Media

Mediation, arbitration on the rise

The Australian Financial Review - 22 July 2005
By Marcus Priest & Steven Scott

Today marks the second anniversary of the start of Australia's longest piece of litigation in the specially constructed courtroom on floor 14 of an office tower on St George's Terrace in Perth.

But there is still a way to go in the infamous Bell litigation hearings before Justice Neville Owen estimates put the end of the hearings at the end of next year.

It is one of a number of major pieces of litigation in train across Australia.

In Sydney, Justice Robert Austin recently heard the first substantive witness in the Australian Securities and Investments Commission civil prosecution of former One.Tel boss Jodee Rich after nearly four years of interlocutory hearings. The One.Tel case is now expected to run until the end of the year.

In the same court building, Federal Court judge Ron Sackville is likely to begin hearings in September in a mammoth piece of litigation between Channel Seven and News Ltd, PBL and Telstra over television rights. That case is expected to run for nine months.

With the Bell, One.Tel and Seven litigation going on, it is hard to imagine lawyers and judges are talking about the death of litigation. But they are.

Growth in what is known as mega-litigation is obscuring a general decline in the number of smaller disputes going to trial.

While some barristers are feeling the impact, there is increasing demand among many to get work in alternative dispute resolution, such as mediation.

Robert Angyal, SC, chairman of the NSW Bar Association mediation committee, said some barristers still regarded mediation as a "sign of weakness", but increasing numbers were trying to get work as mediators.

"There is more mediation happening and barristers, being commercially astute, realise there is an opportunity for them to engage in a new area of advocacy," he said. "In most commercial litigation in Sydney, at some stage before the matter gets to a hearing, someone will suggest mediation."

Mary Walker, chairwoman of the Law Council's Alternative Dispute Resolution (ADR) committee, said ADR had been viewed dismissively by many barristers but those attitudes were changing.

"There is a new generation of barristers who have been educated in ADR as part of their legal training. These barristers regard representing clients in ADR processes as part of their role as advocates."

Ms Walker said there was now a duty for barristers and solicitors to advise clients on the most appropriate forms of dispute resolution for their case. "The practice of the future needs to include all the tools necessary to adequately represent clients in not only litigation, but in alternative dispute resolution," she said.

What is happening in Australia mirrors the experience in the United States. Despite the public perception that the US is a litigators' paradise, mediation and arbitration have grown exponentially.

Last year, the American Arbitration Association handled total claims exceeding $US1 billion ($1.3 billion) in relation to technology arbitrations alone; the average claim was $US1.2 million and the average counterclaim was $US2.3 million.

And the AAA, a private dispute resolution organisation, has been written into eight federal statutes, 34 federal regulations and 318 state statutes as the forum for disputes arising under the statutes.

Last year it handled 240,000 cases, up from 50,000 matters 10 years ago and more than all the civil cases filed in all the federal courts in America last year.

"Anybody in business knows you work real hard to get a client and once you get them, and you have a conflict, you don't want to have to take them to the mat, you want to have a corrective measure," said AAA president William Slate, who recently visited Australia.

"Arbitrators and mediators have an ability to be creative in designing a solution that a judge can never do and can fashion all sorts of creative business solutions which really aren't in the purview of what a court does in finding right and wrong."

An AAA survey of 254 multinational companies found those deemed "most dispute-wise" had price-earnings ratios 40 to 60 per cent higher than the "least dispute-wise".

"What is the P/E ratio other than a statement of confidence in management and the way they manage the companies? And the way they handle disputes is part of that," Mr Slate said.

But mediation can be a lengthy process which involves wearing down the other side, according to Maddocks Commercial Disputes head of practice Grant Levy.

"The great benefit of mediation is that you have an independent person telling a party: 'You really should consider settling, the offer on the table is a good offer'," he said.

"When the other party is saying it, there is usually some dispute and there is usually some problem in the relationship between the parties, so where one party says 'settle' the other party says, 'no, I will go to court'.

"A successful mediation is one where both parties feel they have lost because in essence the mediator is striving to achieve middle ground."

And sometimes, despite the benefits of mediation, litigation is still unavoidable.

"Sometimes the cost of litigation itself precludes settlements," said National Australia Bank general counsel David Krasnostein.

We gratefully acknowledge the permission from Marcus Priest, Steven Scott and The Australian Financial Review to reprint this article.