Private Dispute Resolution for Commercial Disputes
Released on:
22/09/2009
Private Dispute Resolution (PDR), also known as Alternative Dispute Resolution (ADR), embraces all those methods of resolving disputes that are alternative to the formal processes of litigation and arbitration. It includes mediation, arbitration, third party adjudication, particularly in the construction industry, and the use of Single Joint Experts, right the way across to straightforward negotiations.
Because these processes are private and confidential, they are not widely appreciated by the business community. Nevertheless, several years ago, the Lord Chancellor said that “There is a significant role for Alternative Dispute Resolution in a streamlined civil justice system, and for some it is the best way to reach a settlement”. With this in mind, the Courts are reluctant to allow a case to proceed to a hearing unless the parties have first tried one of the PDR processes.
Mediation is now the most common form of PDR. It involves the participation of a neutral Mediator to assist the parties in the dispute to negotiate a settlement. It is a voluntary process that helps the parties to reach a binding agreement more effectively than by direct negotiation or by litigation and with less costs, less disruption to management time and often with better solutions. Mediation cannot guarantee a settlement, although the vast majority of disputes do settle either in the mediation or shortly afterwards.
Arbitration is a regulated procedure whereby two or more Parties in dispute agree to be bound by the decision of an independent third party. It is nothing to do with ACAS or trade union disputes. The procedure for arbitration is regulated by Statute – currently the Arbitration Act 1996 – and the decision (Award) of the arbitrator is enforceable in the same way as a judgement of the Court. Arbitration has been in use since the middle ages, when merchants appointed a senior figure in their trade to rule in a dispute between them.
The role of an Arbitrator is similar to that of a judge, although the procedures can be less formal. Like a judge, an arbitrator will come to a final and binding decision based on the evidence and submissions of the Parties.
The benefits of Arbitration are that it should be quick, efficient, private, informal, and cost effective. Parties can represent themselves at arbitration or they can be represented by anyone – a suitable professional, solicitor or barrister, or a company representative. Most professional partnership agreements and many trading agreements include an arbitration clause to avoid airing differences in open Court.
The Arbitrator will be professionally trained both as an Arbitrator and in the technical area of the dispute, and will therefore be able to understand the problems faced by the Parties. The parties can often have a say in who is appointed. The arbitrator’s decision is FINAL AND BINDING. Having once referred a dispute to arbitration a Party cannot refer the dispute to the Courts.
Single Joint Experts are frequently appointed by agreement between the parties to a business contract – some contracts such as those for the purchase and sale of businesses will include this as the preferred form of dispute resolution. This process is known as Expert Determination, and again it is a private and confidential procedure.
Alternatively, an SJE is appointed on the direction of the Court to produce an independent report on a complex technical issue that would otherwise take many hours of arguing between experts on both sides of a case.
Jeffrey C Rosenthal FCCA FCIArb MAE
Chartered Arbitrator CEDR Accredited Mediator
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