If you are in a commercial dispute with another person or business, you may be considering going to court. However, litigation can be expensive, time-consuming and inappropriate for your particular concern. Instead, you may wish to consider using alternative dispute resolution. This article will detail what alternative dispute resolution (ADR) is and outline the three common alternative dispute resolution methods in New Zealand.
Definition of Alternative Dispute Resolution
Alternative dispute resolution is any method of resolving disputes or conflicts that does not involve going to court or litigation. The method that you choose to take will depend on:
- your desired costs;
- the amount of time you wish to spend;
- the confidential nature of your dispute;
- the nature of the relationship you have with the other party or parties involved; and
- your desired outcome.
The most common ADR processes are:
- negotiation;
- mediation; and
- arbitration.
The key matters that distinguish these forms of dispute resolution are whether:
- you and the other party, or parties, control the process and outcome;
- a neutral third party assist you in achieving the outcome; or
- a neutral third party imposes a decision.
Negotiation
Negotiation is a dispute resolution process in which parties or their representatives communicate and work together to reach a conclusion or agreement. This means that only you and the other party are involved, being responsible for the entire negotiation process. Since negotiations are highly flexible, the parties will usually decide on a method or process they will follow beforehand.
The key elements of the negotiation process are:
- the parties themselves decide the outcome;
- it can be as fast, cost-effective and informal as the parties wish it to be; and
- there is an endless amount of flexibility regarding its procedural requirements as the parties themselves conduct it.
Negotiation is typically the first step in dispute resolution intervention. After engaging in a negotiation, it is common for parties to move on to another form of dispute resolution. However, you must remember that negotiations are largely unstructured and consider whether your relationship with the other party will benefit from this style of resolving disputes.
Mediation
Mediation is a dispute resolution process where a neutral third party (a mediator) facilitates the negotiation between conflicting parties. In short, the mediator's role is to assist you with resolving your dispute.
You can consider mediation as the middle ground between negotiations and arbitration. You are assisted by the mediator in making their own decisions and agreements instead of having a decision imposed or being left unfacilitated. The mediator will help you and the other party in:
- defining issues;
- drawing out relevant information;
- exploring potential settlement options; and
- negotiating a final, mutually beneficial settlement agreement.
Once parties resolve their dispute, the mediator will draft a written agreement that outlines the mediation process's outcomes and resolutions. This document is known as a mediated agreement.
The key elements of the mediation process are:
- a neutral third party facilitates the outcome;
- it is relatively informal and both consensual and confidential; and
- the parties can negotiate flexible solutions that do not conform with any specific legal or general guidelines.
Employment-related disputes typically utilise mediation processes.
Arbitration
Arbitration refers to a dispute resolution method in which conflicting parties agree for a neutral third party (an arbitrator) to come to a final resolution of the dispute.
It is a contractual method of dispute resolution. The arbitrator has the authority to make a binding and enforceable decision due to an agreement reached between the parties. The key elements of the arbitration process are:
- a neutral third party decides the outcome;
- Some similarities to the court process, such as involving evidence, calling witnesses and presenting legal arguments; and
- there is a large amount of flexibility as to its procedural requirements.
The commercial sector typically uses arbitration.
Key Takeaways
Using the court system is not the only way to resolve conflicts in New Zealand. Instead, you may wish to use an alternative method to resolve your case. The most common forms of dispute resolution processes are:
- negotiation;
- arbitration; and
- mediation.
What process, or processes, you decide to choose will depend on your desired outcome, timeframes, the presence of a third party and your available resources.
Frequently Asked Questions
Alternative dispute resolution refers to any method of resolving disputes or conflicts that do not involve going to court or litigation.
The most common types of ADR are negotiation, arbitration and mediation.
Alternative dispute resolution can be beneficial if done correctly. At times, ADR will be more appropriate than litigation, as it is typically more cost-effective, flexible and less time-consuming.
Why is alternative dispute resolution important?
ADR is important because it provides conflicting parties with more options to resolve their conflict.
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.
