The Alternatives to Going to Court – Arbitration as a Dispute Resolution Method

During the course of business, every person is faced with resolving an issue or dispute which they come across merely out of continuing business. Should you be unable to find a resolution to the dispute it eventually leads to the matter being brought before a Court. This is usually a lengthy and costly endeavour, and many persons are dissuaded from pursuing their cases in sight of the time period it will take, or the costs it will house for the matter to be finalised.

This article relates to the use of Arbitration as a method of resolving disputes between parties. Arbitration proceedings are described as “for the settlement by arbitration of a dispute” in the Arbitration Act, 42 of 1965. This is a short answer describing the succinct methodology of an arbitration referral.

Although arbitration is one manner in which a dispute can be resolved, it does not equate to it being the best manner in which the matter should be resolved. Arbitration proceedings carry various pros over that of the normal course of Court proceedings. It necessarily also carries cons which should be taken into account with the facts of each case. For some matters, arbitration would not only be better, but would allow for the parties thereto to continue their business relationship unobstructed, where Court proceedings might deconstruct possible future collaboration between parties. It is best to understand arbitration proceedings before hand, and to thereafter make this decision.

Process of arbitration:

In understanding arbitration proceedings, they are implemented under the following circumstances:

1. Either by way of the parties having concluded an arbitration agreement in their business dealings, contracts or dispute resolution clauses, beforehand. The parties might have considered the possibility of disputes arising from their business and had agreed, signed and implemented an arbitration agreement as part of the initial contracts signed between the parties. The arbitration agreement includes the rights of the parties to refer the matter to arbitration, the rules which each party will follow during arbitration, along with possible persons, be they legal counsel or persons of a different area of expertise, who will preside over the arbitration proceedings, along with how the costs will be carried. In these circumstances, should a dispute arise, both parties have the right to refer the matter to arbitration and in terms of the agreed upon rules and methodology; OR
2. The parties may by way of agreement refer the dispute which arose to arbitration. The parties are free to use the standard rules of arbitration, or to agree and implement their own rules for the arbitration proceedings.

Both of the above options would suffice, but the general requirement is that all parties are in agreement and have rendered their consent to the dispute being referred to for arbitration proceedings. The Arbitration Act, 42 of 1965, defines an arbitration agreement as “a written agreement providing for the reference to arbitration of any existing dispute or any future dispute relating to a matter specified in the agreement”

Arbitration proceedings are started by either party referring the matter to arbitration. Thereafter a large degree of flexibility resides in what process occurs next. The process which follows is usually determined by the appointed arbitrator, or determined by the rules contained in the arbitration agreement between the parties. It is usually that either the pre-arbitration meeting is held, or that the complainant (Person instituting the arbitration proceedings) delivers their statement of claim. The Defendant (Person against whom the proceedings are instituted) is afforded an opportunity to file their answer to the statement of claim.

The proceedings that follow are determined by the arbitration agreement and the arbitrator. The parties might be required to follow a process of discovery, where they make available documents relating to the matter, to the arbitrator and the other party. If the particular case does not require such discovery process, then the parties may be referred to an arbitration hearing sooner.

Cons of Arbitration proceedings:

What is clear from the above is that arbitration enjoys a lot of flexibility surrounding the proceedings. However this flexibility is not endless.

Arbitration proceedings have a standard for the rules which may be implemented to the parties. It is unjust to expect that certain rules be implemented which are in contravention to a reasonable process of completion of arbitration. Thus, the rules of arbitration are usually done by agreement, and may later be amended by agreement or consignment of new rules by the seated arbitrator. This is usually done during the initial pre-arbitration meeting, where the parties meet with the appointed arbitrator. During this meeting a timeline of the when each party is to file their papers is also discussed. The arbitrator is enacted with the power to determine the timeframes, as well as the necessity of calling for certain documents, recordings, electronic files or documents in a similar vein to be made available to them for consideration in the matter. These powers are contained in Section 14 of the Arbitration Act, 42 of 1965.

Pros of Arbitration Proceedings:

Arbitration proceedings are considered to be more cost-effective and less time consuming for the parties. This is due to the inherent power of the parties along with the appointed arbitrator to determine in which manner and in what time frame each party is allowed to file their statements of claim, and their answers to the statements.

This is further compounded by some arbitrators only taking fixed fees for services rendered, which fees depend on either the complexity of the matter or the monetary value of the dispute. These fees are also usually shared equally between the parties.

Arbitration also carries the added benefit of the arbitration awards being easily made an order by a competent court. The arbitration awards are made an order of court by way of application. The party making the application have the benefit of the merits of the case already to have been decided by way of arbitration.

Arbitration proceedings are also held privately, and out of public face. This would assist the parties who might be disputing larger transactions, or labour disputes.

Overall, the parties hold the advantage and convenience of arranging a resolution mechanism catered to their specific dispute, in a manner best fitting their needs. This, of course, only being possible should you and your opposing party be able to agree to the rules.