Giving effect to a dispute resolution scheme

Scheme approval

The scheme may need to be formally approved (eg, by a minister) before it can be implemented eg, the scheme under the Financial Service Providers (Registration and Dispute Resolution) Act 2008).

This is generally the case when the scheme is to be run by the regulated industry. Providers under the scheme may also need to be approved (eg, this is required under the Family Dispute Resolution scheme). This gives the Government some direct control and oversight of the scheme.

If approval is required, it's good practice to have a contingency plan in the event that no scheme is approved (eg, an interim financial services dispute resolution scheme may be appointed by the Governor General). Also good practice is a requirement to publicise approved providers and the ability to ‘unapprove’ them.

Use of legislation

Establishing a formal dispute resolution scheme though legislation is one way of managing disputes. Any legislation that is developed should be principles-based rather than highly prescriptive and should reflect the specific characteristics of the new scheme.

The Legislation Design and Advisory Committee (LDAC) has prepared useful guidance on the development of legislation. This includes considering alternative approaches to achieve the policy objectives (eg, education, relying on the common law etc) and a specific chapter on dispute resolution clauses(external link).

A prescriptive approach

A prescriptive approach to legislating for dispute resolution sets out the dispute resolution process in detail. The clauses are often lengthy and complex and require precise application of the procedure.

We would generally recommend against a prescriptive approach. Although it can provide clarity and consistency, it does not enable the administering agency or practitioner to determine how the process should operate or adapt it over time.

An efficient scheme is one that has the flexibility to enable the right intervention at the right time. The scheme also needs to be able to respond to changes in the environment in which it operates so it can remain fit for purpose.

The LDAC guidance will be relevant in striking the right balance between clarity and flexibility.

Bespoke legislative provisions

In our experience , dispute resolution schemes are unique to their context and require bespoke legislative provisions to be drafted by the Parliamentary Counsel Office (PCO). PCO’s ‘Model Clauses for ADR’(external link) set out the basic steps when parties are mediating between themselves.

Your drafting instructions to PCO shouldn’t need extra policy work as they will simply reflect earlier decisions made during the scheme’s development.

Dispute resolution provisions are likely to include the following elements:

1. Purpose/Objectives –Preferably included in the dispute resolution section stating the scheme’s goals.
   • Purpose/Objectives
2. Definitions –Used sparingly and be broad and permissive.
3. Principles and other safeguards – The Dispute Resolution Best Practice Principles could be included in the dispute resolution section and/or other safeguards to ensure adherence to the principles of natural justice. The legislation may also explicitly offer protections for practitioners and other third parties involved in the process.
   • Dispute Resolution Best Practice Principles
   • Protections for practitioners and other third parties
4. Jurisdiction – This should be as broad as possible to cover the nature of the matters to be resolved through the scheme and its financial jurisdiction (eg, Employment Relations Act 2000).
   • Jurisdiction
5. Timeframes – These should generally be avoided in legislation (but could be included in subordinate instruments).
6. Regulation-making powers – If regulations are required on certain aspects of the scheme, the power to make these regulations must be conferred in legislation. Much of the detail of the processes could, however, be specified through other subordinate instruments such as rules and guidelines.
7. Enforceability of outcomes – If decisions from the process are to be enforceable (eg, through a general or specialist court), this should be given effect through the legislation.
   • Enforceability of outcomes
8. Rights of appeal – If parties can appeal decisions from the informal system to the courts, these rights should be set out in the legislation. The legislation should also state if no appeal is available.
   • Rights of appeal
9. Scheme approval – If the scheme and/or providers require approval, this should be provided for in the legislation.
   • Scheme approval
10. Scheme review – As part of the evaluation plan for the new scheme, it is common to specify in legislation that an initial review should be done within an agreed timeframe after the scheme has been set up. Periodic evaluations should also be planned for.
    • Evaluation plan for the new scheme
11. Funding – There are a variety of funding models ranging from full cost recovery, to user pays, to full funding by the state or the relevant industry. This detail should be specified in legislation.
    • Funding