Ensuring the inclusion of an effective dispute resolution mechanism is vital in every contractual engagement. Some basic principles are dealt with below, as different engagements require different solutions.
It’s Good to Talk …
Effective engagement is the first key building block. It helps to identify the principal causes of the dispute, resolve matters, and avoids needless escalation. Highlight your willingness to enter into a structured alternative dispute resolution format, such as mediation or arbitration. A party’s unwillingness to consider alternative dispute mechanisms can have adverse costs consequences should the matter proceed to litigation.
There will invariably be a need to engage in writing at some point. Ensure that your correspondence reflects the mutual understanding and avoid including any unintended negative or unhelpful connotations.
Mediation
Mediation utilises a neutral facilitator who attempts to help the parties resolve the dispute by encouraging them to find common ground. Whilst there is no obligation to reach an agreement, entering into mediation usually indicates a willingness to compromise – parties should not mediate if they are not prepared to arrive at a solution.
Mediation is especially useful when the parties wish to maintain a good relationship as it allows for solutions which are not available in other alternative formats such as arbitration (which are fact-based decisions).
Mediations involving international settlement agreements can benefit from the Singapore Convention on Mediation.
Adjudication and Arbitration
Adjudication and arbitration share common features. Both require the parties to present their case to an independent panel selected by the parties in advance. The panel operates within parameters pre-agreed by the parties and decides based on the presented information.
An adjudicator’s decision is only binding until a final decision is determined by legal proceedings – though in practice, it is rarely challenged.
An arbitrator’s decision is final, with only limited recourse for appeal. Arbitration awards are enforceable in almost every country due to the widespread adoption of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
Before initiating adjudication or arbitration proceedings, parties are strongly advised to engage with one another (through mediation or otherwise) as early identification of the issues allows each party to prepare properly.
Online Dispute Resolution
Online dispute resolution solutions are increasingly popular and can be better suited for less complicated matters. It’s certainly worth considering this format in certain circumstances.
Litigation
Court proceedings are usually conducted in public, unlike arbitration, adjudication and mediation. Alternative Dispute Resolution (ADR) formats are therefore usually preferred by parties as they are conducted in private and avoid unwanted publicity.
Courts, given their ever-increasing workload, take far longer to process disputes, and litigation costs also tend to be greater than those incurred via ADR mechanisms.
Choose the Most Appropriate Route
For any form of resolution to be successful, parties need to be comfortable and confident with their selected method. Parties should also not discount the benefits of blending the alternative elements of dispute resolution. For example, an arbitrator referring a matter to mediation and then making an award based on the mediator’s recommendation is a cost-efficient route that’s gaining popularity.
About Huw Davies
Huw Davies is an experienced ADR practitioner, working within England and Wales and internationally (particularly in the Middle East). If you have any questions regarding this article or any aspect of alternative dispute resolution mechanisms, please feel free to contact him at HDavies@1ec.co.uk.
