Entri AdminEntrihub chats to Ashley Curran, founder of Curran Attorneys. Ashley talks about Alternative Dispute Resolutions.
Question 1: What is Alternative Dispute Resolutions?
Ashley: In South Africa litigation, the common fighting at art and court has really outpriced itself for many South Africans especially entrepreneurs not only have become very expensive but it's also become a lengthy process. I mean at the moment we're waiting up to three years for trial days. There's been this trend to resolve disputes in an alternative way and specifically, in South Africa there are two ways. It's a. via mediation or secondly what we call arbitration. Both involve an independent third party, referee for lack of a better word who really gets those two parties together whether shareholders or directors that are involved in a dispute and try to resolve that dispute.
Question2: What is the difference between mediation and arbitration?
Ashley: In mediation, the mediator will listen to both sides. They'll put forward a number of suggestions to try and resolve the dispute but the mediator's role really is to try and facilitate the problem solving and for those two parties to reach an agreement by themselves. The mediator can't be imposing a decision upon those shareholders or the directors. The arbitration takes it a step further, where the arbitrator is specifically mandated with powers to make a decision and it really equates itself to a judge in a courtroom. Who will listen to both sides and will say right I've heard all the evidence I've weighed it all up and this is the decision I've made. That decision will then be binding upon the participants involved in the arbitration. The commonality between mediation and arbitration is that the mediator and arbitrator need to be paid, whereas in the court system we don't pay for judges those are government services. There is a cost aspect associated with the process. Mediation attorneys aren't allowed to be present, whereas arbitration participants will be allowed to have legal representation.
Question 3: What are the costs involved in mediation and arbitration?
Ashley: Your mediators, arbitrators generally the fees can range anywhere from R700 up to probably about R2 500 per hour. It's based on the number of sessions, typically in mediation, you'd have about five sessions, and if by that first session you haven't reached an agreement. The mediator will call it. They'll say that unfortunately, mediation has been unsuccessful and the parties will then have to pursue the matter in court. If you're looking at about five sessions that would be based each session is about two and a half hours long and would be charged on that hourly rate of the suitable professional that is appointed as a mediator. Arbitration is a little bit more expensive. It is more time consuming because each individual is given a chance to represent the case, they might have attorneys and paperwork is submitted as evidence. Those costs do become significantly higher than mediation but generally, the costs are split 50 50.
Question 4: What are the benefits of ADR?
Ashley: The advantage of alternative dispute resolution is it really does go a step further in saving these business relationships that have broken down, whereas the core system generally tends to polarize individuals. It's an all-or-nothing approach and it really doesn't take into account the big picture of relationships at stake.
Question 5: What are the typical issues of ADR?
Ashley: Your biggest topics at the moment are disagreements between directors. Typically regarding the management of businesses so contracts, what's coming up often is that directors are being unauthorized in the conduct. They're making decisions on behalf of the business which they're not authorized to do. Shareholders aren't than agreeing with those decisions and that typically then leads to a dispute between your role players in a company. It can go a step further you can have disputes with your service providers, suppliers and that also then lends itself to mediational arbitration.
Question 6: Accounting for ADR in shareholders’ agreement
Ashley: In terms of your alternative dispute resolution it's important to have in your shareholder's agreement that if there's a dispute it will go to arbitration but it's really important that it goes a step further and says what happens if you can't agree with me who the arbitrator is going to be. In our shareholder's agreements it's really wise to put in that if the shareholders or the directors cannot agree that if it's a legal question that it be arbitrated by an attorney with not least instantaneous experience or an advocate or if it's an accounting question that would be dealt with by a childhood accountant with not less than 10 years experience. If the party still can't agree on that then there should be provision and agreements that then your law societies or your arbitration societies of South Africa then appoint the arbitrator.