ADR overview

If one or more parties to a contract find themselves faced by the possibility of a dispute, what are the options?

Do Nothing
When a dispute arises, the parties find themselves faced with the prospect of delays and expensive advisors. This can be a depressing prospect, if only because there are no guarantees when it comes to a fight. The greater the degree of uncertainty, the more wary the parties may become. This can also become a big distraction from the continuing business, and weigh down on personal relationships. It may therefore be entirely rational for the parties to decide to do nothing.

The moment you involve other people, no matter how well-intentioned they are, you are likely to find yourself encouraged to "do something" when doing nothing may actually be the best course until the contract has run as far as it can. That way, everyone takes the maximum benefit available under the contract and, when the dust has settled, they can take the calm decision about whether it is worth fighting over what was lost. You should remember that some independent people who advise you to take action will not be the ones who then have the financial and emotional burden of the fight to carry. Alternatively, the ones encouraging you to fight may be the ones who will be able to bill you for "defending" your interests.

Negotiate
Those with the foresight to see a dispute coming, should have the wisdom to open a conversation with all the interested parties to see whether matters can be resolved before they become sufficiently serious to threaten the "profits" available under the contract. Opening negotiations is not a sign of strength or weakness. It is the simple self-interest of one who aims to keep the contract running smoothly. If you decide to use a mutual friend or an advisor as an intermediary, you have already begun an informal kind of mediation or conciliation process to explore whether a quick settlement is on the cards.

Find a mediator or conciliator
There is nothing magical about finding an independent person who will help everyone to resolve the dispute. "Friends" and "professionals" have been performing this service for centuries. That ADR has become a better known and professionalised service with different bodies springing up to sell their services and Governments stepping in to regulate the industry and impose accreditation standards, does not change the very simple function performed. The interested parties talk to each other and find out whether they can agree not to disagree. The role of the third party is to "keep order" and, if necessary, gently push the disputants towards a solution. This solution may be nothing more than a patch and mend operation to keep things moving along for the time being. Or it may be a more positive negotiation to produce a more fair and reasonable way of realising the original contract goals. It is for the parties themselves to say how much they want the intermediary to do. If this person has useful expertise, a more positive role can sometimes be found that will resolve the parties’ problems.

Find an expert
Sometimes, all you need is an expert to tell you what usually happens when similar situations arise. Once you have this information, it gives you a better perspective on your own dispute. If the expert goes further and offers an opinion on how you should resolve the problems, you can decide whether to follow this advice. There need be no obligation, working on the basis that it never hurts to listen. But, if you think that this expert can give you all what you need, which is a quick and simple adjudication, then you can agree to be bound by what the expert decides.

The question of defining the extent of the third party’s role can lead to a blurring of status between a mediation style and an adjudication style. Making sure that you understand the difference is vital if you are planning to allow the expert to decide some or all of the issues which underlie the dispute. In one sense, the only real criterion for picking anyone as an expert is whether he or she can command the respond of the parties and produce a fair result. However, this has become complicated as Expert Determination has become more professionalised and many now claim academic and vocational qualifications to "prove" how well they can solve the problems of others.

Find an arbitrator
This is the final option: finding someone who will act like a judge and decide the case for you. It does not have to be an accredited professional. You can pick someone you know and trust. But a number of organisations now exist to provide "stables" of people with different types of expertise and they guide the process of selecting someone with the skills to solve your problems efficiently. The key requirements are as to confidentiality and, wherever possible, speed of outcome but, as these individuals come to decide disputes with more and more money riding on the outcome, lawyers inevitably involve themselves to ensure that their clients have a proper opportunity to present their cases. This can slow down the process. In International Arbitration, panels of three arbitrators are usually required and the whole process becomes much more judicial in character. The only advantage to arbitration in these circumstances is that, despite all appearances to the contrary, arbitration is still quicker and less costly than international litigation.

Once litigation has started
There is nothing to prevent the parties from putting the formal case on hold, and referring some or all of the issues to mediation, conciliation or expert determination. Different countries have different sets of rules to deal with this situation in commercial disputes. For example, some courts can formally refer issues of fact to a Special Referee to determine. This is an Expert Determination within the context of judicial proceedings. Others allow settlement terms to be referred to arbitration once basic findings of liability have been made. Courts have become sensitive to the needs of the commercial community to achieve certainty of outcome sooner rather than later, and allow the parties flexibility to resolve their dispute "amicably" when there seems to be a reasonable chance of success.