ALTERNATIVE DISPUTE RESOLUTION (ADR) vs. LITIGATION

ALTERNATIVE DISPUTE RESOLUTION (ADR) vs. LITIGATION:

An avenue available to parties in commercial contracts

“The practice by parties to an agreement for a dispute arising out of the agreement to be referred to a third party, especially an expert in the technical field of which the agreement or undertaking is concerned, is a common feature in resolution of commercial disputes. It is adopted because such dispute resolution tends to be less expensive and faster than a judicial process. The parties often even set down the timelines for an expeditious disposal of their dispute, a power they do not enjoy in the court litigation. Because of the expertise in the field, the third party tends to easily grasp the issues and context of the disputes and this is intended to foster a business-friendly environment and substantive resolution of commercial disputes without being mired in legal technicalities...” Reads an extract from the Court of Appeal judgment in Your Friend (Pty) Ltd v Time Projects (Botswana) Pty Ltd [2018 All Bots 179 (CA)].

The above cited extract fortifies the position held by all those who are of the view that it is not every dispute that has to reach a court of law where strict adherence to the rules of procedure and evidence is expected, (at the expense of substance at times), but instead an alternative dispute resolution may sufficiently avail as a better solution.

This has attracted an interrogation, for the benefit of any contractant, of the pros and cons of ‘Alternative Dispute Resolution’ approach.

THE PROS AND CONS OF ALTERNATIVE DISPUTE RESOLUTION

 PROS

• Choice an of Arbitrator /Adjudicator – unlike in litigation where neither party has a right to choose a judge in their dispute, in ADR, choice of an Arbitrator/Adjudicator is done by the parties themselves either specifically or by reference to chosen qualities.
• Time – in addition to the fact that ADR is generally faster by virture of controled engagement by arbitrator/adjudicator in dispute resolutions, unlike Courts of law, parties actually are at liberty to agree and stipulate the timelines within which the process has to be completed, an option not available in litigation.
• Costs – due to expeditious and less technical nature of ADR, costs are usually lower than in litigation.
• Flexibility – the process is less strict and parties set their own rules regarding discovery, hearing and the time limitations.
• Confidential – the process is not open to the public unlike litigation and is only attended by affected parties.
• Finality – there is no right to an appeal and the setting aside envisioned is limited to certain restricted grounds.

CONS

• No right of Appeal – Parties who feel aggrieved by the outcome cannot appeal, although review process on limited grounds is permitted.
• Unpredictable – The outcome of an arbitration process are unpredictable due to their flexibility nature which may sometimes allow use of eccentric solutions by arbitrators/adjudicators

 NATURE AND EFFECTS OF ARBITRATION CLAUSES IN COMMERCIAL CONTRACTS

Parties to commercial contracts can base their permission to subject themselves to arbitration in two set-ups; (a) entering into a binding arbitration agreement and (b) entering into any other type of agreement and incorporating an arbitration clause therein.

It is imperative to note that once the parties have agreed to subject their disputes to arbitration then the forum is set and no room is left for deviation. When adverting to the effect of an arbitration agreements and/or clauses in a contract, the court in the case of B.M. Packaging (PTY) Ltd v. P.P.C. Botswana (Pty) Ltd [1998] BLR 309 posed that where parties have committed themselves to a specific dispute resolution process then neither party is at liberty to proceed directly to a court of law instead.

In as much as this may sound like an open and shut case, this is not really the case as in a number of cases it has been held that the arbitration clauses were inadequate and caused uncertainty as to whether they ousted the court’s  jurisdiction or the disputes at hand were ones envisaged in the clauses. This would then call for the Courts to embark in an interpretative exercise.

Speaking to the interpretation of arbitration clauses, in the case of Albetrade (Pty) Ltd v. Itirelelng CJSS and Others [2001] 1 BLR 283, the pen of the erudite late Nganunu CJ (as he then was) pointed that the Court ought to look into what has to be referred to arbitration and what the parties really intended to refer for arbitration as a dispute from the arbitration clause itself.

The above leads to the conclusion that arbitration contracts/clauses can be technical and would require legal counsel to be sought before entering into such agreements or drafting and infusing an arbitration clause into the contracts.

 ENFORCEABILITY OF THE ARBITRAL AWARDS

Once the process is done an arbitral award is issued by the Arbitrator. Arbitral awards are enforceable and binding upon the parties equally like court judgments.

Thus the Botswana Court of Appeal in the case of National Amalgated Local and Central Workers’ Union v. Botswana Power Corporation and Another [2010] 1 BLR 265 opined that:

“Whenever two parties agree to refer a matter to a third party for a decision, and further agree that his decision is to be final and binding on them, then, so long as he arrives at his decision honestly and in good faith the two parties are bound by it.”

With that being the case, the parties are therefore guaranteed to get an enforceable arbitral award.

CHALLENGING ARBITRAL AWARDS

Arbitration in Botswana is regulated by statute being the Arbitration Act [Cap 06:01] and Section 13 (2) of the said Act provides restricted grounds to be relied upon when one challenges an arbitration award. The provision empowers the Courts to set aside an arbitration award only where the arbitrator has misconducted the proceedings, or the arbitration award has been improperly procured. See Toys Construction (Pty) Ltd v. Sifelani Thapelo and Another CACGB-112-16.

Any ground outside the purview of the cited section would never survive to see the light of the day.

CONCLUSION

Alternative Dispute Resolution presents itself as a viable option in dispute resolution. Be that as it may, ‘arbitration clauses or contracts’ are so technical and would require the technical knowhow. There is a need to engage legal experts for drafting/review of such contracts.

If you have interest in an in-depth discussion as well as legal advice with respect to the law as it relates to Alternative Dispute Resolution, please feel free to contact us at info@gobhozalegalpractice.co.bw

Tel: 3116371

Disclaimer: This article is for information purposes only and should not be taken as legal advice.