Wherever business is conducted, commercial disputes are, unfortunately, certain. Amid myriad dispute resolution options, arbitration is increasingly being embraced as an alternative to the legal process.
Whenever conflicts arise – in construction, resources, finance, or international trade – seeking recourse through the courts can be slow, frustrating, and very expensive. Arbitration is a powerful alternative dispute resolution (ADR) method that is quickly becoming the preferred choice for Australian businesses.
Arbitration is a process whereby disputing parties agree to have their case heard by an independent, expert arbitrator, or by a panel. It differs from mediation in that it is a rigorous, adjudicative process that delivers an enforceable determination of the dispute without the need to go to court.
What is Alternative Dispute Resolution (ADR)?
ADR refers, collectively, to various options for resolving disputes that do not involve judicial determinations (such as orders made by a court or tribunal). ADR has grown increasingly popular in recent years on account of its informality compared to court processes, lower costs, faster resolution times, and the avenues it offers for disagreeing parties to reach agreements without the need for recourse to litigation.
There are three types of ADR: facilitative (such as mediation), where a dispute resolution practitioner helps parties to a dispute reach a resolution by consent; advisory (such as conciliation), where a dispute resolution practitioner considers the dispute and advises on desirable outcomes and how these may be achieved; and determinative (such as arbitration), where a dispute resolution practitioner evaluates the dispute (which may include formally hearing evidence) and makes a binding determination.
Whilst less determinative forms of ADR have been available to businesses for many years (for example, mediation services offered by state small business commissions and ASBFEO), arbitration is growing in popularity as a preferred dispute resolution mechanism due to the certainty it offers and the clarity it provides with regard to the requirements and obligations it imposes.
Even so, there are other reasons why businesses are increasingly making the shift.
Speed and Efficiency
The “wheels of justice” turn slowly. Courts can take months or even years to hear individual matters due to backlogs of cases, and even then, litigation can drag on for years.
Arbitration cuts through these delays. Parties to disputes can set hearing dates that suit them, agree on streamlined processes, and avoid complexities and adjournments common in the courts. Whilst not always possible, disputes can be resolved within months, not years, allowing everyone to gain certainty and move on.
Expertise of the decision maker
Parties to disputes can select an arbitrator whose expertise is directly relevant to their industries, ensuring someone who genuinely understands the technical aspects of their case makes the decision, leading to better informed and more commercially sensible outcomes.
Privacy and Confidentiality
Unlike court proceedings, which are generally open to the public and media, arbitration is private and confidential. Details of disputes, sensitive financial information, and proprietary business practices are generally shielded from competitors and the public eye. In turn, this protects brand reputation and safeguards valuable commercial secrets.
Businesses wishing to select arbitration as a dispute resolution mechanism should incorporate an appropriate arbitration clause into their commercial agreements, or have an arbitration agreement in place. Rankin Business Lawyers can advise and assist to this end.
