As an alternative to instituting action in a court of law, a person who would be entitled to apply for relief or file a complaint in terms of the Companies Act 71, of 2008 (“the Companies Act”), may refer a matter that could be the subject of such an application or complaint for resolution by mediation, conciliation or arbitration to:
- the Companies Tribunal (“the Tribunal”);
- an accredited entity; or
- any other person in terms of section 166 of the Companies Act.
The advantages of mediation, conciliation or arbitration are seen to be:
- the ability to choose the mediator, conciliator or arbitrator or if appointed by an external organisation, that suitable appointments are made;
- privacy as the proceedings are not open to the public;
- time effectiveness when compared to litigation and available court dates as all parties might be able to navigate their timetable effectively, although this is not always the case;
- flexibility in proceedings as the parties will not be bound by rules of court and may determine procedures by mutual consent; and
- the an arbitration award is usually final and not subject to appeal unless the parties have agreed to an appeal procedure or appeal based on certain grounds. For example if an award has been improperly obtained or the arbitrator –
– has misconducted himself in relation to his duties;
– has committed any gross irregularity in the conduct of the arbitration proceedings; or
– has exceeded his powers.
The lack of the appeal process can however also be seen as a negative to the unsuccessful party.
The disadvantages of mediation, conciliation or arbitration are seen to be:
- potentially increased costs, as costs will include the representation of both parties and the mediator, conciliator or arbitrator;
- delaying of proceedings if the time tables of both parties and the mediator, conciliator or arbitrator do not correlate; and
- there is no automatic right to discovery.
In terms of section 167(1) of the Companies Act if the Tribunal, or an accredited entity, to whom a matter is referred for alternative dispute resolution concludes that the mediation, conciliation or arbitration has been successful the Tribunal or an accredited entity must issue an order. The order issued is non-binding and only once the parties have consented to such an order may the Tribunal or accredited entity submit such order to a court to be confirmed as a consent order.
In terms of section 167(2), upon application by the Tribunal or an accredited entity, the court may either –
- approve the draft consent order making it an order of court;
- alter the draft consent order before it will be made an order of court; or
- decline to grant the order altogether.
Once the consent order is made an order of court, the order may then be enforced in the usual manner that court judgements are enforced.
The above formalisation of the draft consent order as provided by the Tribunal or an accredited entity applies only insofar as a matter has been referred to the Companies Tribunal or an accredited entity and does not provide any indication of how an agreement between the parties can be formalised, where the matter has been referred to “any other person”. It is however assumed that when referring a matter to “any other person” our general law relating to conciliation, mediation and arbitration would apply.
The key to successful alternative dispute resolution (whether in terms of the Companies Act or otherwise) may be summarised as follows:
- the parties must agree upfront in the very document from which the dispute would arise that any dispute between them shall be resolved by means of alternative dispute resolution (i.e. not via the courts);
- the clause dealing with alternative dispute resolution should as a minimum –
–firstly, bind the parties to pursuing alternative dispute resolution avenues and prohibiting any party from initiating an action in a court of law (save for interim relief in respect of urgent matters by way of an interdict, or mandamus pending finalisation of this dispute resolution process);
–secondly, provide the manner in which the arbitrator will be appointed, failing a agreement between the parties; and
–thirdly, should agree to a governing body to “police” the process to ensure that an order is finally made.
Without the prior agreement between the parties, the process of utilising an alternative dispute resolution system will in all probability never materialise, especially in situations where the parties are at loggerheads and reluctant to agree on a way forward.