Introduction to Commercial Law. Discuss the advantages and disadvantages of resolving a civil dispute through 1. Litigation 2. Arbitration 3. Mediation 4. Tribunal

Litigation involves various stages. Legal proceedings are initiated by an originating process which is followed by the defendant’s response (he normally enters an appearance if he wishes to dispute the claim), pleadings, discovery of documents, directions by the court, interlocutory applications for interim or final relief and, if the case has not been resolved by settlement (normally through negotiation or mediation) or terminated by summary or other form of interlocutory judgment, the action will be set down for trial.

 

The advantages of litigation are that the process is open and transparent. It is based on the strict, uniform compliance with the law of the country.

Resolution is final and binding. Parties are obligated to respect the judgment and it is enforceable. However, appeals are possible for litigation. Appeals also allow the reversal of incorrect decisions. Sometimes mistakes are made or evidence that was clearly prejudicial was allowed, thus tarnishing what otherwise may have been a just outcome.

Sometime it may be the only choice left after all else fails.

The disadvantages of litigation are manifest. All court proceedings and records are open to the public which might cause some embarrassment to parties if certain facts about them are disclosed or publicized. It can take a long time before a court gets to the hearing of a case after the original dispute occurred.

Litigation encourages a desire for vindication and public acknowledgement of a wrong suffered. Ultimately there is only one winner and one loser based on the judge’s decision, which is not the preferred outcome for parties having a high degree of mutuality and interdependency.

The complex procedures involved in court litigation means heavy legal costs which may be unsustainable for private individuals and small companies due to the court fees and hiring of solicitors and often barristers.

In litigation, a judge may not have the necessary qualifications and technical expertise to hear a case. Parties may come out of the courtroom feeling they may not have had a fair trial because of this.

Arbitration

Arbitration is a formal process for the resolution of disputes where the hearing is in private in front of a nominated third party (the arbitrator, arbiters or arbitral tribunal) who makes a binding decision (the award) which the parties agree to be bound.

The arbitrator is not a court judge but rather an industry-specific expert or otherwise a well-qualified individual who both parties agree is suitable for resolving their dispute. Arbitration is today most commonly used for the resolution of commercial disputes, particularly in the context of international commercial transactions and sometimes used to enforce credit obligations.

Parties are attracted to the less formal nature of arbitration which encourages a speedier and hence less costly way of settling disputes. The flexibility of arbitration extends to the freedom to choose the venue of the arbitration whether in the contract’s arbitration agreement itself or at a later stage.

Parties who desire more control of the setting in which the dispute is conducted as opposed to allowing the court system to determine would prefer arbitration.

An arbitrator may have or members of a tribunal may consist of those who have the necessary qualifications, technical expertise or even intrinsic knowledge to hear a case.

There is an implied right of privacy in the arbitration process keeping matters private between the parties involved where firstly outsiders do not get access to any potentially sensitive information and secondly the parties to the arbitration do not run the risk of any damaging publicity arising out of reports of the proceedings.

However, arbitration can be costly if the parties select a very eminent arbitrator and engage expensive lawyers or other professionals to assist their case or when there is a panel of arbitrators. Legal aid is generally not available for arbitration too.

The procedure and process used in an arbitral process can be rather complex too. It is possible to appeal an arbitrator's decision, thou not so likely and often, particularly if the dispute relates to an important point of law.

Since arbitration decisions are not public, there is a lack of access to precedents on previous arbitration decisions. An arbitrator may make an award based upon broad principles of “justice” and “equity” and not necessarily on rules of law or evidence.

Mediation

It is an alternative dispute resolution (ADR) process in which two or more parties meet with a mediator to resolve their differences and come to an agreeable solution to the problem. The mediator (a neutral third party) hired by the group involved, assists the parties to negotiate their own settlement. The mediator does not render a verdict in favor of one side or the other. In some cases, mediators may express a view on what might be a fair or reasonable settlement, generally where all the parties agree that the mediator may do so. During the process, the decision is made by the parties involved and no one else.

Since an average mediation takes a single day, the efficacy of this method is much quicker. It is less costly and less formal than litigation or an arbitration hearing and thus it saves money as well as time. 

It allows the parties, not the court, to make decisions. Thus there is complete control by both sides. In addition to having more control over the resolution, there is also a greater confidentiality in keeping the issues of conflict out of the courts. 

All mediations can be held in private and can ensure the confidentiality of proprietary information as well as trade secrets. This allows both parties to openly discuss issues without the possibility of public exposure since the hearings are not made public.

A potential drawback to mediation is that if mediation fails, the parties may have wasted time and money on the process without achieving a settlement and still face the expenses of a trial.

Mediation can be a problem too if one or both parties are withholding information as mediators are usually good at exploring the parties' needs, goals, and possible solutions, but they do not have the legal resources of a lawyer to look for hidden information.

Another disadvantage of mediation is that either party can withdraw from the proceedings at any time. This means that even the party that is ‘at fault,’ can withdraw if they are not happy with where the mediation process is headed.

No decision can be formed if either one party does not agree to the terms, thus a resolution may not be reached.

Tribunals

Tribunals are judicial assemblies, set up by various Acts of Parliament as an alternative to the court system, to rule on the operation of the particular schemes established under those Acts. Tribunals are less formal than courts and are usually a quicker and cheaper way of resolving disputes. Often people involved in a case at a tribunal will be able to represent themselves.

Because the court is not required in most cases, the speed of the tribunals is much quicker as many are dealt with within a day and more to the point. There is no waiting around for court dates and it is more time efficient.

It is simple and cost effective because of the simplicity involved and the costs saved, each party usually pays their own costs. In some cases there are no fees whatsoever, which make administrative tribunals accessible for all, regardless of wealth.

Hearings may be kept private and thus there is no need to for announcement or problems to be aired in public. Discussions and writings are kept relatively informal and free from technicality and therefore do not single out people with a lesser education.

Very specific panels or tribunal members with expertise in the relevant subject area are set up to deal with a particular subject or industry. They possess a depth of knowledge of that area that judges in ordinary courts could not match.

However, there may be a lack of openness as some tribunals are held in private which can lead to the suspicion about the fairness of the decision as reasons for the decisions are not always given.

There is an unfair imbalance between represented and unrepresented parties when an individual who are not represented and cannot get legal aid has to come up against a rich corporation or business where they employ skilled representation for the case.

There is no absolute right to appeal from a tribunal. Such rights exist only when laid down by statute and some tribunals offer no appeal rights at all. Appeals when allowed to the High Court can be expensive and complex.

Conclusion:

In cases where one party wants to enforce and have a legal standing agreement, litigation would be adopted. This would ensure that all findings and ruling are properly documented and made public. This approach is more commonly used by the government, statutory board or banks.

For companies which are more specialized in a certain industry which requires special knowledge or expertise, ie. Biomedical, petrol-chemical etc, arbitration would be the approach most would use as it would be difficult and tedious to file the findings in court and translate it to a way where judges are able to understand and comprehend the technicalities terms. As most arbitration tribunals consist of professionals from different fields or industries thus it would be easier for companies to file the disputes by engaging the relevant arbitrator.

Mediation is more commonly used when it is either a family or small company dispute. As this requires no judges or court, it is more cost effective and time saving. It also ensures the privacy and confidentiality for both parties as most do not wish to have it publicized especially for family disputes concerning divorces.

Tribunal allows one party to file a claim against another party for monetary damages. This allows the claimant to be able to recover most of the compensation as he/she does not have to hire a lawyer or bear any court fees.

Reference:

Singapore Academy of Law        

The Attorney-General’s Chambers