Why is this important?
If a commercial dispute escalates to litigation much harm can be done to a business. Litigation can cause a great deal of personal and financial stress and a court case will disrupt business, damage commercial relationships, distract a business owner from their chief focus and core business, and divert cash flow away from the business and into the hands of the lawyers.
Early alternate dispute resolution (ADR) is a new model of dispute resolution that aims at opening up commercial disputes pathway or roadmap that has inherent benefits to a business, as opposed to the often applied litigious mindset and litigation model businesses use for resolving disputes.
The new model is all about maximising the use of ADR pre-litigation, so that the costs and harm associated with litigation can to a large extent be eliminated and avoided.
The objectives of the new model
- 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’, ‘core’, ‘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 polarise 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
- 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 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 protagonist’s attention, time and resources away from their core business and to destroy commercial relationships irrevocably.
What to do
- Don’t automatically think litigation. Be aware of the strategies involved in ADR and be prepared to use them from the start, that is when a dispute crystallises.
- Exchange your 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.
NB. This is 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. Unless these are 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 for which they will take full ownership. 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.
4. Draw up a set of possible options for settlement (each party will do this) and this is exchanged within the agreed timetable.
If this does not lead to resolution by an agreed date, the next steps will be:
- The ADR specialist draws 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 and 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.
For most persons engaged in a commercial dispute adopting the above 6 steps pre-litigation, and with the aim of avoiding litigation if at all possible, makes not just good common sense but good commercial sense.
Source: Christopher J Whitelaw, Barrister, Mediator and Commercial Dispute Resolver, Commercial Disputes Management Centre
