There are many ways to approach dispute resolution. The great majority of problems encountered by small business are resolved through simple discussion and common sense between the parties and do not escalate into a dispute.
In virtually all instances, small businesses should at first attempt to resolve their disputes through direct discussion and negotiation.
Disputes will occur, however, where there is a lack of communication, where there are unrealistic expectations or where there is a grievance that cannot be resolved through direct discussion.
When a dispute occurs, each party has a choice about the dispute resolution method that they would like to pursue. Unfortunately, litigation is usually the norm and dispute resolution is often approached as a matter between lawyers and the Courts. There are, however, a variety of other approaches available which may save time and money and preserve business relationships.
Dispute resolution options for small business range from negotiation-based methods, where the parties have full control over the outcome (generally known as 'alternative dispute resolution' - ADR), to adversarial methods where the parties have less control over the outcome (such as arbitration and litigation). Where a negotiated settlement is reached through ADR, the terms of the settlement, once agreed and signed by the parties, are legally binding and can be enforced if necessary.
The chart below sets out some of the advantages and disadvantages of different approaches to dispute resolution.
| ADVANTAGES | METHOD | DISADVANTAFES | ||
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→ | Alternative Dispute Resolution (ADR) | ← |
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→ | Adversal Approaches litigation arbitration |
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AN EXPLANATION OF ALTERNATIVE DISPUTE RESOLUTION METHODS
- ASSISTED NEGOTIATION
- The parties engage a professional negotiator or 'go-between' to assist parties reach a desired result. It is usually informal and the negotiator can either be appointed by one party or both. In the latter situation he/she is a joint negotiator. This method is often helpful in smaller disputes where parties are still talking to one another and need help to break an impasse, and where they have identified all the issues to be negotiated.
- MEDIATION
- Mediation is a process where an independent person is used to assist the parties in dispute to find a mutually acceptable solution. The mediator will systematically work through the issues, help identify alternatives, and facilitate final agreement. The process is non-adversarial and focuses on the parties' resolving the dispute themselves using the skills of a mediator. The key principle of mediation is that the parties work together to arrive at an agreement that suits both. This is in contrast to litigation and arbitration where a judge or arbitrator imposes a decision which may be disappointing for one or both parties.
A mediator is appointed by the parties to help establish effective communication and by doing so find a solution which satisfies both their needs and interests. The informal process is speedy and cost effective and caters for on-going business relationships. - INTERMEDIATION
- Similar to Mediation in concept but more sophisticated. The neutral third party closely interacts with the parties in dispute to assess all relevant material, identify key issues, and most importantly, helps to design a process that will lead to resolution of the dispute.
The process involves separate meetings with the parties at their offices to conduct extensive reality testing, and analysis of parties' legal, commercial and financial positions. The process utilises creative thinking techniques and is suitable for more complex, large or sensitive matters.
- FACILITATION
- The parties appoint a neutral facilitator to manage the dispute resolution process, identify issues and apply specialist techniques to achieve the desired outcome. The facilitator assists by preparing an agenda, chairing meetings, distributing relevant information between the parties and steering them to reach agreed objectives. The process is less formal and more flexible than Mediation. It has wide application and is often used where there are several parties or groups involved with differing points of view, such as creditors or multi-party claimants, joint venture negotiations, and environmental and planning disputes.
- EXPERT DETERMINATION/RECOMMENDATION
- The parties agree to an independent expert to provide a report on specific aspects of a dispute by examining relevant documentation and material. The expert is usually commissioned to report on technical matters such as standards, compliance, quality specifications, quantification of loss or similar issues. The expert may be asked to provide a recommendation or a determination on the matter depending on the circumstances.
- PARTNERING
- Often used for long term contracts or in the building/construction industries and in joint venture type projects. A Partnering agreement or charter is based on the parties' need to act in good faith and with fair dealing to one another. The Partnering process focuses on the definition of mutual objectives, improved communication, the identification of likely problems and development of formal problem solving and dispute resolution strategies. It is useful, for example, where there is a need to complete a technical or building project with a minimum of disruption and cost and within a tight time frame.
- LITIGATION
- Litigation is an adversarial legal process conducted in a Court of law, in accordance with strict procedures, where the parties present legal arguments and evidence to support their claims before a judge. The judge applies the relevant law to the evidence, resulting in a judgement in favour of one of the parties involved.
- ARBITRATION
- Arbitration is an adversarial process, agreed by the parties in dispute, in which each party presents legal arguments and evidence, in accordance with formal procedures, to a mutually agreed arbitrator.
The arbitrator makes a determination in favour of one of the parties. This determination is usually legally binding.
AN EXPLANATION OF ADVERSARIAL DISPUTE RESOLUTION METHODS
The next Step 3, will assist you to determine which dispute resolution method is most appropriate for your dispute.