Prof. Mervyn King, the well known advocate, judge, chairman of listed companies as well as a CEO of a listed company once said ”In order for directors (managing members) to discharge their duty of care to a company they have to ensure that a company has an adequate and effective dispute resolution clause in their customer, employee and supply contracts. It is in the best interest of the company that disputes are resolved with its stakeholders as expeditiously and efficiently as possible as well as being cost-effective”. (AFSA @ Work, June/July 2016)
A dispute could arise between partners of a business, factories, medical practices etc, between customer and supplier or between company and an employee.
It is importance to ensure that the procedure one is going to follow in the event of a dispute is laid down beforehand. Fighting about the procedure afterwards can be very expensive and drawn out.
In order to receive professional assistance, we recommend that in all contracts either the name of the Mediator / Arbitrator to be used be stipulated or a general comment be made that an AFSA registered Mediator / Arbitrator would be called upon in the event of a dispute.
By including a paragraph that ADR will be used in the event of a dispute, and who will be the appointed person, does not say there will be a dispute, but only pave the way for a smooth dispute resolution should it arise.
I would like to remind you of the advantages of ADR:
- It is a more flexible and informal system to litigation
- The process is a confidential one, not like litigation which could be in an open court.
- The parties determine the outcome in a mediation process.
- There is a relatively high rate of settlement
- There is a high rate of compliance with the terms of the settlement.
- The ADR is normally cheaper than litigation
- The process is much faster than litigation (weeks vs. years)
- Mediation preserves the existing relationship between the parties, where as litigation tends to polarize it.
We would like to point out that the outcome of mediation and arbitration can be made a ruling of the court, i.e. it can be enforceable like a court ruling.