While going to Court may be the de facto dispute resolution method, litigation may not always be the ideal answer to disputes arising in today’s business world.
Parties to a commercial transaction will naturally seek for sensible reasons to settle disputes, to prevent unnecessary risk of escalating the dispute. They settle because there are sound commercial reasons for doing so, usually based, at least in substantial part, on a careful analysis of the strengths and weaknesses of the case.
Types of Alternative Dispute Resolution (ADR)
Besides litigation, parties may opt to resolve their disputes using one of the following methods:
Arbitration
The arbitration process is very similar to the litigation process, except that arbitration is conducted in private and the parties get to choose their arbitrator(s).
The arbitrator, who is a neutral third party, shall decide on the dispute between the parties upon hearing the facts, law and evidence by the parties. The decision given by the arbitrator, known as an award, is binding between the parties and can be enforced by court. The relevant legislation for arbitration is the Arbitration Act 2005.
Negotiations
Roger Fisher and William Ury in ‘Getting to Yes- Negotiating an Agreement Without Giving In’ described it as “a back-and-forth communication designed to reach an agreement when you and the other side have some interests that are shared and others that are opposed.”
This process normally happens concurrently with the litigation process and is usually conducted by the lawyers representing each party.
Conciliation
Conciliation is a process similar to mediation, in which it is a voluntary and private process, where a third party would assist the disputants negotiate their differences.
However, the conciliator plays an active role in the conciliation process. They usually offer their advices and possible solutions to the dispute at hand and propose a settlement by taking into account not only the legal positions of the parties, but also their commercial, financial and personal interests.
What is Mediation?
Mediation is a voluntary and private dispute resolution process in which a neutral person facilitates the negotiation between the parties in order to achieve a settlement agreement.
Mediation requires participation of all parties in order for the outcome to be satisfactory to all the parties. Therefore, either of the parties are free to walk away anytime during the mediation process, and the mediation ceases then. Further, in agreeing to mediate, the parties are not bound to achieve a settlement. Where there is no agreement between the parties, the case will proceed to the next stage in the litigation process.
The entire mediation process is conducted in private and on a without prejudice basis. This means that all the information made available to the parties during the mediation process are strictly confidential and shall not be used in court in the event there is no settlement and the matter proceeds to the court. This enables parties to negotiate freely without the fear that any disclosure or offer made in the process would be used against them later.
The mediator serves as a facilitator of the negotiation process between the parties and thus should be neutral and impartial. His/ her role is to help the parties work towards a consensual resolution of the dispute and this may require him/her to be a devil advocate at times, asking difficult questions but this does not in any way allow him/ her to make any decision that binds either of the parties.
Mediation in the United Kingdom
Since the Woolf Reforms, the Civil Justice System in the UK has been overhauled and the Courts in the UK have been required to encourage and promote settlement between parties at as early a stage as possible. In line with the spirit of the Civil Procedural Rule (CPR) in the UK, in which the courts are to deal with cases justly and at proportionate costs (CPR1.1), the Practice Direction- Pre-Action Conduct and Protocols requires parties to consider settlement through ADR, frequently mediation, and litigation should be a last resort. The courts may require a party to provide reason for refusing mediation and will impose costs sanctions on parties who unreasonably refuse to mediate; an adverse costs order may be imposed by the Court even if the party wins the case (Halsery v Milton Keynes NHS Trust [2004] EWCA Civ 576).
It has widely been discussed as to whether the spirit of the CPR together with the courts’ attitude suggest that mediation should be made mandatory, and there are arguments both for and against. However, the language of the CPR maintains that the parties ‘must consider’ and not obliged to settle.
Mediation in Malaysia
In Malaysia, the mediation process is governed by the Mediation Act 2012 and parties may refer to the Malaysian Mediation Centre. However, mediation is more commonly used as an alternative dispute resolution method in family and employment cases and is often overlooked as to what could be derived from the process in commercial dispute resolutions.
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