Alternative dispute resolution can be defined as all forms of dispute resolution other than litigation or adjudication through the courts.[1] One type of alternative dispute resolution is arbitration; parties may elect to refer their dispute to arbitration for determination rather than approaching a court of law.
Arbitration is a process whereby the parties to the dispute enter into a formal agreement that an independent and impartial third party, the arbitrator, chosen directly or indirectly[2] by the parties, will hear both sides of the dispute and make an award which the parties undertake through the agreement to accept as final and binding.[3] Notably, the arbitrator(s) appointed by the parties can be an expert in the field of the dispute, whereas a judge or magistrate is typically not.
Conversely, litigation is a process whereby the parties to the dispute approach a court of law, where a judicial officer presides over the matter in accordance with established procedures and court rules, and delivers a judgment after having considered the facts, evidence and arguments. Litigation is often the default position, especially if the parties have not entered into an arbitration agreement.
Arbitration procedures are voluntary and confidential, and can resolve a dispute quicker than court proceedings, which are often subject to delay. However, like litigation, arbitration can also be a costly form of an alternative dispute resolution due to the arbitrator’s fees and other associated costs. Notwithstanding this, because arbitration proceedings are fast-moving, it may potentially be less expensive than litigation in terms of opportunity costs and legal costs over time.
Arbitration procedures are usually stipulated within the underlying arbitration agreement between the parties. This allows for significant flexibility as the parties can control and determine the process of adjudication to suit their needs and preferences, unlike in a hearing before a court.
The parties may agree whether the process itself should be formal or informal.[4] A formal process would entail the application of rules of evidence, leading and cross-questioning witnesses, and generally applying rules similar to those in applied in court. An informal process, on the other hand, my involve, for example: simple party submissions, greater arbitrator(s) involvement through questioning of witnesses, and the application of an equity discretion rather than strictly applying the law.[5] The arbitration procedures must be read with the Arbitration Act 42 of 1965 (“the Act”) which empowers, for example, the arbitrator(s) to “examine the parties appearing to give evidence in relation to the matters in dispute and require them to produce before the tribunal all books, documents or things within their possession.”[6] Further, the Act empowers the arbitrator(s) to determine the time period for the delivery of pleadings, discovery, calling of witnesses and agreement between the parties on the issues in dispute[7] and many more.
Further, arbitrations can be governed by specific sets of rules, such as the Arbitration Foundation of South Africa (AFSA) or the Association of Arbitrators Rules. Both of the latter bodies aim to promote the use of arbitration in South Africa and have their own sets of rules which differ significantly. Parties can elect, in the arbitration clause of their agreement, to adopt a specific set of rules as such previously mentioned and then will be bound to utilise an arbitrator who is accredited by the relevant organisation.
With reference to court proceedings, these are generally open to the public and governed by specific court rules that outline detailed procedures, enabling the parties to present their facts, evidence and arguments before a court of law. The court rules cover various aspects such as the initial issuance of documents, the prescribed forms to be used, the timeframes for the filing of documents, the process for inspecting and producing documents and many more. Non-compliance with the rules can result in additional procedural disputes.
Importantly, arbitration proceedings are not subject to appeal on the merits on the decision but are in limited instances subject to review, such as reviewing whether the arbitrator handing down the arbitration award made an impartial decision. The decision of the arbitrator(s) is normally final, whereas the decision of a court is subject to appeal.
As a general rule, parties who have agreed to resolve their dispute through arbitration are not permitted to approach a court. However, there are circumstances whereby the parties may approach a court. These circumstances include the unenforceability of an arbitration award because the arbitrator(s) do not possess the powers to enforce such an award or to determine the validity of an arbitration agreement.
In conclusion, there are notable differences between arbitration and litigation. Often, people are not knowledgeable about other forms of alternative dispute resolution mechanisms and run straight to court with their disputes. However, arbitration may be the faster and more flexible approach that parties need to enforce to resolve their dispute, depending on the circumstances of the matter. It is prudent to consult an attorney au fait with both litigation and alternative dispute resolution to see which route will provide you with the best outcome.
[1] Wiese T Alternative Dispute Resolution in South Africa: Negotiation, Mediation, Arbitration and Ombudsmen (2016) 1. [2] An arbitrator(s) can be chosen indirectly, for example, if the parties agree in their arbitration agreement to have a neutral third party, like an arbitral institution (such as AFSA), appoint the arbitrator(s) for them. [3] Wiese T Alternative Dispute Resolution in South Africa: Negotiation, Mediation, Arbitration and Ombudsmen (2016) 126. [4] Wiese T Alternative Dispute Resolution in South Africa: Negotiation, Mediation, Arbitration and Ombudsmen (2016) 126. [5] Wiese T Alternative Dispute Resolution in South Africa: Negotiation, Mediation, Arbitration and Ombudsmen (2016) 126. [6] The Arbitration Act 42 of 1965, section 14(1)(b)(iii). [7] The Arbitration Act 42 of 1965, section 14(1)(a)(ii).While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither writers of the articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes and should not be construed as legal advice.
Add a Comment