It is inevitable that businesses have disagreements with other businesses and individuals. When you are involved in a business dispute, it is best to resolve it in a timely and cost-effective way. There are at least three ways to resolve a business dispute:
Mediation
What is it?: Mediation is a voluntary process in which the mediator helps the disputed parties to reach a settlement. The mediator is an impartial and trained third person.
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Parties can avoid confrontation and conflicts with each other.
Parties can freely reach agreements and make their own decisions, so there is greater flexibility.
Parties can save money and time because the mediation process can be completed within a day.
The terms of the settlement can be kept confidentially.
Mediation can help the parties in maintaining and improving their relationships.
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If one party is withholding information, it may cause difficulties in conducting the mediation process.
If the mediator is unskilled, it may contribute to an unproductive resolution.
Either party can withdraw from the mediation proceeding at any time, which may also result in a waste of money, effort and time.
The mediation cost may be wasted if the dispute cannot be resolved by mediation.
During the mediation process, information may be given away from one party to the other party, which may benefit the other party.
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Arbitration
What is it?: Arbitration is a process in which, upon the parties’ agreement, a dispute is submitted to the arbitrator(s) to make a binding decision regarding the dispute.
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There is flexibility within the arbitration process because the parties can choose the arbitrator(s).
The parties can ensure that the arbitration is neutral by not only choosing a neutral nationality of the arbitrator(s) but also selecting other important elements neutrally, such as the venue and language of the arbitration.
The details of the arbitration can be kept confidential, so parties have privacy.
The decision handed down by an arbitral tribunal is final and not difficult to enforce.
The arbitral award can be enforced internationally through the New York Convention.
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The arbitration decision requires the parties to act in good faith and the arbitrator’s power is not as strong and wide as the court’s power.
The pre-arbitration stages are usually not as direct and clear as the court proceedings, which may cause confusion to the parties as well as delays with the arbitration hearings.
The scope to challenge an arbitrator’s decision is limited.
Most parties choose to be represented by a lawyer despite it not being mandatory, and parties often do not realise the cost savings of not hiring a lawyer.
Local courts may deny enforcement of arbitral awards due to protectionism.
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Litigation
What is it?: Litigation is a legal process by which the parties’ disputes are adjudicated by a judicial officer or a judge sitting in a tribunal or a court.
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The court’s decision is strong and legally binding, so parties are compelled to comply with it or else they may be penalised.
As opposed to mediation and arbitration, the parties to a litigation have the right to appeal the court’s decision, which may subsequently be overturned.
The outcome of the litigation can be predictable if similar cases have been decided or if legislation clearly dictates the outcome.
If one party is uncooperative, litigation can solve this problem with deadlines and requirements that are mandated by the court.
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Cases can take up to months or even years to be decided by the court, so the timeframe of litigation is comparatively much longer than that of mediation and arbitration.
While the parties can appeal the court’s decision, the process may have to be redone again, which incurs more cost and prolongs a final decision.
As opposed to mediation, taking a case to court often damages the relationship between the parties and it will become very difficult for the parties to preserve their relationships.
As opposed to mediation and arbitration, most court documents are publicly available and accessible, so litigation does not provide as much confidentiality and privacy to the parties.
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Key takeaways
- There are at least three ways to resolve business disputes.
- There are pros and cons to choosing which method to resolve disputes.
- Whether you choose to use mediation, arbitration or litigation to resolve your dispute would depend on many factors, e.g. whether you are able to afford the legal costs and whether the other party is willing to settle out of court.
Bibliography:
- Department of Justice, ‘Legal and Dispute Resolution Services in Hong Kong’: https://www.doj.gov.hk/en/legal_dispute/index.html
- Hong Kong Bar Association, ‘Alternative Dispute Resolution’: https://www.hkba.org/content/adr
- Hong Kong Mediation Centre: http://www.mediationcentre.org.hk/en/home/home.php#gsc.tab=0
- Hong Kong International Arbitration Centre: https://www.hkiac.org/
