Choosing a Dispute Resolution Mechanism/Process: The Pros and Cons

By Professor Offornze D. Amucheazi SAN, FICMC, FCArb

Introduction

• Dispute is inevitable in human relationships; resolving them is inescapable.
• Various options in dispute resolution processes – binding, non-binding; formal, informal; Public, Private; domestic, international; adjudicative/consensual.
• Four main dispute resolution mechanisms – Litigation, Arbitration, Mediation/Conciliation and Negotiation.
• Choice of Dispute Resolution Mechanism/Process determined by a wide array of factors including-
  • Type of Dispute
  • Duration
  • Cost
  • Publicity of process/mechanism
  • Location of Parties
  • Appeal Process

Forms of Dispute Resolution Mechanisms/Processes

• Binding/Formal-
  • Litigation
  • Arbitration
• Non-Binding/Informal-
  • Negotiation
  • Mediation/Conciliation
• Public- Litigation
• Private – ADR (Arbitration, Mediation, Conciliation, Negotiation)
• Adjudicative – Litigation, Arbitration
• Consensual- Mediation, Conciliation, Negotiation

Features of Dispute Resolution Mechanisms/Processes

LITIGATION– Formal, adjudicative, binding and public.

• Judges are neutral and adjudicative (i.e. reach conclusions on rights/wrongs).
• Proceedings are public (no confidentiality).
• Procedures are fixed by law, so parties have no control over the process
• Time-consuming and costly.
• Covers all types of disputes.
• Judgments are binding though subject to appeal (where available)
• ARBITRATION- Formal, adjudicative, binding and Private
• Alternative Dispute Resolution (ADR) processes protected by law.
• Arbitrators are neutral and adjudicative.
• Procedure determined by the parties.
• Proceedings/decisions are private and confidential.
• Usually time and Cost saving
• Does not cover all types of disputes (arbitrability).
• Awards/decisions are final and binding, not subject to appeal (except impeaching the award).
• MEDIATION/CONCILIATION – Informal, non-adjudicative, non-binding and Private
• ADR process generally not covered by statutes.
• Mediators are non-adjudicative (consensual)
• Procedure is informal and decided by the parties.
• Proceedings are Private and Confidential.
• ‘Decisions’ are not imposed/non-binding terms agreed by the parties.
• Time –saving and more cost-effective compared to Arbitration
• Preserves relationship/cordiality between disputing parties.
• NEGOTIATION- Informal, non-adjudicative, non-binding, private.
• Direct meeting between disputing parties to resolve dispute.
• No neutral third party involved.
• Private and confidential.
• No ‘decisions’ are imposed; ‘terms’ agreed by the parties.
• Time –saving and more cost-effective compared to Arbitration.
• Preserves relationship/cordiality between disputing parties.

Why Alternative Dispute Resolution?

Factors to Consider in Choosing a Dispute Resolution process

• 5 key factors to consider-

1. Type of Dispute
2. Litigation covers all types of disputes, compared to ADR processes.
3. Some disputes require binding processes (Litigation, Arbitration)
4. Technical disputes are better off with private mechanisms with experts as adjudicators (arbitration)
5. Complicated disputes involving 3^rd parties are not suitable for ADR mechanisms.
6. Disputes involving interpretation of statutes/ constitutional rights are more suitable for litigation.

2. Confidentiality/Party Autonomy

• Parties desirous of confidentiality should adopt the private processes (Arbitration/Conciliation, Mediation and Negotiation).
• Litigation is a public mechanism and lacks confidentiality.

Party autonomy is only possible in the private processes of ADR mechanisms.

3. Time/Costs

• ADR processes are generally faster in concluding than litigation.
• ADR processes are also generally more cost-effective than litigation.
• Parties are able to determine the cost of the private resolution mechanisms in advance of commencing the process.
• Time-conscious disputes require quicker resolution mechanisms.
• Parties desirous of controlling the costs of dispute resolution are better off with the private resolution mechanisms.

4. Bindingness of Decisions

• Parties seeking binding resolution of disputes are better off with the adjudicative, binding processes (litigation, arbitration).
• Bindingness makes enforcement easier and less complicated.
• Prevents parties from abandoning the proceeding to stall the dispute resolution process.
• Enables the assertion of legal rights/responsibilities based on binding declaration by a court/arbitrator.

5. Location of Parties/Maintaining Relationship

• Where parties are located in different countries, private processes may be preferable to allay concerns over domestic courts by foreign party.
• Relationships are better preserved post-dispute resolution by the private dispute resolution processes.

Pros and Cons of Dispute Resolution Mechanisms

LITIGATION

PROS

• Formal — less opportunity for abuse of process
• Parties compelled to attend
• Institutionalized process allows safeguards
• Final decision binding
• Legal precedent

CONS

• Time consuming
• Parties not in control of process or decision
• Public process
• Expensive process
• Onerous evidentiary burden
• Post-resolution relationship jeopardised.

ARBITRATION

PROS

• Party autonomy
• Technical Expert as adjudicator
• Confidentiality
• Formality/mandates attendance
• Less time consuming
• Final decision binding
• Less expensive
• Preserves parties’ relationship post-dispute resolution.
• CONS
• Not suitable for all types of disputes (arbitrability).
• Parties able to delay proceedings through non-cooperation.
• Lack judicial powers of sanction like courts.
• Right of appeal against awards/decisions limited.
• Can sometimes become as technical and time-consuming as litigation.

MEDIATION/CONCILIATION, NEGOTIATION

PROS

•  Speedy resolution/less stressful
• Confidentiality
• Party autonomy over process.
• Preserves parties’ relationship post-dispute resolution.
• Flexibility
• Ability to select technical expert to resolve dispute (mediation).
• Cost effective.
• CONS
• Recalcitrant party can frustrate proceedings without consequences
• Lack of bindingness of process/decisions
• Little check over power imbalances between the parties.
• Lack powers of compelling attendance/witnesses/documents.
• Not suitable for cases where legal precedent is sought.
• Depends majorly on good-faith of disputing parties.

CONCLUSION

• Choice of dispute resolution mechanism/process should be carefully considered by the parties (preferably before a dispute arises) taking the relevant factors into consideration in order to achieve an effective resolution of their dispute.
• Need to preserve relationship post-dispute resolution should be given major consideration in choosing a dispute resolution mechanism.
• Also, the technicality and time-sensitive nature of disputes should be given significant weight in choosing an appropriate dispute resolution mechanism.
• Mediation/Negotiation can be/should usually be adopted as a first step in dispute resolution before proceeding to the formal/binding/adjudicative processes where these fail.