Introduction
Alternative Dispute Resolution refers to processes for resolving disputes other than litigation. The distinction between the various types of dispute resolution processes, they can be arranged from the perspective of the level of control the disputants have over the process the more formal they get the less control the parties have.
a. Dispute Prevention
b. Negotiation
c. Mediation;
d. Hybrid between mediation and arbitration (Medarb)
e. Hybrid between arbitration and mediation (Arbmed)
f. Arbitration
g. Litigation or the trial itself.
There are other mechanisms or processes that exist; there are many trials and early neutral evaluations. As we examine these processes the following features emerge
1. The more formal the process, the higher the level of involvement by a third party in the process. Parties do not have a say in the process itself but they are bound by rules of procedure which they have to follow so compared to other processes like arbitration the element of party participation in arbitration is higher because the parties are at liberty to decide which rules of procedure to apply or the venue etc.
2. As you approach the more formal processes like litigation, the process is increasingly formal from the dress that the parties wear, i.e. wigs an gowns in litigation or judicial process, manner of address, references to magistrates and Judges as my lord and your honour, the requirement as to pleadings and the format that they have to meet etc,
3. The more formal the process, the more the danger or likelihood of potentially damaging the relationship between the disputants. The decision that is reached after the result of a trial is an imposed decision and carries consequences for not complying with it. Secondly the parties have not voluntarily submitted to that process. For example in a matrimonial dispute where a husband is forced to pay alimony to the wife, that kind of decision cannot endear the parties to each other, the more formal it is the likelihood of destroying the relationships.
4. Arguably the more the formal the processes the more expensive it is, arguably because arbitration can be expensive as well, getting the disputes through the process is very expensive in terms of court fees, lawyers fees etc.
The standard practice in arbitration is that the arbitrator is paid on an hourly basis that is not to say that the arbitrator is not at liberty to value his services with that value of the dispute, he is at liberty to adopt a method of charging that best suits him.
5. The process of litigation tends to take longer. From commencement to the stage of the dispute resolution the amount of time taken is a lot longer. Rules of procedure in litigation are rigid and they tend to make a case to last longer than it should. There is also the backlog and the volume of work that the judiciary have to go through, it’s a lot.
6. Finally the more formal the structure is, the higher the focus on the disputants’ rights as opposed to their interests. The distinction between interests and rights is that interests of parties are usually in having a continuous relationship and when parties litigate their interests are destroyed by virtue of enforcing their legal rights.
DISPUTE PREVENTION
One mechanism for preventing disputes is by providing dispute resolution training. Training that provides people with skills to prevent unnecessary disputes. If you take a typical case of a husband and wife, how would training come in to prevent disputes arising? Training maybe in better communication skills.
Second method of dispute resolution is partnering. This requires disputants involved in a project to meet to discuss how to resolve any conflict which may arise. If for instance there is a building contract that involves, employer, QS engineer building contractor etc. these people can meet at their own set of this project and decide that should conflict arise we will deal with it in this fashion that is partnering. They can agree for instance that the decision of the architect will be the final decision.
The other form of dispute prevention is systems design which involves determining in advance what process would be used for handling conflicts which arise.
NEGOTIATION
Negotiation is any form of communication between two or more people for the purpose of arriving at a mutually agreeable solution. In a negotiation the disputants may represent themselves or they may be represented by agents and whatever the case, whether they are represented or not represented, they have control over the negotiation process. When attempts are made to settle matters out of court involves negotiations
There are two extreme styles of negotiating. there is what is referred to as the competitive bargaining style and co-operative bargaining style or hard bargaining and soft negotiating.
The competitive negotiators are so concerned with the substantive results that they advocate extreme positions. They create false issues, they mislead the other negotiator, they even bluff to gain advantage. It is rare that they make concessions and if they do, they do so arguably, they may even intimidate the other negotiator.
Cooperative negotiators are more interested in developing a relationship based on trust and cooperation they are therefore more prepared to make concessions on substantive issues in order to preserve that relationship.
Is negotiation a dispute resolution mechanism that can be applied in all kinds of situations? Are there disputes that will not be necessarily resolved by negotiations? There are certain disputes that negotiations would not perhaps assist.
In as far as hard bargaining is concerned, the perceived advantages would be
1. The hard negotiator is likely to get a better substantive especially in circumstances where such a negotiator is negotiating with a co-operative negotiator;
2. If a negotiator is a professional negotiator i.e. one who is called upon to negotiate on behalf of parties, he is likely to develop a reputation which will be useful in future negotiations;
3. The competitive negotiator is not open to easy manipulation;
4. A negotiator of that style is also likely to take initiative and to take a lead role in negotiations;
Disadvantages
1. The solution that comes out of such hard negotiations is likely to be a fragile one and therefore not long lasting so the other party is likely to come out of the negotiations feeling like maybe they gave too much and this may create ill feelings;
2. The competitive or hard negotiator may by reason of his approach fail to take an opportunity to reach a good deal because of the attitude that he must have his way and a good deal may be put on the table which he does not look at as he does not want to compromise.bbb
3. It may harm the relationship; it may also create misunderstanding by the fact that the interests of the party maybe compromised.
4. The competitive bargainer or negotiator is unlikely to be aligned to the concerns of the other party because the emphasis is no compromise.
SOFT NEGOTIATING STYLE
ADVANTAGES
1. Sustaining relationships or good long term relationships;
2. A deal or compromise will be reached when there is a deal to be made;
3. From the perspective of a professional negotiator, it is more likely that people will want to deal with you.
4. A compromise is likely to be reached sooner and to work quickly either to agree or disagree.
DISADVANTAGES
1. A good deal may be lost or the opportunity for a good deal may be lost because the negotiator by the end of the process may feel that they give more than they should have;
2. There is the possibility of manipulation by the other party.
3. The negotiator may be taken advantage of by the other party;
4. The party may want to get out of the deal later so he may feel sorry and try to get out of the deal.
5. In the case of a professional negotiator, a cooperative negotiator may not get a very good name e.g. compromises too much which may not be good for business.
In each of these two styles and based on the mentioned disadvantages, the negotiators are more focussed on their respective positions than with their interests and to try and reap the advantages of both the cooperative and competitive bargaining style, Roger Fisher and William Ury came up with a project at Harvard Law School and developed what they referred to as principled negotiations.
Principled negotiations require negotiators to focus on the interests of each of the disputants with the goal of creating satisfactory options for resolution which may be assessed by objective criteria.
Principled negotiation seeks to take advantage of both cooperative and competitive styles and avoid the pitfalls or the disadvantages of the two styles.
MEDIATION
Mediation is a non-binding process in which an impartial third party facilitates the negotiations process between the disputants and it is that impartial third party who is called the mediator. The mediator has no decision making power, he has no decision making power and the parties maintain the control over the substantive outcome of the mediation.
However, the mediator with the assistance of the parties will control the process and he will with the consent of the parties set and enforce the ground rules for the mediation process. If in the dispute the two examples that we have looked at we now bring in a third party as the mediator, he will probably get an overview from both parties as to what their contentions are. He will then agree with the parties that each party will be given an opportunity to state their case, they could also agree that when one party is stating their case, the other party shall not interrupt. The role of the mediator is not to impose his own solutions and not to even suggest solutions but that the solutions should be suggested and agreed upon by the parties themselves.
Story telling - the disputants communicate with the mediator to tell their story. The mediator then assures them that he has heard the story by re stating what each party has told you and letting them state whether those are the facts as they have stated them. You re narrate the story. You may then ask them to suggest the way forward and both parties can state how they want to proceed. Lay down the rules.
The mediator should not descend to the arena but should let the disputants decide how to conduct the negotiations.
ARBITRATION AND MEDIATION
Arbitration is a process in which a third party neutral, or an odd number panel of neutrals render a decision based on the merits of the case. The Hybrid of mediation or the hybrid between mediation and arbitration which is a very rare sort of scenario is that the third party neutral commences the process in the role of a mediator and if that does not yield or result in a resolutions the mediation ceases and the mediator assumes or becomes an arbitrator who then makes a binding decision. In the arbitration mediation hybrid (arbmed) the disputants present their respective cases to the third party neutral who prepares or makes a decision, he does not however share that decision or release that decision to the parties but he keeps it away and then assumes the role of a mediator. If a result of the mediation, the parties reach a resolution, he destroys his decision but if the mediation does not resolve in a resolution then he releases his decision to the parties.
OMBUDSMAN
An ombudsman is a person who investigates complaints and attempts to assist the disputants to reach a decision. Usually this is an independent officer of the government or a public or quasi-public body. An ombudsman can be classified as an alternative dispute resolution.
Principles of Natural Justice in Relation to ADR proceedings
It is a fundamental requirement of justice in deciding a dispute between two or more parties,
1. Firstly that the arbitrator or the tribunal must be and must be seen to be disinterested and unbiased.
2. Secondly, every party must be given a fair opportunity to present his case and to answer the case of his opponent.
The first principle is embodied in section 13 of the Arbitration Act (cap 4 of 1995) which provides that when a person is approached for appointment as an arbitrator he must disclose any circumstances likely to give rise to justifiable doubts as to his impartiality or independence. That duty on the part of the arbitrator is a continuing duty right from the time that he is approached through to the time he accepts appointment, conducts the reference, and renders his award.
So under section 13(2) the arbitrator is obliged through the arbitral proceedings to disclose without delay such circumstances.
The arbitrator must be on his guard with respect to connections with a party or connections in the subject matter of dispute or connections with the nature of the dispute. And the test that the arbitrator must always bear in mind is whether a reasonable person not being a party to the dispute would think that the connection was close enough to cause the arbitrator to be biased.
So there are three elements there of connections.-
--party
--subject matter
--nature of the dispute
The arbitrator has an obligation to conduct the reference impartially in both actions and words and to decide each issue put before him fairly and impartially. And whatever the provocation, each decision must be made impartially. There is therefore an overriding duty to work fairly and dispassionately even if one of the parties, for example, provokes the arbitrator by making the wildest of accusations.
The arbitrator should also take pains not to associate with one party of his representative more than with the other. He should, for example, never have lunch with one party during a hearing or in the course of the reference in the absence of the other party. He should also try to avoid even casual conversation with one side in the absence of the other. For his confidence in his own probity may not be shared by a party who does not know him.
Each party must also be given a fair opportunity to present their case and to know the opposing case and to meet the opposing case.
Under section 19 of the Arbitration Act, for example, parties must be treated with equality and each party given full opportunity of presenting their case.
Section 21 is perhaps also relevant in this regard in that if parties have not agreed on the place of arbitration, the tribunal must determine the place having regard to the circumstances of the case and the convenience of the parties. The arbitrator is doing a balancing act.
Under Section 21 the parties have the right to agree on the venue, failing which section 21 (b) intervenes.
Section 24 provides for exchange of statements of claim and statements of defence: To inform parties of the case they are to meet: natural justice.
Section 25 provides that the arbitral tribunal must hold oral hearings unless the parties have agreed that no hearing shall be held. For the same reason an arbitrator should not receive oral evidence or arguments from one party in the absence of the other. Neither should the arbitrator receive any document from one party without ensuring that the other party receives a copy. It is important to make it clear to the parties that all correspondence with the arbitrator must be copied to the other party. This should be in the agenda of the preliminary meeting.
The arbitrator, if there is to be a hearing, must fix hearing dates so far as practicable convenient to both parties.
Other provisions in the Arbitration Act that you may want to look at:
Section 27, where a tribunal appoints an expert if it has the power to do so. The report must be available to the parties and they must have the opportunity to examine that expert and to present their own expert on the subject.
Section 29: obligation on the part of the tribunal to decide the dispute in accordance with the rules agreed upon by the parties
What happens when an arbitrator uses his knowledge and experience to determine the matter? Should the parties have right to influence the judge’s mind? That is where the arbitrator is empowered by the parties to use his own expertise, he should grant the parties an opportunity to comment on his views and so on.
Section 35 deals with the setting aside of an award. If a party was not afforded an opportunity to be heard, notice not served, appointment of arbitrator, etc.
Under section 26 an arbitrator has powers to decide on a hearing date unless otherwise agreed by the parties. Any party that fails to attend a hearing, the hearing could go on, etc.
In summary, the principles of natural justice must be observed in the arbitral process.
Go through the Arbitration Act in your own time and see what sections have a bearing on natural justice.
When drafting the substantive contract it is important to point out that in case of any dispute the matter is to go before arbitration. This can be part of the substantive contract or just a clause.
Invariably almost all insurance companies include arbitration clauses in all their policies.
THE ARBITRATION AGREEMENT
Arbitration is a process in which a third party neutral or an odd numbered panel of neutral persons render a decision on the merits of a case.
The statute that deals with arbitration in Kenya is the Arbitration Act (1995) Act No. 4 of 1995 Cap 49 Laws of Kenya. This statute commenced on the 2nd of January 1996 by virtue of Legal Notice No. 394 of 1995. This date is important because prior to this statute we had an Arbitration Act that was based on different legal principles for instance under the repealed or previous Acts, the courts had a wider role in Arbitration than they do under the current Act. Parties to Arbitration under the previous statute had recourse to the High Court more than they do under the current Act. For instance under the old Arbitration Act a party could challenge an award of an arbitrator on the grounds that the arbitrator has misbehaved in the course of arbitration. Misbehaviour on the part of an arbitrator suggested that it was a ground on which the award could be challenged which is not the case under the current law. Some cases may suggest that one might have recourse to the High Court when it is not so. Under the current Act the situations where one can go to court to complain after arbitration are limited.
The current Arbitration Act is based on a Model of the United Nations Commission on International Trade Law (UNCITAL) which was adopted in 1985 with a view to encouraging arbitration and processes that would have global recognition. United Nations came up with a model of a statute that has been adopted by many countries. The essence of the Act is that it provides for very broad party autonomy in fashioning the Arbitration process. This means that parties who enter into an arbitration agreement are to a large extent at liberty to determine the process of adjudication of the disputes that will go to arbitration. Autonomy for example in deciding who the arbitrator will be, the venue of arbitration, the substantive law that will apply to that agreement or arbitration. Once a dispute has arisen, they also have autonomy with regards to how the arbitral process itself will be conducted. To a large extent, the Arbitration Act provides the default position in very many respects so that if parties in an arbitration agreement have not provided the number of arbitrators, then the statute will tell you that the default position is the presumption that the parties intended for one arbitrator.
WHAT IS AN ARBITRATION AGREEMENT?
According to Section 3 of the Arbitration Act Arbitration Agreement means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship whether contractual or not. A distinction is made or liberty is given to the parties to choose that only certain types of disputes will go to arbitration and not all of the disputes that arise will go to arbitration. An example is where you have a tenancy agreement between a tenant and a landlord which provides that there will be review of rent after every two years of the term under the tenancy and the tenancy agreement may proceed to say that at the time of review the margin by which rent will be increased will be by agreement of the two parties. It may proceed to state that if there is a dispute as to what the margin should be, then the matter should be referred to arbitration.
Effectively what those two parties have done is to select certain type disputes that would arise under that agreement and decide that they are the only two that would go to arbitration if they arose. Parties are at liberty to select certain disputes and agree that those should go to arbitration while others may remain for determination by the courts.
The other important distinction made by the statutory definition is that parties can anticipate disputes and parties can also decide to go into arbitration after disputes have already arisen i.e. an agreement to arbitrate may be made in respect of existing disputes between the parties or in respect of disputes that may occur in the future and in each of these cases that agreement to refer either existing or future disputes to arbitration is an arbitration agreement.
Traditionally an agreement to refer future disputes to arbitration was referred to as an Arbitration Agreement whilst an agreement made after disputes have arisen was traditionally referred to as a submission or a submission agreement. But in light of the statutory definition that distinction between submission and agreement is no longer relevant.
Section 2 - except as otherwise provided in a particular case the provisions of the Act shall apply to both domestic and international arbitration.
WHAT ARE THE FORMALITIES/FORMAL REQUIREMENTS
This is dealt with under Section 4 of the Arbitration Act.
The formal requirements under the Arbitration Act are set out under Section 4 of the Arbitration Act and the first thing the statute provides for is that an arbitration agreement may be in the form of an arbitration clause in a contract or it may be in the form of a separate agreement all together. So for example in a contract between the government and a building road contractor, the contract will set out what the works are and the instructions from the engineer and one of the clauses in that agreement may simply be the clause that says any or all the disputes arising from this contract shall be referred to Arbitration. That is one option.
The other option is where the contract is silent on whether it should bind the parties to arbitration.
An Arbitration Agreement shall be in writing, it is a requirement that it be not oral. Section 4 (3) an arbitration agreement is in writing if it contains
a. a written document by the parties;
b. an exchange of letters; telex, telegram or other means of telecommunications which provide a record of the agreement;
c. an exchange of statements of claim and defence in which the existence of the agreement to arbitrate is alleged by one party and not denied by the other party.
Section 4 (4) … the reference in a contract to a document containing an arbitration clause shall constitute an arbitration agreement if the record is in writing and the reference is to make that arbitration clause part of the contract. This is talking of incorporation of an arbitration agreement by reference.
CONSTITUENTS OF A PROPERLY WORDED ARBITRATION CLAUSE
In practice not both parties to an agreement are as keen to have the dispute resolved. The disputants are usually at different positions. So if you have a clause that facilitates a protraction of the process then the Respondent will capitalise on it since he is not interested in having the matter resolved. It is thus advisable that a basic arbitration agreement or clause should provide some essential details. For if an arbitration clause simply provides that disputes to be settled by arbitration questions would arise as to how the arbitrator is to be appointed, what qualifications the arbitrator should have, where the arbitration should take place, how many arbitrators, what substantive law is to apply to that contract, what procedural law is to apply to that contract etc.
Is there a distinction between the law governing the contract and the law governing the arbitration?
There is a distinction between the law governing the contract and the law governing arbitration. For instance if a contract stipulates that in case of a dispute the substantive law to apply will be Kenyan law, then any other arbitration law will apply. It is important if one is to avoid conflict in basic matters that the arbitration clause should be as clear in these matters as possible.
WHAT ARE THE ESSENTIAL INGREDIENTS
1. PROVISION WITH REGARD TO THE NUMBER OF ARBITRATORS
Section 11 of the Arbitration Act provides that the parties are free to determine the number of Arbitrators and section 11(2) failing a determination by the parties on the number of arbitrators, the number shall be one. The nature of the dispute should dictate how many arbitrators to go for.
2. METHOD OF APPOINTMENT
A lot of time can be spent and wasted between parties on this question once a dispute has arisen. The default position is that if the parties do not agree on the method of appointing then they can apply to the court to appoint Section 12 of the Arbitration Act. There is a drawback in doing that, firstly time is of the essence and you will lose so much time like a few months. Then there is the question of the costs to be paid to court over the process. So if the procedure for appointment had already been provided for in the arbitration clause one can avoid the delay and the cost. Parties will choose an institution if they are not agreeable on an arbitrator, they can approach another institution i.e. the chartered institute of arbitrators to appoint. They can for example decide if there is a dispute as to method the chairman of LSK becomes the appointing authority.
3. CHOICE OF THE RULES TO APPLY IF ANY
The Arbitrator has power to control the preparations for hearing. He is obliged to exercise that power and to do so by reference to demanding standards. Also an arbitrator is involved in each case during its interlocutory stages. If he makes proper use of his powers he can and should shape the preparations so as to eliminate unnecessary costs. In particular he can direct the advocates, the experts and even the parties to get to grips with identifying what the issues really are and how best to present them. He can decide a preliminary issue quickly; or it may be enough if he merely indicates his provisional views. In this way both the issues themselves and the costs that have to be incurred in preparing for them, can be greatly reduced.
4. TIME FRAMES
Time frames are matters that should be spelt out in the Arbitration Agreement for the following:
a. the time limit for the giving of the notice of claim
b. the time limit for giving of notice to appoint an arbitrator;
c. and the time limit for the commencement of arbitration.
Time frames give certainty in any industry and a time frame within which the parties should agree is essential.
5. REMUNERATION:
Parties may decide how the arbitration costs are to be shared, whether the loser in the dispute bears the cost or both parties provide for the costs.
Section 12 of the Arbitration Act provides that parties are free to agree on procedure of appointment and failing such agreement where parties have provided for 3 arbitrators the presumption is that each party shall appoint one arbitrator each and the third one is to be appointed by those two.
There is a common misconception that in situations where you have 3 and each party appoints one that the arbitrators are the agents of the respective parties, they are not, arbitrators must always remain impartial.
In arbitrations where provision is made for one arbitrator then the parties should agree on the person to be appointed failing which an application is then to be made to the High Court.
Section 12 of the Arbitration Act - to read
No person shall be precluded by reason of that person’s nationality from acting as an arbitrator, unless otherwise agreed by the parties.
(2) The parties
The Chartered Institute of Arbitrators has published rules and it is open to parties to an arbitration agreement to provide in that agreement that for instance the Arbitration Rules of the Chartered Institute of Arbitrators shall apply. For instance these rules will provide for how parties to an arbitration agreement can approach the institute to appoint an arbitrator where the parties are unable to agree. They also provide the procedure to be adopted by the arbitrator upon appointment. To a large extent the rules in arbitration are influenced by the rules of pleadings in a civil process e.g. the Chartered Institute of Arbitrators Rules provide that the claimant should make a statement for a claim within 21 days, 21 days to file defence and 14 days to file a reply..
It also provides for what is to happen if one of the parties does not comply.
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