There are a number of alternatives to the resolution of disputes through litigation. Parties entering into commercial agreements should be aware of the options which exist and the advantages and disadvantages of different forms of alternative dispute resolution. The main forms of commercial dispute resolution are outlined in this note.
The primary purpose of civil litigation is often considered to be the resolution of disputes. Litigation is a form of adjudication whereby the dispute at hand is resolved by the binding, although sometimes appealable, judgment of the court. The hearing of the matter in court allows the litigant’s case to be presented to the judge. Although historically litigation is seen as the primary form of dispute resolution, the notion exists that there is no single universal best way of resolving disputes. Various forms of alternative dispute resolution may be more appropriate or attractive in the context of the nature or requirements of a specific matter.
In arbitration proceedings, the arbitrator performs a quasi-judicial function and must ensure the fair administration of justice. Arbitration is a consensual process which depends entirely upon the agreement of the parties to arbitrate; and the right of the parties to agree to arbitrate, and to do so in the manner that they see fit, is known as party autonomy. Certain types of dispute cannot be arbitrated and can only be resolved by the courts – these are primarily matters relating to status (divorce, insolvency and the like). The features of arbitration are the need for a contractual provision in terms of which the parties agree to arbitrate; the referral of the dispute to arbitration; the privacy of the proceedings; a determination of the dispute by the arbitrator; and the finality of the decision. The arbitrator must act independently and impartially. Arbitration awards are not subject to appeal unless the parties agree otherwise, but may be subject to review if the arbitrator commits a gross irregularity in conducting the proceedings, exceeds the limits of his powers, or the award is improperly obtained.
Mediation can be defined as “a flexible and confidential process which is private, in the interests of settlement and is conducted by the mediator, a neutral independent party”. In essence, it is a facilitated negotiation which may or may not lead to a resolution of the dispute. Unlike arbitration, the mediator is not an adjudicator and the mediation is not binding unless and until a settlement agreement is achieved between the parties, at which point the parties are bound by the settlement agreement.
In an expert determination, the expert’s duty is not to hear and determine a dispute but rather to decide the question submitted to him by agreement between the parties. The expert is expected to resolve the issue by the exercise of his honest judgement and skill without a judicial enquiry. Expert determination is used when there is no formulated dispute in which the parties have defined positions that need to be subjected to arbitration, but rather both parties are in agreement that there is a need for an evaluation. Expert determination is often employed to resolve a specific technical issue in the context of a broader litigious or arbitral dispute.
The important distinguishing feature between litigation and other forms of dispute resolution is that all other forms require agreement between the parties. Arbitration is a popular method of settling commercial disputes, both domestic and international, in South Africa. Arbitration clauses are found in most commercial agreements, and this has resulted in an increasing number of commercial disputes being submitted to arbitration. The long awaited reforms of South African arbitration legislation will undoubtedly increase the popularity of arbitration as South Africa increasingly becomes an important regional arbitration centre.