Hilary Muza 
Arbitration is the out-of-court resolution of a dispute between two business parties by an unbiased third party, the arbitrator. Arbitration may appear to the uninitiated as the less appealing relative of litigation.
Nonetheless, because of its speedier resolution, cheaper overall cost, and binding ruling, arbitration should be the preferable choice for corporate clients.
Arbitration clauses are frequently included in commercial contracts, stating that if a dispute arises, the parties will settle it through arbitration.
These clauses can be clear-cut: both parties agree that they will resolve disputes in front of an arbitrator and obey its guidelines.
Issues involving govern the time duration, types of damages to be awarded, discovery limits, and appellate rights are included in more comprehensive arbitration clauses.
What is litigation
Why do parties still go to court when all of the evidence points to arbitration as the best conflict resolution choice for corporates?
If the answer is litigation, who wins in the arbitration vs. litigation debate? If one of the parties refuses to proceed to arbitration, or if it is not expressly stated in the contract, litigation is the only option.
It is a centuries-old form of dispute resolution: it takes place in a courtroom, in front of a judge. It can be unpleasant, inconvenient, and costly, but it is an effective way to settle a dispute.
Comparison between the two
The key comparative advantage of litigation is the ability to challenge the decision in an appeal.
In arbitration, the result is often binding and the parties have little opportunity to oppose a judgment; in litigation, there are numerous levels of appeal (which can be both a reassurance and a cost-prohibitive provision.)
Ideally, most lawsuits are settled without going to trial. It’s been claimed that a bad settlement is preferable to a good litigation. Since a litigation outcome cannot be guaranteed, settling a matter may be the best and most efficient approach to resolve the disagreement.
Binding decisions
The ruling of an arbitrator is generally enforceable upon registration as an order of the High Court. While a binding decision helps both parties move forward, if a party feels they didn’t get a satisfactory resolution, there’s little they can do. If there is no evidence of prejudice or fraud on the part of the arbitrator, their decision is often regarded as final.
Privacy
The fact that the hearing is held confidentially is a clear advantage of arbitration. There is no public court record. This protects corporate clients’ trade secrets or other intellectual property that may be critical to their operations. Third parties (including the press and competitors) are not permitted to attend the hearing. Yet, while privacy is an important aspect of arbitration, secrecy is not guaranteed. The laws of the jurisdiction of the arbitration and the norms contained in the business contract govern confidentiality.
Flexibility
One of the core differences between arbitration and litigation is that the former is more rigid and linear in that it places the reliance on strict rules of procedure and commonly accepted practice before the courts. Arbitration on the other hand, allows parties to be more flexible in their approach to a resolution to the dispute. For instance, in the case of Durco (Private) Limited v Dajen (Private) Limited, it was accepted that parties to an arbitration can agree to set aside an arbitral award and agree to have the matter submitted to arbitration afresh.
In this case, Durco wanted to sell maize to Dajen through its broker Atrax (Private) Limited. Dajen however, refused to take delivery of the maize, arguing that Atrax did not have authority to act on its behalf. This meant that Durco had to sell the maize to a third party at a loss. Durco accordingly sought damages against Dejan. In the initial arbitration, it was held that Atrax did not have authority to conclude the contract on its behalf.
However, this outcome came with the implication that if Durco sued Atrax and it was held that it acted without due authority, then Durco would have no recourse. Further, Durco would also have no recourse against Dajen because it would not have been a party to the second arbitration. As a solution, it was agreed by the parties that they set aside the first arbitration award and resubmit the matter for arbitration, this time including Atrax as the third party.
In the second arbitration, Atrax was found to have had authority to act for Dajen, meaning that Dajen was liable to Durco. The matter eventually came before the Supreme Court, where Dejan argued that the second arbitral award was invalid. The Supreme Court however, accepted the argument that flexibility is a defining feature of arbitration and if the parties agree to a certain procedure, then that procedure becomes binding on the parties. This is different from litigation where the parties are bound by a predetermined set of rules regarding evidence and procedure. Flexibility makes arbitration speedier and more solutions-based in a manner that the parties understand and appreciate.
In conclusion, neither arbitration nor litigation is a pleasant exercise. After all, it was a conflict that brought the parties to a formal resolution. Yet not being able to resolve a dispute at all is even worse.
Clients deserve the most deliberate, effective method of resolving business issues, and dispute resolution experts have the knowledge to help them through the process.
Muza is a duly admitted lawyer with expertise in business law, labour law and commercial litigation. He writes in his personal capacity. For feedback, email him at hilarykmuza@gmail.com or call on +263719042628.
