Arbitration on the rise - Financial Mail

I am not sure where Judge Basil Wunsh in “The Downside of Arbitration” (By Invitation August 4) obtains information that leads him to conclude: “Americans have found arbitration expensive and slow, and there is growing disillusionment with it”.

In the American National Law Journal of June 14 2000, leading lawyer Harvey Berkman writes “In the Eighties, the US Supreme Court made clear in case after case that it favoured arbitration as a method of dispute resolution. Now, as arbitration is increasingly used by companies to resolve disputes, the court again is stepping into the fray.”

Florence Peterson, general counsel for the American Arbitration Association, a not-for- profit group which has 14 000 arbitrators to hear labour, contract and other dispute reported arbitration case filings stagnating around 60 000/year in the first half of the Nineties, jumping to 72 200 in 1996, 95 000 in 1998 and past 140 000 in 1999.

A further interesting development in the Us — not styled arbitration but which would be viewed as an arbitration as the result is legally binding — is that provided by online claim settlement services, notably Cybersettle.com and ClickNsettle.com, which have drawn thousands of potential litigants away from traditional settlement routes.

Simply stated, the parties involved in a legal claim make a series of offers and counteroffers online and try to reach a settlement within a specified time. When the parties’ offers are within 30% of one another, the mid-point of that range is considered the settlement amount.

As in most negotiations, the settlement is legally binding. ClickNsettle.com began last year as a subsidiary of National Arbitration & Mediation (NAM) Corp, and since October 1999 has completed about 600 cases. About 50% of the cases submitted are settled using the online service and the rest often have turned to the traditional alternative dispute resolution services of NAM to reach agreement.

“Our legal system is now so flawed and archaic,” writes Cybersettle.com chairman James Burchetti in the American Lavtyer on January 30, “that if you want US$100 000, you ask for $250 000. If you are willing to pay $80 000, you offer $40 000.”

It is of course unlikely that this type of sudden-death bidding to resolve the financial aspects of a dispute would be suited to any dispute where the facts were in issue and required evidence to be adduced. It does, how ever, illustrate the growing desire worldwide to avoid the ponderous procedures imposed on litigants through the courts.

In SA, one of the first commercial arbitration initiatives was that pioneered by two advocates in 1997 trading under the name The Arbitration Forum. Through an accommodation reached with the Road Accident Fund (RAF) it has been instrumental in moving about 5 000 RAF cases from the High Court into the realms of binding arbitration. It has obtained results in 25% of the equivalent court time and has thus saved 37% in direct legal costs.

No doubt some of the criticisms levelled at arbitration by Judge Wunsh are valid, but the flexibility provided by arbitration in the choice of venues, dates of hearings and procedures to be applied, enables a competent arbitrator to provide solutions to problems that would be impossible in the High Court, given the rigid structure of that litigation process.

Neither arbitration nor litigation can be considered ideal methods of dispute resolution, They are both methods of last resort, but the Association of Arbitrators has found that disputing parties would rather get their dispute over and done with and focus on the future than have what is often an argument over costs, the capital sum having been eclipsed by advocates’ and attorneys’ fees.

That Judge Wunsh’s opinion is out of step with the SA legislature is also highlighted by the soon-to-be-promulgated International Arbitration Act, which will incorporate the UN Com mission on International Trade Law’s model law, subscribed to by about 60 countries. The intention of the proposed legislation is to level the playing fields between SA and its major trading partners in regard to dispute resolution.

Finally, perhaps I might be permitted to ex tend an invitation to Judge Wunsh to join my association as its guest at our forthcoming conference on September 15-16, which will deal with disputes in cross-border trade and which will be addressed by his brother judges, H Judge President of the Western Cape and Zulman, Judge of the High Court of Appeal, both of whom will deal with the relevance of arbitration in the context of international trade and existing litigation procedures.

FINANCIAL MAIL 18 AUGUST 2000