Alternative dispute resolution
Disputes are inevitable, especially in harder times like these, but costly legal battles can be avoided by turning to other means of resolution
11 March 2009
Given the choice, most people would never set foot in a courtroom, but the reality is that harsh economic times mean more litigation.
Invariably, this includes disputes over the payment of debts, disputes over payment for goods and services, and general contractual disputes between parties.
Court litigation can prove to be a costly business for both parties to a dispute, and in times such as these, it is the kind of extra cost many businesses could do without. It is often in both parties’ interests to find alternative ways of resolving their differences, in a less costly and less time-consuming manner, and alternative dispute resolution can pave the way forward.
What is alternative dispute resolution?
Alternative dispute resolution (ADR) is the umbrella term given to different processes that can be used in an effort to resolve disputes, none of which involve conventional litigation. ADR can take numerous forms, and often involves a neutral person who does not pass judgement on a given case, but rather who acts as a facilitator to help the parties find a solution themselves.
Mediation is by far the most common form of ADR. Mediation has become a very effective tool in resolving disagreements, as witnessed last year in the high profile land dispute between RTE presenter Pat Kenny and his neighbours.
Mediation involves the appointment of a neutral mediator chosen by the parties to oversee a managed negotiation process. It is an informal, private, and voluntary process.
The appointed mediator does not pass judgement on the issues at stake between the parties. The mediator attempts to facilitate a resolution between the parties, rather than imposing a verdict, as would happen in a conventional courtroom.
Entering into mediation
Usually, one party to the dispute will suggest mediation to the other side. This should not be viewed as a sign of weakness, but rather as an attempt to resolve the dispute in a timely and cost-efficient manner, without recourse to the courts. It can be used prior to legal proceedings being commenced, or at any stage in the legal process.
Once the parties have agreed in principal to the concept of mediation, a mediator has to be chosen by the parties. Generally speaking, each side proposes a few names, and then the parties choose one of those people by agreement. The mediator is an impartial independent person. The choice of mediator is very important, and you should note that the mediator does not have to be a lawyer. In many cases, the mediator will be an expert in the same field of business as the parties, which means that he/she will have a good grasp of the issues involved.
The parties pay the mediator’s fees, so they have to agree upon the fees at the outset, as well as agreeing the format of the mediation and the rules that will govern it. This will include where and when the mediation will take place, how long it will last, the confidentiality requirements, and what documentation will be provided to the mediator by each side in support of their respective positions.
During the mediation, round-table discussions may take place, but each side will also have their own private rooms so that the mediator may talk with them separately. The mediator then moves back and forth between the parties to tease out each party’s position and to communicate whatever proposals they may have for one another. The separate private meetings are confidential between the party concerned and the mediator, but the parties can agree that the mediator can disclose particular information to the other side if they feel it is beneficial.
A good mediator gets the parties to confide and trust in him/her, listens to both sides, and tries to find common ground between the parties. A good mediator can analyse the problems, get to the core of the issues at hand, and help the parties to develop settlement proposals. If a negotiated settlement is reached, it needs to be documented by the lawyers present. If settlement is not concluded, the parties may resort to litigation, or continue existing litigation, or indeed seek to employ another form of ADR.
Where settlement is achieved by way of mediation, it is up to the parties to decide whether the settlement agreement will be legally binding or not. In the majority of cases, the parties will opt for a legally binding agreement. Where settlement is not achieved at mediation, the process can still prove to be a very worthwhile exercise. At the very least, even if the parties then resort or revert to litigation, their differences have nonetheless usually been narrowed down, thereby increasing the chances of a settlement being achieved pre-trial. In addition, parties can enter into mediation on a “without prejudice” basis. This involves a party disclosing information or making certain proposals in an effort to resolve matters, but on the strict understanding that if the mediation fails, the information provided by it or the proposals put forward by it cannot later be used against it in litigation between the parties.
Advantages of mediation
When compared with conventional court proceedings, mediation possesses a number of advantages. To begin with, the process is confidential, which means that if the parties agree to mediation in the early stages of their dispute, news of that dispute is less likely to become public knowledge, and most businesses are keen to keep their disputes out of the limelight.
In addition, mediation can help to maintain an existing commercial relationship between the parties after the mediation process has been completed, to the mutual benefit of the parties involved. If a negotiated settlement is reached by way of mediation, the parties are more likely to continue their business relationship afterwards than in a situation where a full confrontational court case has been heard between the parties.
Also, in a court case, the remedies available to the court may be limited, such as the court awarding damages, or ordering a party to perform or not perform certain acts. In mediation, the parties are not bound by such restrictions, so the potential settlement options are limitless and flexible. Mediation enables the parties to be more creative in their negotiations, and arguably more practical, which of itself helps increase the chances of the dispute being resolved.
Above all, in a mediation, the costs are usually lower than in a traditional litigation case comprising a full court trial, and the process can be much faster too. Importantly, mediation also tends to be less stressful than court litigation and as an inclusive process, it enables clients to feel more in control of disputes they are in involved in.
Good success rate
Every case is different, but mediation has a good success rate. For example, in the Commercial Court, which is a division of the High Court, judges may temporarily suspend proceedings to enable mediation to be considered. The Commercial Court cannot force mediation upon the parties, but where the court suggests mediation, the parties usually comply.
Statistics from the Commercial Court have indicated that an agreed settlement is reached in more than 60% of the cases sent to mediation. Furthermore, success rates are higher where the parties themselves suggest mediation without being prompted by the court.
ADR is growing, particularly in an increasingly cost-conscious and time-conscious economy. Disputes involving businesses are a fact of life, and will continue to be so. These days, every business needs to ensure that its disputes are resolved in its best interests, both in terms of the outcome of the dispute, and also the time and cost involved.
ADR is a mechanism that can benefit businesses by reaching a satisfactory conclusion to a dispute within a time-frame and cost-structure that may not always be achievable in conventional court litigation.
Alternative dispute resolution in a nutshell
ADR is the umbrella term given to different processes that can be used in an effort to resolve disputes.
Mediation: the appointment of a neutral mediator chosen by the parties to oversee a managed negotiation process
• The appointed mediator does not pass judgement on the issues at stake between the parties but attempts to facilitate a resolution between the parties
• Mediation can be used prior to legal proceedings being commenced or at any stage in the legal process
• The mediator does not have to be a lawyer; in many cases, the mediator will be an expert in the same field of business as the parties
• The parties agree the mediator’s fees at the outset, as well as agreeing the format of the mediation, rules that will govern it, and where it will take place
• If a negotiated settlement is reached it must be documented by the lawyers present; in the majority of cases, the parties will opt for a legally binding agreement
© Matheson Ormsby Prentice 2009
The information in this article is not intended to provide, and does not constitute, legal or any other advice on any particular matter, and is provided for general information purposes only.
This legal update is compiled by Lorraine Compton and Darragh McElligott from the Retail and Leisure Group of leading corporate law firm, Matheson Ormsby Prentice. The firm’s Retail and Leisure Group comprises lawyers who provide a one-stop shop designed to cater for every aspect of the retail and leisure business.
For more detailed legal advice please contact Lorraine Compton or Darragh McElligott at Matheson Ormsby Prentice, Solicitors, 70 Sir John Rogerson’s Quay, Dublin 2, by telephone on 01 232 2000 or by email at email@example.com or firstname.lastname@example.org.
Further information on the firm is available at www.mop.ie