Guide to business disputes: litigation, arbitration & mediation
Disputes are uncommon in business. Contestation is always present where competition prevails. However, at times, these turn hostile, requiring some form of legal intervention in the form of dispute resolution.
By way of deﬁnition, dispute resolution is the process during which conﬂicts are resolved by addressing the needs and interests of both parties. The traditional method for resolving business disputes in Singapore is litigation, where each party - and often together with a corporate lawyer - commence proceedings in court.
Today, there are alternative dispute resolutions (ADR), with two of the most common methods being arbitration and mediation.
What is litigation?
Litigation for dispute resolution is described as the process of taking legal action in the form of civil proceedings. It involves a party (the claimant) bringing a claim against another in court.
The claimant can ﬁrst engage a lawyer to draft a letter of demand to be sent to the other party. The latter is required to comply with the demands or risk being taken to court. In the event where the demands are not met, the lawyer may advise commencing legal proceedings if other dispute resolution methods are not possible. Under the Rules of Court, there are two ways to commence legal proceedings in Singapore:
- Writ of Summons
- Originating Summons
Writ of Summons
In pursuant to Order 6 of the Rules of Court, civil actions that involve substantial disputes of fact can only commence through a Writ of Summons. These include but are not limited to claims for damages as a result of contractual breaches, road accidents, property damage, negligence, copyright infringement, fraud and defamation.
The writ is a formal document (Form 2) addressed to the party you intend to take action against (the defendant), requiring a court appearance if he/she wishes to dispute the claim.
A simpler and swifter procedure, the Originating Summons (Forms 4 or 5), following Order 7, is required by statute, or when the dispute concerns matters of law in which there is unlikely any substantial dispute of facts. It is generally dependent on aﬃdavits ﬁled by appointed lawyers or the plaintiﬀs themselves and does not involve pleadings or interlocutory proceedings. Should requirements concerning a writ apply, necessary modiﬁcations can be made to the Originating Summons.
What is arbitration?
Arbitration is an alternative method of dispute resolution that involves a neutral third party - the “arbitrator”. He/she makes the ﬁnal decision for the parties involved. Your lawyer may recommend this option before taking the case to the Singapore court as it allows the parties to resolve the dispute more amicably.
Generally, arbitration is recommended by lawyers when the parties in dispute are unsure of the best and fairest agreement, and are keen to explore diﬀerent solutions. This method is more adversarial than other methods as there is a party that loses upon the decision made by the arbitrator - the arbitral award - no matter how fair and reasonable it may be. As such, it is held in a formal setting with rules that both parties must comply.
What is mediation?
Apart from arbitration, parties in dispute can consider mediation. A neutral third party called the “mediator” acts more as a facilitator to the negotiations between the parties and allows them to come to a mutual agreement voluntarily. This method of dispute resolution is ideal for parties who are conﬁdent in expressing what they want.
Being part of the decision-making process means you are less impacted by the judgement or award against you, especially so if you have a high stake in this dispute and you cannot aﬀord to lose out on too much.
If a neutral third party opinion is required, a neutral evaluation may take place. The mediator assesses the merits of the case and oﬀers a sound opinion on the probability of success for both parties. The parties can then discuss if they want to have the opinion legally binding on their case - like a court judgement - and if so, they agree to the remedies in accordance with the opinion.
Why choose arbitration & mediation over litigation
Arbitration and mediation are often recommended over litigation due to several reasons:
1. Less costly
Compared to litigation and arbitration, mediation is a more aﬀordable dispute resolution method. This is because litigation and arbitration court proceedings may potentially stretch over an extended period, which then adds on to the hearing fees, and those of your lawyer’s. Mediation is therefore for business owners who do not have enough funds to begin with or when prolonged proceedings costs may potentially push the business to bankruptcy.
Since litigation judgements are accessible to the public, businesses may ﬁnd their brand image and reputation compromised. If parties want to safeguard the integrity of their brand in the industry and market of consumers, they can opt for arbitration or mediation and keep their dispute conﬁdential.
3. Less confrontational
With a neutral third party to mediate between the two parties, this is far less confrontational and exhausting than litigation. From the business perspective, this is conducive to maintaining long-term relationships despite the dispute as a breakdown of partnerships can have larger and more severe implications.
When arbitration & mediation is not possible
Arbitration and mediation are not always possible as both parties must agree. Your lawyer may advise against them and recommend you to take the case to the Singapore court for speciﬁc reasons:
1. A huge disparity in bargaining power exists
Should either party have higher bargaining power in terms of resources, revenue and the equivalent, the decision may be skewed in their favour with the other feeling pressured into reaching an agreement. Litigation ensures that the judge makes a fair and equitable decision based on the merits.
2. The relationship has soured beyond repair
If parties are unwilling to arbitrate or mediate with good faith since the relationship has severely broken down, it becomes diﬃcult for any neutral third party to intervene. Litigation ensures the case is dealt with according to the law and the judge makes the ﬁnal decision based on the facts of the case.
3. Either party is reluctant to arbitrate or mediate
Since arbitration and mediation can only take place upon mutual agreement, that is in the absence of business clauses that make these methods contractually compulsory, litigation is the way forward.
If you are unclear whether arbitration, mediation or litigation is the best for you, consult one of our dispute resolution lawyers in Singapore for advice.