Alternative dispute resolution: What impact does it have on the adversarial nature of the law?

Australia is fast becoming an alternative dispute resolution (ADR) hub. In August last year, the Australian International Disputes Centre (AIDC) was opened in Sydney as a rival to the more established commercial international arbitration centres in Europe, as well as those in Singapore, Hong Kong and the Asia-Pacific.

Initiatives to promote ADR, such as the establishment of the AIDC, have been supported by the highest levels of government, with legislative changes being enacted by the federal and state governments to promote ADR in both commercial and non-business spheres.

Last year, the Standing Committee of Attorneys-General (SCAG) agreed to a uniform scheme to govern all of Australia's domestic commercial arbitration, which included the adoption of the United Nations Commission on International Trade Law model.

The overhaul of Australia's ADR system has continued apace since then, with legislation enacted in February that hands power to the Australian Centre for International Commercial Arbitration (ACICA) as the sole default appointing authority under the Australian International Arbitration Act. Previously, the Supreme Court of the various states and territories had this power.

ACICA has a list of more than 100 fellows who can act as arbitrators if called upon. Those arbitrators include current practitioners in Australia and overseas and ex-judges.

With Australia seen as one of the world's leading lights in the promotion and use of mediation, the current endorsement of arbitration is intended to add more muscle to Australia's suite of available ADR mechanisms.

"This brings ACICA into line with other strong arbitration centres such as Singapore and Hong Kong," says Alex Baykitch, the vice-president of ACICA and a partner in the Sydney office of international firm Holman Fenwick Willan. "In terms of mediation, Australia is in many ways more advanced than jurisdictions such as Singapore and Hong Kong and even England. We have been doing it a lot longer than lawyers in those jurisdictions but, for arbitration, the hope is that Australia will be a viable alternative in the region."

EXPERT VIEW

"There is an increasing trend and pressure from the legislation end to avoid litigation" Mark Chapple, partner, Baker & McKenzie

"While from a commercial perspective clients would normally lean towards settlement, especially for minor disputes, they will often say, 'If we settle, it sets a precedent that any time someone wants to leave our organisation, they will threaten to sue us'" Kate Jenkins, partner, Freehills

"When it comes to arbitration, clients and corporate Australia still have a long way to go to catch up with their international cousins" Alex Baykitch, partner, Holman Fenwick Willan

"It is critical in order to win that work and to demonstrate to clients that you can bring to bear all of the tools in that tool kit of ADR" Doug Jones, partner, Clayton Utz

The undisputed doyen of ADR in Australia is Doug Jones. The ACICA president and Clayton Utz partner was last year elected as the first Australian to head the Chartered Institute of Arbitrators. Based in London, this global group of learned professionals has around 12,000 members. Jones has described the recent reforms to Australia's ADR system as having the "potential to create a new dawn for domestic arbitration in Australia".

"From the perspective of commercial ADR, the significant issues are the encouragement by governments of a non-binding ADR - that is, mediation - and the introduction by the SCAG of the new domestic arbitration legislation, which has now been enacted in NSW and all the states have agreed to enact," he says. "This provides a significant opportunity for the revival of domestic arbitration as a different and effective form of binding dispute resolution."

Throughout this reform process, Attorney-General Robert McClelland has been an active supporter of the push to modernise Australia's ADR systems. When opening the AIDC in 2010, McClelland said he wanted Australia to adopt a truly "cutting-edge and internationalised" model of arbitration. "We need to do away with unnecessary formalities and get on with identifying and solving the real dispute in issue. And we need to ensure that arbitration delivers swift and cost-competitive outcomes," he commented at the time.

"This requires arbitrators and lawyers to leave old prejudices and methods behind - arbitration is not court without the wigs. It will also require Australia's highly regarded courts to respect the fundamental nature of arbitration and provide appropriate support where required."

Practitioners have certainly noticed the focus by policymakers to try to soften the adversarial nature of the legal system and promote ADR. "There is an increasing trend and pressure from the legislation end to avoid litigation," says Baker & McKenzie dispute resolution partner Mark Chapple. "Judges involved in case management want to know if a case has been mediated and if not, to encourage or effectively force parties into mediation."

Some courts, such as the Equity Division of the NSW Supreme Court, ask parties to nominate whether a matter is suitable for mediation or other forms of dispute resolution.

Courtroom vs boardroom

While most lawyers and policymakers extol the virtues of ADR in solving disputes quickly, fairly and at a reduced cost, within an adversarial legal system, litigation is still the preferred course for lawyers and clients in many circumstances.

Allens Arthur Robinson industrial relations and employment law partner Jamie Wells - who counts Rio Tinto, BHP Billiton and the Queensland Government as clients - believes that despite the encouragement of commercial arbitration and mediation, the preferred method to settle workplace disputes is still one that is driven from the client side.

"That decision is usually culturally driven by the view of the organisation," he says. "Some organisations are much happier trying to sort these things through forums like the Fair Work Australia conciliation process or even to adopt a more informal approach. Other clients might say, 'We have a policy on this and it has been breached', particularly if it is an employment dispute, and to settle or keep that person in the workplace could compromise their policies."

Contrary to popular opinion, Wells says, it is these cultural factors within organisations, rather than its size or financial clout, that are usually the most pivotal in discussions about the best way to handle disputes. "It is completely cultural and not related to size," he says. "You will often get a top 50 ASX-listed company handle a dispute the same way as a smaller organisation."

Employment law and industrial relations has become fertile ground in recent years for dispute resolution lawyers. Changes in legislation, the rapid adoption of social media networks such as Facebook and Twitter, and a greater degree of scrutiny surrounding workplace policies in the areas of harassment, bullying and parental leave have had a significant impact on workplace policies and fundamentally changed the nature of the employer and employee relationship.

High-profile cases such as the $37 million damages claim filed by Kristy Fraser-Kirk against David Jones and its former CEO, Mark McInnes, have also prompted large corporations to ask their preferred workplace lawyers to run a fine-tooth comb over their employment policies to ward off the threat of such a claim being made against them.

Despite the massive publicity generated by the Fraser-Kirk case, and the reputation of David Jones taking a battering, corporations are still prepared to "take a stand" and defend litigation while rejecting overtures to settle despite the cost benefits and confidentiality clauses that would seem to make mediation and arbitration attractive.

"A lot of my large corporate clients would agree that commercial litigation is not desirable because of the legal costs, damages costs and reputation damage," says Freehills employee relations group partner Kate Jenkins.

"While from a commercial perspective clients would normally lean towards settlement, especially for minor disputes, they will often say, 'If we settle, it sets a precedent that any time someone wants to leave our organisation, they will threaten to sue us'.

"So for most of my clients, they are often caught between not wanting to settle when they feel they have a strong case, and not wanting to litigate either," she says.

In addition to employment disputes, there are other matters where litigation or a formal court process, at least initially, is preferred. "Some cases are simply not suitable for mediation," says Bakers' Chapple. "With insolvency matters, sometimes liquidators need to make applications to the court for directions or to have a particular issue decided. Mediation just doesn't work and it also doesn't work if you need an urgent injunction."

Educating clients and lawyers

While litigation is still a viable option for clients with deep pockets and the stomach for a fight, employment and dispute resolution lawyers without expertise in ADR will struggle to build a significant client base.

Mark Chapple, who has more than 25 years of experience as a commercial litigator acting for high-profile clients such as AMP, Fujitsu and SingTel Optus, says he spends more time out of the courtroom these days and that the mindset of clients and lawyers towards mediation, in particular, is more favourable than it was 10 years ago.

"If you look across the spectrum of clients, there might have been some concerns that proposing mediation themselves might be indicating a sign of weakness," he says. "I think those days are long gone, because mediation is so common."

Chapple adds that litigation lawyers are also more accepting of ADR. "I have a reputation as a hard-nosed litigator, but you need to be commercial, realistic and pragmatic when acting for your client," he says. "Lawyers have to be flexible and cut their cloth to the situation."

While corporate Australia views mediation is as a viable alternative with regard to solving corporate disputes, it seems there is still some way to go before other methods of ADR, such as arbitration, are fully embraced.

In a similar vein to Chapple, HFW partner Alex Baykitch says he "hasn't seen the inside of a courtroom much over the past five years". He acknowledges that despite the best efforts of legislators and legal groups such as ACICA to advocate arbitration, that does not necessarily make it an obvious choice for clients. Says Baykitch. "In terms of mediation, corporate Australia is across that and keen on it, but there is still a long way to go."

Although many matters still go to litigation despite the best intentions of the system to dissuade parties to go down such a course, lawyers acting in dispute resolution cannot hope to be successful if they don't have skills in the use of ADR techniques and mechanisms.

"It is a very competitive market and clients in the commercial space are very discerning," says Doug Jones from Clayton Utz. "It is critical in order to win that work and to demonstrate to clients that you can bring to bear all of the tools in that tool kit of ADR, rather than just approach dispute resolution in the traditional adversarial way that has been done by lawyers in the courts."

New entrants in the legal market attempting to get a slice of the pie have also noticed the promotion of ADR. Last year, Tony Dempsey, former Clayton Utz lawyer and head of the Rugby Union Players Association, started Wisdomdr with ex-Freehills lawyer David Vaux. They have 25 "captains of industry" on their books who help disputing parties and their lawyers to settle disputes.

"Mediators traditionally come from a legal background and are often retired judges or silks," says Dempsey. "We saw an opportunity to use semi-retired business heads with commercial nous and business acumen to come up with solutions that are commercially driven."

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