Why business operators should embrace arbitration

For long, businesses have sought court intervention to resolve commercial disputes among them. This process is always lengthy and costly on either party of the conflict, and may not provide the best solution. That is why experts and some private sector players have increasingly encouraged businesses to embrace arbitration, which is a more reconciliatory approach to litigation that promotes amicable settlement of business disputes and is less costly compared to court cases, writes Francis Byaruhanga.
Arbitration has been touted as a better way of handling business disputes. (Net photo.)
Arbitration has been touted as a better way of handling business disputes. (Net photo.)

For long, businesses have sought court intervention to resolve commercial disputes among them. This process is always lengthy and costly on either party of the conflict, and may not provide the best solution. That is why experts and some private sector players have increasingly encouraged businesses to embrace arbitration, which is a more reconciliatory approach to litigation that promotes amicable settlement of business disputes and is less costly compared to court cases, writes Francis Byaruhanga. 

The growth of the industrial and business sectors has resulted in marginal rise in commercial disputes, which are costly, especially in terms of lawyers costs and time spent in court sessions. For instance, last year a dispute over a trade name involving regional firms operating in Rwanda created more harm than good as each company used all the legal gymnastics to outwit the other, and hence causing more friction and animosity.

Experts say this happened because most business operators still use the traditional way of settling trade disputes through the commercial courts ignoring opportunities offered by arbitration.

Experts say this happened because most business operators still use the traditional way of settling trade disputes through the Commercial Court ignoring opportunities offered by arbitration.

Arbitration is a dispute resolution mechanism of settling commercial conflicts outside the court process. The parties to the dispute select one or more independent persons to hear the case and pronounce themselves on the matter. The decision by the arbitrator is binding on both parties and is recognised by law.

Dr Fidelle Masengo, the Kigali International Arbitration Centre (KIAC) secretary general, said arbitration is new in Rwanda, adding that they are going to conduct awareness drives to educate business operators on the concept. He argued that arbitration benefits all parties involved in commercial disputes, saying it is not costly in terms of money and time compared to resort to courts of law.

“We are already training lawyers and business people about the benefits of this form of settling commercial conflicts so they avoid lengthy and costly court processes,” he said.

He said KIAC is working with the Private Sector Federation and some specific sectors, like mining, services and banking, sensitising them on how they can use arbitration to settle disputes. He said the centre has already trained a sizeable number of professional arbitrators to handle such cases.

Jean Claude Mutabazi Abayo, an advocate at Rwanda Bar Association, said a lot needs to be done, noting that many Rwandans do not know the role of arbitrators.

“In most cases, parties involved in disputes do not understand the use of arbitration, while others neglect it when they are drafting commercial contracts preferring to use courts. However, arbitration helps resolve commercial conflicts faster compared to courts of law,” Abayo, also the lead partner at Abayo Law Firm, said.

Business actors’ say

Mustapha Bahati, head of the finance and marketing department at Lemigo Hotel, urges businesses to embrace arbitration, saying it provides amicable solutions compared to going to courts.

“We try our best to avoid any misunderstandings with business partners, but in case conflicts arise we prefer arbitration to courts because the litigation method destroys the relationship,” he said in an interview with Business Times yesterday.

Mun Seong, the owner of Kimihurura-based Korea company dealing in car sells and software, prefers arbitration “because courts do nothing rather than complicating matters” through the win-lose approach of commercial conflicts.

“Arbitration is better because all parties win when the intermediaries are involved to find a solution rather than finding the winner and the loser,” she said.
Why arbitration
Using arbitration has many advantages, including allowing parties to the conflict to choose the tribunal judge.This makes arbitration especially useful in complex, technical commercial disputes where judges are not familiar with the subject matter, according to Abayo.

Professionals, say bankers or accountants, can be selected to hear the dispute since they are more knowledgeable on matters in their specific areas of specialisation compared to Commercial Court judge.

Under the Rwandan arbitration law, parties are also free to choose the time frame and the number of hearings during the arbitration process, as well as the venue and language. This is specifically beneficial to foreign litigants in Rwanda who may have difficulty following court proceedings in Kinyarwanda.

Arbitration is also held in privacy compared to courts hearings that are open to the members of the public, where trade secrets can be exposed.

 

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