Why not arbitration?
Arbitration agreements and the process of arbitrating disputes are often much maligned by lawyers. There are cries of "You'll be relinquishing your right to a fair trial by a judge; you can't do that!" or "You'll be putting your fate in the hands of an anonymous and random adjudicator" or "You'll be abandoning your right to appeal".
As a litigator of more than 20 years, it is my view that none of these are valid reasons for dismissing arbitration as a reasonable alternative to litigation.
Commercial litigation is a minefield of rules and regulations and the court's interpretation of them, making it (in my view) uncommercial to go to trial over disputes that are less than $30,000 in value. That means you have to settle your claim and your opponent knows it. The process allows the procrastinators and game players considerable latitude to thwart the timely resolution of disputes.
Recently, I was involved in proceedings where the plaintiffs had nine different firms of solicitors involved. They built a claim premised mostly on inferences and constantly flouted court-ordered deadlines. When they missed another deadline last year and found themselves without lawyers, my clients tried to strike out the proceedings. At the eleventh hour, the plaintiffs retained new lawyers... and the proceedings were allowed to go on.
At the recent trial, the plaintiffs' witnesses gave their evidence and were cross-examined. This was followed by the plaintiffs making a proposal for the complete abandonment of their claim before the defendants had even given their evidence!
The defendants spent five years defending the plaintiffs' claim. They couldn't get summary judgment and they couldn't strike it out. They couldn't convince the court to make guillotine orders.
More than two years was spent arguing with the plaintiffs about disclosure and the commercial sensitivity and confidentiality of documents. This was not something that was expected (or could be reasonably planned for), but it was allowed to occur because of the rules relating to disclosure and the various court decisions concerning those rules.
This experience motivated me to delve deeper into the viability of arbitration as an alternative to litigation.
By including an arbitration agreement in your commercial agreements, you can circumvent the vagaries of the Court Rules and processes. You can frustrate the game-players and procrastinators, instead of the other way around.
You can nominate a streamlined process for resolution of disputes and specifically exclude the jurisdiction of the courts. You can make any arbitration decision final and binding and exclude any appeal. By using an abbreviated arbitration process to reach that decision, you will have saved considerable time and money.
The other big positive is that you can force your opponent into a position where they have to enter into settlement negotiations much earlier, if they want to avoid a judgment against them. And that is the real aim of dispute resolution. After all, more than 95% of disputes are resolved before the parties set foot in a court room.
You are not giving up your rights to a fair trial. You are merely modifying those rights so that they work for your business, instead of against it.
You can create different processes for different types of disputes, so as to reduce the costs of the arbitration process. For example, you might create a substantially abbreviated process for claims under $50,000, where decisions are made:
on the papers, without a hearing;
without discovery of documents or delivery of particulars between the parties; and
in accordance with strictly enforced timeframes.
With stringent timelines which the parties and arbitrator must comply with, you could be in a position to obtain a judgment in less than three months. You can also stop game-players and procrastinators in their tracks. Each deadline in the arbitration process can have a guillotine effect. That is, if any party fails to comply with a deadline at any time, the other party can immediately seek default orders and the arbitrator must make those orders.
To be prudent, you may still have lawyers prepare documents and act on your behalf. But, with a lawyer who has developed and refined the processes and documents necessary to complete the arbitration process, the cost will be minimal, especially when compared to litigating through the courts. In any event, the arbitration agreement would contain a clause to the effect that the successful party recovers its legal costs on a full indemnity basis.
In my view, you should have an arbitration clause. Why leave the dispute resolution process in the hands of lawyers and the courts? You can control the process and resolve your disputes more quickly, cheaply and efficiently.
If you have any questions about arbitration agreements or the processes and documents involved in the suggested arbitration process, please do not hesitate to contact me at Anderssen Lawyers by phone (07) 3234 3130 or by email rob@anderssens.com.au.
