Australia
In your jurisdiction, are there any formal ADR procedures available for resolving commercial disputes other than litigating (or arbitrating) to a final hearing?
Mediation and expert determination are the two most common ADR procedures available for resolving commercial disputes in Australia without litigating (or arbitrating) to a final hearing.
Mediation can be voluntary or court ordered and involves a neutral third-party mediator facilitating settlement discussions between the parties and assisting them to reach a negotiated and consensual outcome. The resolution is generally recorded in a binding and enforceable deed or agreement. This process allows parties more flexibility as to the resolution which can be helpful if the parties have an ongoing commercial relationship. If the mediation is court ordered, the mediator is generally a Registrar of the court. If voluntary, the parties may appoint a mediator of their choice and have the flexibility to agree a negotiation framework suited to their circumstances. The mediator has no power to impose an outcome on the parties.
Expert determination involves a neutral third-party expert deciding an issue or issues between the parties, typically in an area of specialized technical skill. The expert can rely on the expert’s own investigations, skill and judgment. The decision is typically final and binding, and subject to narrow appeal rights. Unless dictated by a contractual framework, the process is subject to agreement between the parties.
Parties in Australia also negotiate both before and throughout proceedings and may agree to attend informal settlement conferences with party representatives and legal representatives only.
Does engaging in ADR have any effect on potential or existing litigation or arbitration?
Engaging in ADR does not generally stay litigation or arbitral proceedings or impact limitation periods (unless mandated in a contract). ADR can be scheduled to fit within the procedural timetable of the litigation or arbitration. Negotiation can be engaged in at any time without hindering the progress of the litigation or arbitration.
Is ADR compulsory and if so are there any consequences if a party fails to engage in ADR? If it is not compulsory are there any plans for this to change?
ADR is generally not mandatory in commercial disputes however Australian courts have powers to compel parties to attend and participate in mediation and to refer questions which arise in proceedings to expert referees. If a party fails to engage and participate in ADR when ordered by a court the possible consequences include a stay of the proceedings and costs orders made against the defaulting party.
Some Australian jurisdictions require parties who institute civil proceedings to take certain steps prior to commencing proceedings, for example in the Federal Court of Australia, some proceedings require a “genuine steps statement” pursuant to the Civil Dispute Resolution Act 2011 (Cth), to be filed when the proceedings are commenced, specifying the steps that have been taken to try to resolve the issues in dispute between the parties or the reasons why no such steps were taken. The statutory examples of genuine steps include considering whether the dispute could be resolved by one or more ADR processes. The responding party is required to file a separate genuine steps statement stating whether it agrees with the instituting party’s statement or how and why it disagrees. There can be cost consequences if these steps are not undertaken.
Can the parties agree, in advance of any potential dispute, to engage in ADR?
Yes, the parties may agree on tailored ADR procedures in their commercial contract and may rely on their agreement in later proceedings, including to obtain a stay if proceedings are commenced without undertaking the process in the contract. Parties to a dispute can also voluntarily participate in ADR by agreement.
When does ADR generally take place?
ADR can take place at any point in a dispute, including prior to or during proceedings. The parties’ commercial agreement may require them to participate in ADR before commencing litigation or arbitration, although there is generally an exception for proceedings for urgent relief. During proceedings the parties may agree to an ADR procedure or a court may order one, often after the parties have served evidence so the parties have sufficient information to make an informed assessment of their respective risks.
Is ADR subject to without prejudice privilege and/or confidential? If not, is there any other means to protect confidential information?
ADR is generally subject to without prejudice privilege and is confidential. The parties’ confidentiality obligations may arise from the rules of court, the parties’ commercial agreement or the parties’ agreement with a mediator or an expert.
Does the output from ADR create precedents?
ADR does not create a precedent. The ADR process is typically private, in light of the without prejudice privilege and confidentiality obligations involved. If parties agree on terms of settlement, they may record their agreement in a deed or agreement and include terms to apply to the court or the arbitral tribunal to make a judgment, final award or otherwise finalize the proceedings on agreed terms.
Who bears the costs of ADR?
The costs of ADR are typically shared equally between the parties, subject to any agreement, order or determination otherwise.
Is your jurisdiction subject to any specific rules for cross border ADR?
There are cross-border rules in respect of arbitration. In September 2021, Australia signed the United Nations Convention on International Settlement Agreements Resulting from Mediation (Singapore Convention). The Singapore Convention is not yet in force in Australia, however it proposes a standardized procedure for enforcement of settlement agreements arising from cross-border mediations.
Are there any particularly unusual features of ADR in your jurisdiction that you are aware are different to other jurisdictions?
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