Shun litigation, embrace arbitration

Disputes exist wherever opposing rights or interests in human interaction elude management.

At the onset, the persons in dispute have a significant degree of control on the process for resolving their differences and possible solutions.

But as it persists and a stalemate created, it becomes imperative that assistance be drawn from others. The degree of control is then transferred from the belligerents as third parties acquire power in its resolution.

Whether by default or design of the system, in Kenya, we place emphasis on court litigation, where the judicial authority assumes an overwhelming control of the process and outcome.

More time is invested and costs incurred with the outcome a potential point of future dispute and the relationship severed.

Alternative dispute resolution (ADR), however, is a method of dispute resolution that reserves greater control over the process and outcomes to the actual belligerents.

But since no dispute is the same as the other, different methods are available to the parties.

STRUCTURED DISCUSSIONS

Viewed as a continuum, the options range from the least formal and non-adjudicative to formal-adjudicative methods — including negotiation, conciliation, mediation, adjudication and arbitration. I briefly describe three of the more commonly used ones.

Negotiation is a process by which two parties communicate with each other in order to reach an outcome on which they mutually agree.

Successful negotiations are usually achieved when conducted face to face by empowered, suitably experienced and knowledgeable practitioners.

Depending on scale and complexity, it is generally recognised that successful negotiations may be conducted by a team rather than on a one-to-one basis. Participants are encouraged to adopt a common philosophy of principled negotiation.

Separate relationship issues from substance and deal with the latter by focusing on interests, not positions; invent options for mutual gain; and use independent standards of fairness to avoid a bitter contest of will.

Mediation involves structured settlement discussions with flexible procedural rules facilitated by a neutral third party with no decision-making power.

Helping parties to identify the genuine issues that divide them, and their underlying interests, is a key part of the mediator’s role.

MORE FORMAL

It is particularly effective where there is an ongoing commercial relationship between the parties but can assist parties in virtually all disputes — except where one of the parties requires an outcome or remedy that only a court or an arbitral tribunal can provide.

Even where mediation does not result in a settlement, it can enable parties to identify and focus on the key issues between them and also their respective underlying interests.

Parties may negotiate or mediate more than once in the life of a dispute before reaching an acceptable resolution.

Arbitration is a doorstep away from the court, hence more formal and adjudicative than the other methods.

A private adjudicative dispute resolution process is based on a contractual agreement to submit the relevant dispute to arbitration. It usually results in a binding award by the arbitrator or arbitral panel.

The arbitrator acts as an independent, impartial and neutral third party, and the process is governed by the arbitration agreement signed by the parties and the rules of the arbitral institution (if any) agreed by them.

COSTLY SITUATION

Arbitral awards can rarely be appealed, unless permitted by the agreement. Whichever the dispute, a resolution with finality is important to the parties.

But sometimes, though not always, one or the other party may have a less-than-genuine interest in a resolution. This could be influenced by factors such as loss of reputation, perceived power relationships and risk of financial loss.

Despite these bottlenecks, the opportunity to achieve a speedy, more acceptable outcome and preserve a relationship outweighs the risks.

There is a public good in resolution of disputes that would otherwise withhold resources from the economy.

Every time a dispute remains unresolved, it costs money, man-hours, delayed execution of transactions and potential fallout in relationships.

Abraham Lincoln said: “Discourage litigation. Persuade your neighbours to compromise whenever you can. Point out to them how the nominal winner is often the loser — in fees, and expenses, and waste of time.”

The next time you are involved in a dispute, elect with appropriate advice one or a combination of these less conflictual methods.

Mr Ngugi is the registrar/CEO, Nairobi Centre for International Arbitration. [email protected].