Why the courtroom may not be the first place for commercial dispute settlement

It is without a doubt that for many people the court remains the most viable avenue for the settlement of disputes, and this is reflected in the hundreds if not thousands of legal suits that are commenced at the various courts across the country over various claims – commercial, property or land, family and matrimonial, constitutional, or administrative.

Whereas this may be demonstrating faith in the judiciary and the judicial system as the most viable avenue for the settlement of disputes, experiences from our courts however suggest that the court system is not necessarily the best, particularly as the first option for certain categories of cases, especially commercial ones.

The court system despite its definitive benefits, has its own challenges. The challenges of delays, formality, cost, and the difficulties with the enforcement of judgments of the court among other factors make the court system not the most attractive first option for businesses seeking the settlement of commercial claims with speed, especially in informal settings where relationships are key to business survival. It is therefore expected that whatever steps that businesses take, they must ensure that they preserve relationships and encourage the participation of all parties in the process to achieve lasting resolutions to commercial disputes.

Lawyers on a daily basis are exposed, in the most astonishing manner, to the failings of the court system which makes it exceedingly unattractive to businesses. In this piece, I will take a look at some other options businesses can pursue in the settlement of commercial disputes, and which may produce results, which may in fact be similar, if not superior to a settlement achieved through a court action in Ghana.

THE STATE OF COURT-CONNECTED SETTLEMENTS

Firstly, a court-connected settlement (litigation) is sometimes time-consuming and expensive – costly. This has become the case because the parties have no immediate control of the processes and even the court may not be able to fast-track the case in the manner that it may genuinely desire to, because the court, like the parties, is bound to follow the rules of procedure – law and decided cases applicable to the particular proceedings.

The mandatory requirement to comply and follow established rules leads to delays and costs sometimes in simple matters. And in complex litigations, the related cost and time may be amplified with opportunities within the rules of court. Consequently, a party is expected to commit resources to the dispute resolution process as long as it remains unsettled. For small businesses and startups, this level of expenditure cannot be supported, thereby increasing the need to explore other options for lawful settlements of disputes.

Also, the unpredictable and uncertain nature of court outcomes, which sometimes results in a party not securing the awards or reliefs they asked from the court, may not be in the interest of a commercial party. Court cases are resolved not merely based on settled laws and precedents but on other variables, including legal technicalities and how legal representation was pursued during the trial.

A party seemingly having a good case may not be victorious due to for instance how the issues were framed and to some extent the court’s appreciation and application of the law to the set of facts put up by the parties. All of these factors make it exceedingly difficult and, in some cases, impossible to predict what the outcome of the case may be. And sadly, these factors may unfortunately be out of the power and control of the parties and the court itself which makes litigation the least appropriate method for resolving commercial disputes.

Further, litigation or court actions have the tendency to strain business relationships, thereby reducing, if not eliminating the possibility of the parties engaging in any future business. Litigation by nature is acrimonious, especially where the parties have taken entrenched positions and are unwilling to cede in the mutual interests.

Flowing from this, are the display of emotions and passionate determination to seek an exclusive outcome sometimes to the detriment of the underlying business relationships. The result is a situation where the parties may not be willing to work with each other again due to unpleasant past experiences which may have created distrust and hostility between the parties.

Additionally, litigation may expose the business of the parties to the public and may generate unwanted publicity which may negatively affect the image of their related company and brands. Proceedings in courts are held in public subject only to the limited exceptions provided by law.

Therefore, proceedings in court carry with them the risk that embarrassing revelations concerning the business and its officers may become public with negative consequences for the business, its officers, and brand. The reputation of the company and its operations may be damaged by the revelations and outcomes which were made public in the course of the trial of a case.

Finally, litigation may not offer many flexible outcomes to businesses in an attempt to settle the resulting dispute. Although there are mechanisms within the court system that encourages the parties to resolve their disputes, often under the supervision of the judge and other court-appointed experts, these are not mandatory and hardly are able to achieve maximum results.

In instances, a meeting between the parties with the assistance of a judge can go a long way in resolving the dispute between them. But these interventions constitute just a few exceptions to the general rule, which is that the majority of commercial cases in our courts are resolved through trials.

SOME ALTERNATIVES

From the above discussions, a strong case has been made as to why businesses should consider other avenues for resolving their commercial claims other than the court process. These are referred to broadly as Alternative Dispute Resolution (ADR) mechanisms. Alternative Dispute Resolution refers to any of a variety of techniques for resolving civil disputes without the need for conventional litigation in court.

One important common feature of all ADR methods is that they each enable the parties to find mutually beneficial solutions to their conflicts outside of the traditional legal court system in a manner that has the most probability of repairing and restoring business and corporate relationships and achieving expedited resolution of commercial disputes. Each of the mechanisms to be discussed below, however, is governed by different rules of engagement, and the expected outcomes and their effects may also vary, depending on the subject matter of the dispute and the approach adopted.

The enabling legislation in Ghana is the Alternative Dispute Resolution Act, 2010 (Act 798) which was passed to regulate the application and conduct of cases using the various alternative dispute resolution mechanisms provided for under the Act. The Act provides that parties to a written agreement may provide that a dispute arising under the agreement shall be resolved by arbitration which may be in the form of an arbitration clause in the agreement or the form of a separate agreement.

The starting point, therefore, is for parties to commercial transactions to have their agreements reduced into writing by a competent person and in that agreement, make provision for the resolution of disputes that may arise in the future through any of the ADR mechanisms.

In practice, it is however typical for parties to indicate that in the event that such matters are not resolved through the chosen ADR mechanism, the dispute, or any part of it should be submitted to the court or words to similar effect.

Additionally, the law provides that where a court before which an action is pending forms the opinion that the matter may be properly dealt with through ADR, it may with the consent of the parties in writing refer the action or any part of it for arbitration. It is important to note however that the court has no power to order or compel parties to agree to employ any other mechanism where they do not want to.

1. ARBITRATION

Undoubtedly the most popular of all the Alternative Dispute Resolution mechanisms is arbitration. Its unique feature is that it allows the parties to submit to one or more independent third parties (generally expertise in the subject matter of the dispute dispute), usually three and referred to as the Arbitrators, who conduct a hearing of the dispute and pass a verdict, known as an award.

One striking and endearing feature of arbitration which perhaps makes it acceptable to most people and accounts for its popularity is the fact that the Arbitrators are appointed by the parties in accordance with the terms of the arbitration agreement. And where it is an order of a court, the parties will still have the liberty to appoint their own choice of arbitrators.

Although arbitrators are generally to apply the law as a court would, arbitrators are however allowed to be flexible about the procedure including the exclusionary rules of the law of evidence, that is to say, all pieces of evidence may be accepted and evidence which may typically be rejected by a court of law may nonetheless be accepted by an arbitrator.

Notwithstanding this, arbitrators are however bound to comply with the rules of natural justice which means that all the parties must be heard before a final decision is made and a person who has an interest in the outcome of the matter may not be appointed as an arbitrator.

The final decision of the arbitrator is binding on the parties and the proceedings, and the decisions of the arbitrators are usually confidential. The final decision is also generally treated as final and cannot be appealed against thereby bringing finality to the dispute. Most importantly, arbitration relies on the consent and full cooperation and participation of the parties.

2. MEDIATION

Mediation allows the parties to appoint an independent third party (mediator), who, unlike the judge in litigation, is empowered by the parties to assist them to deliberate on their dispute and achieve a mutually acceptable resolution of the critical issues that are in contention.

The striking feature of this approach is that the settlement ultimately depends on the parties as the mediator has no decision-making powers and cannot force the parties to accept a settlement or impose a resolution on them. The added advantage of this mechanism is that mediators usually are individuals trained in negotiations and are therefore able to bring their expertise to bear and bring the opposing parties together and attempt to work out a settlement or agreement that both parties accept or reject and which wholly or at the very least substantially disposes of the issues of their disagreement.

3. NEGOTIATION

Negotiation allows the parties themselves, without the intervention of third parties, to bargain among themselves in an attempt to reach an agreement that is mutually acceptable to each of them, and which wholly or substantially resolves their differences. This approach, like the other mechanisms, empowers the parties themselves to control the process, including the procedure, timing, and resources as well as the outcome of the process.

Once parties engage in negotiations in good faith, they will be more amenable to making tradeoffs and concessions where necessary. The discussions may take the form of either formal or informal discussions between the parties or a mixture of both and are ultimately aimed at achieving an amicable resolution or settlement agreement of their dispute.

4. CONCILIATION

Conciliation takes the form of attempts to resolve disputes raised by a complaint, or by the investigation of a complaint, through informal negotiations involving the aggrieved person, the respondent, and an appointed third party. Conciliation is similar to mediation in that a neutral third party helps guide them through the negotiation process.

However, unlike mediation, the conciliator will often offer suggestions and help the parties settle rather than merely guide the discussions between the parties. Like the other mechanisms noted in this piece, conciliation gives control of the process to the parties to create a solution that is acceptable to them and fitting to their unique circumstances.

ADVANTAGES OF ADR OVER COURT LITIGATION

One advantage of the alternative dispute settlement mechanisms is that they are generally less expensive and save time. As noted earlier, litigation can take a lot of time to complete depending on the nature of the case - and could be years before a final decision is made. Even after a conclusion of a dispute, the losing parties may typically exercise the right to appeal which could potentially extend the timeframe for finality.

This means that typically, from the time an action is commenced to the time it is finally determined, it could take at least five years on average. Therefore, the consideration and adoption of ADR methods which usually takes a few months to complete in most cases enable the parties to resolve their issues amicably and within a reasonable time and with comparatively fewer resources, both in paying for legal fees and also for related expenses.

Secondly, broadly speaking ADR mechanisms allows the parties the freedom to manage the process in a way that helps them to avoid hostility and encourage them to work together to resolve the dispute and achieve a mutually satisfactory outcome.

This way, relationships are maintained, and the probability of the parties putting their immediate disputes and disagreements behind them and working together again in the future is very high, unlike the adversarial nature of litigation which in almost all cases pronounce one party a winner and the other a loser. ADR mechanisms can empower the parties to create a solution to the dispute that ensures that there are really no winners or losers as both parties may be making trade-offs and concessions in the process.

Also, the ADR mechanisms are generally confidential which means that the parties are allowed to resolve their dispute without disclosing important and sensitive information about their business operations to the public. Contentious litigations have the potential of generating bad press and publicity for a business and its brand which could negatively affect its standing within the business community.

It is important to note that, the court itself recognizes the need for a speedy resolution of disputes involving commercial claims and has made provision for the effective and speedy resolution of commercial claims. The rules of procedure applicable in the trial court, in particular the High Court and Circuit Court, makes provision for a court-assisted pre-trial settlement conference in commercial cases – where settlements are adopted as the consent judgment of the court.

There is also a mandatory court-assisted mediation to deal with commercial disputes in particular and these are intended to ensure that commercial claims are dealt with expeditiously and in a timely manner. Regrettably, experience from the courts suggests that not many cases are resolved in court through these court-assisted ADR mechanisms as commercial claims are still mostly tried and determined in court. Regrettably, it does appear as though lawyers and litigants are not taking full advantage of these opportunities to resolve their disputes but rather prefer to engage in a full trial of commercial cases.

CONCLUSION

It is imperative that businesses pursue speedy and expeditious determination of commercial disputes. And although the court system remains the traditional means by which disputes are resolved, there is a growing need to consider alternatives to the court system for the settlement of disputes, especially for commercial claims and it is highly recommended that the court should not become the 1st point of call for commercial claims. Therefore, businesses should explore the alternative mechanisms discussed in this article seriously for the stated advantages.