King III - Chapter 11: Alternative dispute resolution

Overview
Chapter



11


 

As new products and services, further globalisation and an increase in electronic relationships and transactions have succeeded in making business more complex, so the corporate world has become increasingly litigious. Disputes are now more frequent and consume more management time and organisational resources than ever before. If disputes cannot be resolved through negotiation, it can take years to seek redress through the courts. Litigation is an expensive and time-consuming exercise, the outcome of which can be unpredictable and which can also have negative consequences for a company’s reputation.

For the first time in South Africa, King III promotes a more responsible and progressive approach to dispute resolution. The Code specifically identifies alternative dispute resolution (ADR) as an essential component of good governance and recommends that, as part of their fiduciary duties, boards and directors should explore more creative methods of dispute resolution.

The Code endorses mediation and conciliation firstly and failing that, arbitration. The two former processes are particularly suited to relationships that have future potential in that they are entirely voluntary. Both involve third-party intervention to assist in exploring the issues and understanding the relative strengths of the opposing argument with a view to arriving at a mutually acceptable way forward. Mediation has traditionally been seen as a mechanism suited to labour disputes but its applications are much wider. Conciliation goes a step further than mediation in that a recommendation is provided by the independent third party.

By resolving past differences, parties can take the opportunity to map their future relationship in a fair way and hopefully arrive at a win-win solution. This could be based on improved productivity, joint-profitability or some other arrangement from which both parties would benefit.

While arbitration may not be seen to be vastly different to traditional litigation, it offers some significant advantages. Notably the parties can choose the adjudicator, focus on the issues and have a private, efficient process.

Key provisions of the Report - click here
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Organisations should consider how different approaches might affect the outcome of a dispute, especially where an important relationship is at stake.
Resolving disputes outside the rigid confines of the judicial process represents the future of dispute resolution. It is a positive development that organisations can now explore the boundaries of disputes to come up with creative solutions. Uncompromising and dogmatic legal confrontations with adversaries seldom result in an optimal outcome and usually create a winner and a loser. ADR can result in two winners and we endorse King III’s view that this approach improves the prospects of a better outcome for organisations and their shareholders.
  1. Is our organisation involved in significant disputes?
  2. What do these disputes teach us about our customers/suppliers and our own approach to business?
  3. Has negotiation failed in these disputes?
  4. Can we consider ADR processes? E.g. mediation, conciliation
  5. Is there potential value to be added in changing the dispute mechanism from an enforcement of rights process to a ‘partnership’ approach?
  6. Has the organisation considered adopting a dispute response plan?
How we can help you
Contractual disputes, claims and litigation can be expensive and unproductive. At PwC, we use our in-depth industry knowledge and professional expertise to offer a range of dispute resolution services. These include
  • Mediation
  • Arbitration
  • Independent expert accountant