Keeping out of court

Alternative dispute resolution is having a moment. Recent years have seen a marked rise in initiatives designed to keep conflicts out of court.

In October, the Mediation Act came into law here. Designed to promote mediation as an effective and efficient adjunct to court proceedings it "should divert many family, civil, commercial and community disputes from our courts", says Sabine Walsh, president of the Mediators' Institute of Ireland, who expects to see "a significant rise in the demand for mediation among Irish people".

The merits are clear. With mediation, an independent, neutral individual assists two or more disputing parties in resolving a dispute in a collaborative, consensual manner. Both parties agree on the neutral mediator in advance and the terms of agreement are agreed with his or her help. Typically, these agreements are not legally binding but can be if both parties agree to it.

With arbitration, the second most common form of alternative dispute resolution (ADR), both parties agree to go to undergo a process in which the decision of the arbitrator is legally binding. This process was already enshrined in law, under the Arbitration Act of 2010.

In whatever form in comes, the primary benefit of ADR is that it is cheaper than going to court. That should make it particularly appealing to cash-stretched small- and medium-sized enterprises. One of the barriers to its growth up until now, at least for low-value dispute, was perhaps the success of the Small Claims Court.

Small claims procedures are provided by the District Court offices, for claims valued at up to €2,000. It is cheap to use too, as it does away with the need to employ a solicitor. Though originally established to provide consumer protection, since 2010 the mechanism has been open for business-to-business (B2B) claims too.

Online purchases

Alternative dispute resolution received its biggest fillip yet, however, when the European Commission launched its platform to help consumers and traders solve disputes about online purchases. Driven by the belief that cross-border online sales were being dampened by consumer fears about lack of recourse in the event of shoddy goods, it launched the Online Dispute Resolutions (ODR) platform in February 2016.

The ODR platform offers a single point of entry that allows EU consumers and traders to settle their disputes for both domestic and cross-border online purchases.

The user-friendly platform enables parties to conduct the entire resolution procedure online. Crucially, for Irish businesses selling online across Europe, it is multilingual, with a translation service available on the platform to assist.

According to European Commission figures, it takes about 90 days for a case to be solved. And not alone does it reduce the risk of costly litigation, it can also help maintain good customer relations in a way that the intrinsically adversarial nature of the courts disallows.

The ODR works by channelling disputes to national, authorised Alternative Dispute Resolution bodies. Within the platform’s first year in operation, 24,000 complaints were lodged on it. Yet despite this volume of activity, and its benefits to business, EU research indicates that 40 per cent of EU traders have no knowledge about ADR at all.

In Ireland, the European Consumer Centre (ECC) Ireland is the national point of contact for information about the ODR. “To participate, a trader has to include a link to the ODR on their website and provide a business email address. When a complaint comes in, the trader is then notified and a list of designated resolution bodies sent out,” says ECC Ireland spokesperson Martina Nee.

If the business agrees to go this route, it and the consumer have 30 days to agree on an ADR authority.

While there was a flurry of interest in the ODR when it launched, raising awareness of the mechanism among businesses here is taking time too. “However, it is important businesses pay attention to emails coming from the ODR,” cautions Nee. “If they are not familiar with it, they might ignore them or think it is spam, so they need to be aware of what it means.”

While currently ODR disputes here only relate to consumer grievances, in some countries – Belgium, Germany, Luxembourg and Poland – it works in reverse too, allowing traders to lodge a complaint against a consumer, most likely for non-payment.

If an Irish business receives a complaint via the ODR, they are not legally obliged to engage with it, but it is “better if they do”, says Nee, not least if it heads off a court action.

Willingness to engage

If a case cannot be resolved through ADR, and ends up in court anyway, simply having shown a willingness to engage in some kind of mediation will work in a business’s favour, points out Charles McLaughlin of NetNeutrals, to date the only Irish ADR body authorised by the ODR.

Not all traders want to be involved with the ODR, he admits. One business owner he heard speak on the topic said he did not like the idea of a third party having a central role in a dispute that could cause his business reputational damage. That owner’s policy was simply to settle in order to maintain good will.

NetNeutrals has a team of 12 “neutrals”, as it calls its mediators, on its books, as well as access to another 600 in the US, where the business was originally founded in 2002 and where the concept is longer established. In some cases there, business sectors have their own network of ADR providers, such as the travel industry, he points out.

“From a trader’s point of view, if they have tried to resolve a dispute with a complainant internally and the relationship has broken down, the next stage tends to be court. What we are saying is that there is an alternative,” says McLaughlin.

In his experience, a large part of what an aggrieved party wants is to be listened to, yet in a litigious culture, many are afraid to apologise for anything, for fear it might be perceived as an admission of liability in court. “Companies are trained to say nothing,” he says. ADR gives both a chance to give their side without this pressure.

The fact that the courts appear to look increasingly favourably on cases that have tried ADR should help establish the practice further, McLaughlin believes. “Already we are seeing it used increasingly in business to business cases, for example in relation to things like disputed escrow payments where both sides want a resolution fast,” he says.

ADR has a well-established role to play in relation to managing conflict within the workplace too, whether via the Workplace Relations Commission or the appointment of an independent and trusted outsider to help with divisions at board level. Supplier contracts very often have a specified arbitration clause in them too, in the event of a dispute.

Whatever the stakeholder involved, the first step should always be to try and sort a conflict internally, says Mary Connaughton, director of the Chartered Institute of Personnel and Development. “It has to be appropriate, but when it comes to managing corporate conflict, start from a customer-service-type perspective. If you get a complaint, sorting it internally is the most effective and efficient route. If you have made a mistake, that’s a black mark against you. If you fix the problem, you’ve probably won a customer for life. If you don’t, you’ve lost them.”

The same ethos should apply to all conflicts – “So get your complaints procedures in order,” she says.

[ ec.europa.eu/consumers/odr ]