The law in South Africa makes provision for dispute of a commercial nature to be settled in and out of the court. Where a dispute is brought before the court, the process is called litigation. However, when parties do not want to involve the courts, alternative dispute resolution methods such as arbitration may be called upon.
In general, it seems as though arbitration has become a preferred method of dispute resolution, especially when we consider that South Africa, through its International Arbitration Act 15 of 2017 may now be chosen as a seat for international arbitration matters. It could also be that when it comes to commercial matters, an arbitrator may have a more specialised skill set than a judge – for example, an arbitrator with extensive experience in the shoe manufacturing industry. If the matter does not cross borders, it should be noted that it will still be subject to the provisions in the Arbitration Act 42 of 1965.
It is important to know that one dispute resolution method is not better than the next, each has its time and place. Why don’t we look at a few advantages and disadvantages of arbitration and litigation:
- In terms of cost, arbitration does win out. Since it is resolved much faster, the legal fees for arbitration will be much lower than a long and drawn out litigation process in the courts.
- Arbitration also allows the parties to choose their arbitrator, whereas with litigation a judge is assigned to them
- Arbitration is more private than litigation, as the matters discussed in the agreement are not being discussed in a possibly open court of law
- In some cases, the cost of arbitration may exceed that of litigation, such as when High Court rules apply - which increases the cost of professionals involved in the process significantly
- The rules regarding contractual consent are more complicated when it pertains to arbitration than litigation and it may sometimes be more cumbersome in a practical sense to commit to an arbitration process.
- With litigation, there is always the chance to appeal the decision of the courts, however, arbitration is more final, unless both parties agree to an appeal procedure.
Although mostly governed by legislation, commercial litigation and arbitration in South Africa also draw from the common law influences on our legal system, which is based mostly on English law and case law as developed by the courts.
Both commercial arbitration and litigation follow similar procedures for evidence gathering, such as evidence discovery, expert witnesses and pre-trial conferences. In many cases, the courts may actually advise the parties to seek out alternative dispute resolution methods such as arbitration for commercial matters, because of the financial and time investment commercial litigation in court might be.
If you are in need of any advice regarding commercial litigation and arbitration processes, kindly reach out to us and we can put you in touch with a commercial litigator that may be able to advise on the matter.
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