ARBITRATION & MEDIATION

Domestic Arbitration and Mediation: The Pros and Cons

When a domestic dispute arises, the question is not always whether to fight or settle. It may be whether arbitration or mediation is the right path forward. Each offers a different way to resolve disputes, and the best choice depends on the parties’ needs, priorities and circumstances.

JOO TOON LLC LITIGATION TEAM 3 MIN READ

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Historically, arbitration and its offspring, mediation, were developed to address the inefficiency of litigation as a means of dispute resolution. However, Singapore has attained an excellent reputation for its justice system. The quality and the speed with which it disposes of cases have been exemplary. What then are some of the considerations that affect the litigants’ choice of arbitration and mediation as the preferred means of dispute resolution in Singapore?

Arbitration in practice

In an arbitration that the writer had the privilege to sit as an arbitrator, the essential dispute (without disclosing too much details for reason of confidentiality) concerned the valuation of the outgoing director’s shares in the company and the remuneration that had to be paid to him. The issues were adjudicated upon on the merits within the time prescribed for the substantive hearing. This is no doubt thanks to the able and effective presentation by the parties’ counsel, but more importantly, the imposition of time limits imposed which focused the parties’ and the arbitrator’s minds on the need for expedition and economy. Thus, even though there were two witnesses on each side, one of each being an expert, with complex accounting and legal issues, the dispute was resolved by the writer, hopefully with a result that was to the satisfaction of both parties.

Thus, as can be seen, domestic arbitration cater particularly well to those disputing parties who are both equally keen to bring their dispute to an expeditious and final adjudication on the merits.

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Mediation through court dispute resolution

This process of adjudication on the merits contrasts sharply with the mediation process under the Court Dispute Resolution (CDR) process. This process is not an adjudication on their merits, but conciliatory or mediatory in approach. Although the settlement judges do give broad indications, these are not binding. CDR and family mediation have become a significant and reputable institution in Singapore’s litigation landscape. It is well-nigh difficult, if at all possible, to match, let alone surpass, the efficiency and effectiveness of the CDR process, which is very ably manned by bright and talented judges.

Why so many parties choose CDR

From anecdotal evidence, there appears to be a phenomenally high success percentage as well as a high degree of satisfaction with the process. When a legal action has commenced in the State Courts, although there is at the moment no compulsion to subject the dispute to the CDR process, the motivation to do so is particularly strong given the attraction of the cost and time-savings that can be achieved, especially since the CDR facility offered by the courts is almost free of charge.

A case in point: Forged cheque claims

To give one example, there was a case, in which the writer was acting for a customer of the bank in an action involving allegations of forged and unauthorised signatures on a number of cheques. After months of legal wrangling over the statutory duties owed by banks to customers for honouring such cheques, the parties decided to bring the matter to CDR. Much to the relief of the litigants, the senior bank director who turned up at the CDR settled the matter by agreeing, amicably and out of goodwill, to absorb a substantial part of the losses without admission of liability. This was after the settlement judge had objectively conducted an evaluation of the cost implications of litigation involving forensic investigation and loss of executive time. There are thus clearly cost and time saving in referring a matter to CDR even though currently there are no costs sanction for unreasonably refusing to refer a matter to CDR. There may well be a case for reform to empower the exercise of judicial discretion in cases where parties unreasonably refuse to mediate especially in acrimonious cases involving small amounts. The limits of this judicial power are the subject of interesting recent English cases.

CDR and the SMCC

The role that CDR now plays in the State Courts is parallel to the role that the Singapore Mediation Centre (SMC) plays in relation to High Court proceedings, with the added attractiveness that CDR is almost free of charge, whereas SMC’s costs may be too prohibitive for small claims. The success of the SMC owes much to the fact that parties were invariably encouraged to refer their dispute to the SMC during the pre-trial conferences of actions commenced in the High Court.

Another advantage of the arbitration, which contrasts with the court-adjudicated dispute mechanism, is, of course, the limited avenue for appeal. This advantage of finality may outweigh the advantages of a court-adjudicated dispute. Very frequently, parties who are aggrieved with the first instance decision tend to appeal further even to the Court of Appeal, with leave of court in instances where the amount in dispute is below the prescribed limit. The lack of finality detracts from the need for commercial men to put an end to a dispute and in such cases where the amount in dispute is relatively small, parties may still be encouraged to avail themselves of the arbitration rather than the court process, subject always to any cost advantage in terms of filing fees and court hearing fees as compared to the arbitrator’s and hearing room fees. This is not to imply that the arbitration on the merits is more superior to or more expeditious than court-based mediation, but merely to single out finality as a factor which may be pivotal in the parties’ decision to opt for one or the other of the processes.

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Disclaimer: These articles are intended to provide general information only and do not constitute legal advice. Each article is prepared based on the law and information available as at its date of publication. While care is taken to ensure that the contents are accurate and informative, the law is subject to change, and subsequent legislative, regulatory or judicial developments may affect the interpretation or application of the matters discussed. These articles should not be used or relied upon as a substitute for professional legal consultation, and legal advice should be sought in relation to any specific legal matter.

Choosing your route

The above is an attempt to sketch, in a modest way, a comparative analysis of the two processes and the considerations that affect the choice open to the litigants in Singapore as alternatives to litigation. These options will thus remain viable to the litigants so long as they retain their attractiveness as economical, expeditious and conclusive means of dispute resolution. They compete with litigation which will always remain an initial port of call for litigants in Singapore who will be drawn to its first-rate justice system, which few court systems in the world, let alone any resolution process, can match or surpass.