their own space. The mediator / conciliator will meet each party in private and in absolute confidence. Usually a room will be provided were both parties can meet with the mediator / conciliator who will synopsise the various issues.

For mediation / conciliation to work the parties must fully engage in the process. The primary disadvantages are that the parties may not reach an agreement or they may feel that they have not been given a sufficient opportunity to establish legal rights within the scope of the process.

OMBUDSMEN

Ombudsmen are independent office holders and in the case of the general Ombudsman have a statutory basis and are normally used to deal with complaints from the general public about issues in both the public and private sectors. The general Ombudsman deals with complaints against central and local government. Examples of non-statutory Ombudsmen include the Banking Ombudsman and the Insurance Ombudsman. Usually Ombudsmen can only make recommendations (although these recommendations are given substantial weight) but there are a few decisions which are enforceable through the courts.

ADR - A WAY FORWARD?

ADR as a real alternative to litigation is constantly evolving. In April 2002 the EU Commission published a Green Paper on Alternative Dispute Resolutions in Civil and Commercial law. It deals with the promotion on an EU wide basis of ADR as an alternative to litigation primarily due to the every increasing number of international disputes but also with the aim of promoting a framework to ensure that disputes can be dealt with in an efficient and cost effective manner. The Green Paper addresses issues such as wider access to justice, consumer protection law, family law and labour relations among other issues. It is envisaged that the various forms of ADR which are currently being used and developed within the various member states and internationally will have a more formal and acceptable basis.

In the UK, the new Civil Procedure Rules introduced by Lord Wolfe have provided a mechanism for the UK courts to either encourage or order litigants and lawyers to use ADR as a means of resolving their dispute. These Rules at the moment have protocols which only deal with claims in relation to personal injury or clinical negligence but other protocols for other areas of litigation are under review at present.

As an indication of the potential success of the use ADR, statistics in the UK show that in the commercial court were ADR was recommended by the Judge, 88% of the cases were concluded in one day while the remainder took up to 6 days. Of the total number of referrals, 77% were settled on the day or shortly thereafter. The average value of each case referred to ARD was £150,000.00. This gives a clear indication that parties are prepared to submit to ADR even where there is a high value at stake. ADR is most popular in construction, employment, professional negligence and sale and supply of goods but it is also used in the financial, high-tech and property areas to name but a few.

CONCLUSION

ADR has applicability and benefits in areas varying from commercial to family law and in every area of industry where disputes may arise. The EU's Green Paper discusses various methods of on-line dispute resolution which has the advantage of being able to use innovative technology and communications between the parties can and should be rapid.

Ireland is an attractive location for international arbitration. Ireland has ratified the New York Convention on the Recognition and Enforcement of Arbitral Agreements and as an English speaking Common Law jurisdiction offers an effective cost efficient location for such arbitrations.

ADR is rapidly becoming developing as an alternative to litigation but has yet to receive the open acceptance of the legal and business communities. ADR is being introduced coyly but it is only a matter of time before ADR will find many suitors.

For further information or enquiries please contact:-
Thomas Simpson
E-mail: tsimpson@kilroys.ie or
Kevin O'Gara
E-mail: kogara@kilroys.ie
Telephone: +353-1-4395600
Fax: +353-1-4395601/4395602

© Kilroys Solicitors 2002