ADR – an overview
ADR, or Alternative Dispute Resolution, embodies a range of processes for parties to resolve disputes outside the law courts. The most common processes are mediation, arbitration and adjudication.
ADR is no longer merely an ‘alternative’ – the acronym covers a wide array of ‘Additional’, ‘Assisted’ or ‘Appropriate’ dispute resolution processes available to disputing parties. Parties are encouraged to explore ADR options whenever they are faced with disputes or litigation.
In the construction industry many contracts provide for or encourage parties to attempt to resolve disputes by negotiation or mediation despite any right to refer matters to adjudication or arbitration. There are some 45 New Zealand statutes that include references to mediation as the preferred or required method of resolving disputes.
Types of ADR
Peter acts in the following ADR processes:
- Mediation for a wide range of disputes including construction and commercial
- Adjudication (Construction Contracts Act 2002 – for construction disputes only)
- Arbitration (Arbitration Act 1996)
- Expert Determination
- Dispute Resolution Board
The roles in ADR
When two or more Parties have a difference of opinion they may have a dispute. If they cannot resolve their differences they may choose to engage an ADR practitioner engaged by the parties for their selected ADR process as an Independent Neutral to assist the parties (e.g. mediation) , to provide a non-binding recommendation, to provide a binding decision (e.g. adjudication or arbitration), or otherwise.
Other distinct roles that may be involved in ADR proceedings include:
- Witness – the people involved in the dispute, or in events relating to the dispute, provide evidence to the proceedings. The form of witness evidence will depend on the selected ADR process and the procedures agreed between the Parties. The Parties may be the only Witnesses.
- Advocate – the Parties may engage legal counsel or other experienced person to advocate their position or represent them in the ADR proceedings.
- Expert Witness – expert reports may be provided, primarily to assist the Independent Neutral and the Parties to understand complex technical or contractual issues. An Expert Witness is expected to provide an opinion based on given facts and their own professional judgment.
Features of ADR
The features and benefits of effective ADR processes include:
- Well-defined and often flexible processes
- Parties control the process, to the extent agreed or allowed by relevant statute
- Parties in dispute engage with each other, rather than through their lawyers
- Focus on the dispute, not legal niceties and procedural objections
- Process is ‘outcome oriented’
- Focus on keeping costs low and speed of resolution
- Process is managed by a person who acts neutrally but firmly, in the interests of the parties and their right to natural justice
- Confidentiality may be preserved.
Whether these features appeal to disputing parties will depend on many factors including the selected ADR process, the nature of the dispute, the perceived strength or weakness of each party’s position, and any ongoing relationship between disputing parties.
What parties expect
Compared with litigation, parties to a dispute may reasonably expect the following benefits from ADR:
- Improved prospect of settlement
- Improved satisfaction with the outcome or process
- Reduced time
- Reduced costs
- Increased compliance with an outcome that has been agreed (e.g. in mediation), or where the parties have agreed upon a decision-maker (arbitration, adjudication)
- The potential to reduce or limit (and possibly repair) damage to business and other relationships (e.g. mediation).
These benefits may be offset to some extent by limitations inherent in certain ADR processes, such as any need for party consent, lack of finality, and enforcement of decisions.
Closer alignment between ADR and litigation
Recent years have seen a trend internationally towards a closer alignment between the courts and ADR processes. In New Zealand it has become more common for the courts to actively encourage parties to settle through ADR processes, even after filing. This allows the courts to concentrate on cases that cannot otherwise be settled, for which the law should be tested, or otherwise in the public interest.
Although court-related mediation is not new, it will be highlighted as an option by a High Court mediation pilot, under which parties may elect to have their dispute heard by a private mediator, commenced in November 2009. This, alongside judge-led settlement conferences and court referrals to mediation, demonstrates an ever-increasing increased ‘settlement-focus’ of the New Zealand court system. We are seeing the rapid growth in awareness and acceptance of ADR as part of, or as an alternative to, court proceedings.
Which ADR process is most suitable?
Disputing parties’ reasons for adopting ADR are many and varied: a realistic alternative to litigation, an attempt to explore settlement options before or after litigation commences, a desire to maintain confidentiality, or to preserve an ongoing business relationship, or otherwise.
The choice of process may depend upon the parties’ willingness to participate, their desire to resolve the dispute, whether they can agree on an ADR practitioner, the relative strengths and weaknesses of their positions, any ongoing relationships, and many other factors.
The parties (or in the case of adjudication, the referring party) select the process and the ADR practitioner. The ADR practitioner leads the parties through the process with a firm hand, keeping time tight and cost as low as practicable, and taking into any aspects of the process that the parties have agreed.