Dispute resolution provisions are often left the "Old Maid" of contractual terms. Busy people, intent on closing the deal, frequently don't pay them much regard. However, should things not go quite to plan, they can become the centre of attention. It is important to get it right at the outset as the mode of dispute resolution prescribed can have immense consequences in terms of time, cost and strategy.
Most commercial contracts require high level discussion and mediation before matters can escalate. After that, the contract is either silent or sets out compulsory provisions for an arbitration or expert determination. Expert determination is appropriate for the resolution of narrow technical issues. It does not respond particularly well to disputes that involve interpretation of the contract, quantification of loss or those involving set-offs of cross-claims.
Where mediation has failed, arbitration or litigation are usually prescribed as the next step. However, arbitrations are perceived to be plagued by delay and expense, so much so that it often seems cheaper and quicker to litigate. Other than in the rarefied air of international disputes, arbitration has become relatively unpopular and uncommon.
The leading alternative dispute resolution body, The Institute of Arbitrators and Mediators Australia (IAMA), has taken determined action to address the demise of this once very popular alternative to litigation. On 1 June 2007 it launched its new Arbitration Rules (Incorporating the Fast Track Arbitration Rules).
The new rules provide the arbitrator with the power to limit the time to be taken in any aspect of the proceeding. The overriding objective is defined as conducting the arbitration fairly, expeditiously and cost effectively and in a manner which is proportionate to the amount of money involved, the complexity of the issues and other relevant matters. All very laudable but, the really exciting development is the option of "Fast-Track Arbitration".
The essence of the fast track version is that the time is fixed for every step and an award produced within 150 days, whilst the benefits of arbitration, such as confidentiality, choice of venue and appropriateness of the arbitrator are preserved.
As its title suggests, the timeframes are tight. The claimant must have its material on by the 20th day including its pleadings, statements, expert evidence and submissions. The respondent has until the 40th day to put on its material. The arbitrator is to determine the dispute based on the written material, unless a hearing is necessary to explain or resolve any conflict in that written material. If there is to be a hearing the arbitrator may direct it to be a "stop clock" affair, much like competition chess.
The parties' representatives must be well organised and concise. Filibustering or long submissions will be to the offender's disadvantage. Most advocates (and those supporting them) are paid by the hour, so in addition to an earlier resolution of the dispute, the parties stand to benefit from considerable cost savings.
The arbitrator's award must still explain the reasons for the arbitrator's decision. However, the rules provide that the parties acknowledge that the extent of reasons for the award shall be proportionate to the time available to the arbitrator to deliver it, ie the number of days until the 150 days expire.
The agreement for the resolution of disputes through fast track arbitration is similar to the ordinary garden variety, except that it specifically provides that the parties have agreed to apply IAMA's fast track option.
The new Arbitration Rules complement rather than side line mediation. They aspire to return arbitration to a time and cost effective method of reaching finality in intractable disputes.
For detailed advice on how to draft arbitration agreements adopting the new Rules and/or Fast Track provisions, please contact Rob Riddell or Kim Middleton.
t (02) 9931 4940
t (02) 9931 4916
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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