Preliminary Considerations of Arbitration

There are issues which have to be considered in arbitration in order to further understand the applicability of the system.

Arbitrability

In order to talk about arbitration in arm length, first we have to know issues which are arbitrable and which are not. To state otherwise, some disputes are not subject to arbitration due to different reasons, for instance, public policy might be one reason to exclude an issue from arbitrability. The issue of arbitrability, therefore, concerns whether a particular dispute is properly the subject of arbitration.

Zekarias kenea quoted the proposition of Redfem and Hunter on the idea of arbitrability as follows:

The concept of arbitrability is in effect a public policy limitation upon the scope of arbitration as method of settling disputes. Each state may decide, in accordance with its own public policy considerations, which maters may be settled by arbitration and which may not. If the arbitration agreement covers matters incapable of being settled by arbitration, under the law of the agreement or under the law of the place of arbitration, the agreement is ineffective since it will be an unenforceable. Moreover, recognition and enforcement of an award may be refused if the subject matter of the difference is rot arbitrable under the law of the country where enforcement is sought.

Disputing parties, thus, have to first determine whether their dispute is arbitrable or not before they referred their case for a arbitrator who is appointed to give decision or opinion on the case. States, as to their real conditions, determine which matters are arbitrable or which are non arbitrable.  Under chapter three you will be familiarized the issue of arbitrability in Ethiopia.

Arbitration agreement

Other important concept in arbitration is arbitration agreement. If so, What is arbitration agreement?

Is there any difference b/n arbitration submission and arbitration clause?

Can you mention the requirements of arbitration agreement?

Arbitration, as one of out of court dispute settlement device, most of the time if not completely, depends on the agreement of the disputing parties to resolve their difference through it. To state otherwise, arbitration is hardly possible without the consensus of the conflicting parties to submit their difference  to third party, arbitrator and thereby  to be  bind by the award given thereof. Therefore, parties who intend to resolve their current or potential dispute by arbitration have to express their consent by agreement, mostly known as arbitration agreement.

The word arbitration agreement as defined in Indian arbitration and conciliation Act of 1996, specifically in section 7 thereof is stated as follows.

Arbitration agreement

1. In this part ‘arbitration agreement’  means an agreement by the parties to submit to arbitration, all or certain dispute which have arisen or which may arise b/n them in respect of a define legal relationship , weather contractual or not
2. An arbitration agreement may be in the form of arbitration clause in a contract or in the form of a separate agreement.

In arbitration agreement parties need to have a willingness to abide by the decision of the arbitrator(s). Essentials of arbitration agreement providing for arbitration are that there must be an agreement b/n the parties and the parties must be ‘adidem’ and that there is intention of the parties to have their dispute or differences referred and decided through arbitration.

In Ethiopian words arbitration agreement, submission and arbitration clause, which connote the same thing, are used in the Civil Code and Civil procedure Code and refer negotiated agreement of disputing parties to resolve their dispute by arbitration. The only difference, if it is considered as a difference at all, b/n arbitration clause and arbitration submission is that in case of arbitration clause the agreement of the parties to arbitrate their difference by arbitrator is inserted as a clause in the main contract which is made by the parties. Whereas in arbitration submission their agreement exists independently of main agreement-contract (there is separate agreement).

That is to meant that while persons enter in to legally binding transaction or relationship with other individuals, they may, apart their main obligations they assume for each other,  include in their agreement a clause to settle dispute arise out  of the contract or legal relation by arbitration. This is known as arbitration clause. Arbitration agreement in a contract called arbitration clause is fully distinct from contract in which it is included.

Unlike arbitration clause, arbitration submission is an agreement of conflicting parties usually to settle their current difference through private judge(s). Phrases ‘submission agreement’ and “arbitration clause” are enshrined under art 3325 and 3328 of the civil code Ethiopia respectively.

Art 3325, thus, defines arbitration submission as “contract where by the parties to a dispute entrust its solution to a third party, the arbitrator, who undertakes to settle the dispute in accordance with the principle of Law.”  Sub article 2 of the same article stipulates further that arbitrator may be ordered by the disputing parties to establish a point of fact without making decision on the legal consequences following there from.

Art 3328 of the civil code, on the other hand, talks about ‘arbitration Clause’ though the sub article of this article uses the ‘arbitration submission’ instead of arbitration clause as of the topic article.

As arbitration submission and clause are contracts, the requirements for valid contract in the general part of law of contract should be full filled for their validity.

Different scholars, nevertheless, share the distinct nature of arbitral clause (submission) than other ordinary contracts though it is contract by itself.

Ato Bezza work shimelash, for instance, directly cited the work of Lord Macmillan to show the peculiarities of arbitration submission unlike other types of contracts. To re-cite the paragraph on this matter it reads as:

The other clauses set out the obligations which the parties undertake towards each other, ‘Hincinde’, but arbitration clause does not impose on one of the parties an obligation in favor of the other: It embodies the agreement of both parties that if any dispute arises with regard to the obligation of which the one party has to undertake to the other, such dispute shall be settled by a tribunal of their own constitution.

Then, in arbitration clause, as stated above, the obligations that the parties undertake are not towards each other but rather they both undertake to submit the resolution of their dispute to a person or person(s) called arbitration(s).

The other feature of arbitration clause is that it creates of kind of obligation b/n the disputing parties to submit their conflict to third party for resolution and the other is b/n disputing parties and arbitrators. To state other wise, arbitration clause (submission) not only imposes obligation on the disputing parties to submit their dispute for arbitrator (s) for resolution, but also on the arbitrator, he/she is willing to arbitrate the case, to give arbitral award (opinion)

The fact that parties are able, through arbitral clause, to create their own private regime of administrative of justice is another peculiarity. By this mechanism parties can have their own private judges outside the court system and if they both continue subjecting themselves to this system throughout, there is a possibility to settle their difference up to the end without the intervention of government’s justice machinery, court or administrative tribunal.

A) Validity requirements for arbitration agreement

As far as arbitration agreement is a contract the requirements for the validity of contract have to be ensured. In deed these requirements may differ from one state to the other. In Ethiopian to establish lawfully sustainable agreement, there are requirements which have to be respected by the contracting parties.  Art 1678 of the civil code enumerates requirements of valid contract in their generality. The article reads;

Art 1678 Elements of contract

No valid contract shall exist unless.

1. The parties are capable of contracting and give their consent sustainable at law.
2. The object of the contract is sufficiently defined and possible and lawful.
3. The contract is made in the form prescribed by law, if any.

Therefore, parties in arbitration agreement should follow the above general requirements apart specific requirement(s) that apply(s) to arbitration agreement. In addition to general requirements mentioned under art 1678 above parties in arbitration agreement are expected to conclude their agreement based on special requirements for the same. In Art 3326(1) Civil code for example states that “The capacity to dispose a right without consideration shall be required for the submission to arbitration of a dispute concerning such rights”

When parties need to submit their dispute to be resolved by arbitrator, the first requirement that parties have to ascertained is that whether they do have the right to dispose a right on which they try to submit to arbitration freely (without price) or not. Nevertheless, the person should not always be an owner of a thing (right) to have the right to dispose a right without consideration. The right might emanate either from agency relationship by agreement of agent and principal or by the dictates of the law as witnessed in art 2179 of the Ethiopian Civil code. Even if the right to dispose a right without consideration mainly attached with being an owner of the right, this right might be acquired by being an agent someone who is the owner of the right.

Varieties of Arbitration

Arbitration might be divided having in to consideration different measurements. Accordingly arbitration may be:  Ad-hoc arbitration, contractual in built arbitration, institutional arbitration and statutory arbitration. Let us look briefly each of them.

1)      Ad-hoc arbitration is form of arbitration where the procedure of arbitration, an most of the time, set by the disputing parties them selves. Parties in a dispute need not stick on the institutional procedure. The national law of the place of arbitration avoids any problem arise of ad-hoc arbitration.

2)      Contractual in built arbitration came to juncture due to increasing of business transaction with complex phenomenon. While business relation increased, presumably clashes b/n parties in the transaction is natural, and this scene called for regular machinery in the shape of in built arbitration clause, an integral part of the contract covering present or future disputes and  the system devised was reference to named arbitrator or on arbitrator to be appointed by a designated authority.

3)      Institutional arbitration- this is another form of arbitration and probably most conducive for the parties’ as  the parties agree in advance that in the advent of future disputes they will be settled by arbitration by the named institute of which one or more of them were members. In institutional arbitration parties’ dispute is arbitrated according to pre- establish rules of the institution, which most of the times known to disputing parties. The Arbitrators mostly, are among named specialists.

4)      Statutory arbitration:- the above three kinds of arbitrations are constituted by the consent of the disputing parties. Where as Statutory arbitration is an imposition by law which governs the parties in dispute- parties should submit the case to specified person or institutions for arbitration to resolve their case irrespective of their consent.

Arbitration and litigation

“Sometimes critics of arbitration complain that it is ‘really just court’ ”  Do you agree with this statement?  If so please state your reason(s). If not, what is your ground to have such position?

Even though there are common features of arbitration and litigation, there are also grounds which differentiate both of them. It is to mean that there are features which intersect arbitration and court adjudication.   Chornenki summarized the similarity and difference among the two dispute resolving mechanisms. Here under we present the comparison made by this author in his book entitled ‘The corporate counsel guide to dispute resolution’.

Comparing civil arbitration and litigation

Arbitration-resembles litigation

Adversarial process- parties bring contending positions and try to convince decision- maker to rule in their favour.

Rule of natural justice apply (i.e. notice, fairness, impartiality)

Decision is made according to the law (unless parties agreed to use

Obligations of disclosure to opposite party (although may be streamlined and focused ) apply

Principle of res judicata and issue estoppel apply.

Appeal is possible unless expressly excluded

Arbitration awards like court judgments are enforceable at law.

Arbitration- differs from litigation

• Disputing parties incur costs accommodation (facilities) (e.g. room rental fees, court reporters)
• Parties pay the decision makers fee
• Hearing and other procedures are flexible and informal
• Arbitration decision is not precedential; stare decisis does not apply.
• Process in both private and confidential.
• Process can not be initiated with out the consent of all parties either by way of arbitration clause or an agreement to arbitrate
• A third party claim by a defendant does not exist unless the plaintiff and the third party both agree
• Parties select the decision maker.
• parties choose the decision- maker

Arbitration is typically an out- of- court method for resolving a dispute in which a party submits a disputed matter to impartial person (the arbitrator) for decision. The arbitrator controls the process; listen to both sides and make a decision. Like a court trial only one side will prevail, but unlike court litigation appeal on the merit of the case is limited.

In a more formal setting the arbitrator will conduct hearing where all of the parities present evidence through documents, exhibits and testimony. The parties may agree, in some instances, to establish their own procedure or administrating organization may provide procedures.

What is Arbitration?

Until now you are familiar with the meaning of two major alternative dispute resolution mechanisms, i.e. negotiation and conciliation /mediation and now you will be acquainted with the concept of arbitration. Though most of the definition given upon the word arbitration do have similar gist (theme), there are various definitions as the persons who define the word are different.

As of Byrne’s law dictionary, quoted in the book entitled ‘Law Regulating to arbitration and conciliation arbitration’, ‘Arbitration’   means “the determination of disputes by the decision of one or more persons called arbitrators.”  As to the same source, every dispute, which might be determined by civil action, may be submitted to arbitration.  The author of the same book also specified the following meaning;

Arbitration’ is the substitution by the consent of the parties of another tribunal for the tribunal provided by ordinary process of law, a domestic tribunal as distinct from regularly organized court, proceeding according to the course of the common law depending upon the voluntary acts of the parties, disputants, on the selection of judges of their choice.

Arbitration is a settlement of conflict by the decision of not of regular and ordinary court of law but of one or more persons who are called arbitrators.

But all the definition above connote that arbitration presupposes binding decision from the arbitrators. Whereas some writers use the word arbitration irrespective of the decision that appointed arbitrators would give: whether it is binding decision or non binding decision. In binding arbitration, the arbitrator has the power to render a decision that decides (concludes) the dispute in a legally binding way by issuing an award. The award can be enforced against a party in the same way that a court judgment can be enforced, such as by seizer and sale of property. If arbitration is not “binding”, then it is “advisory.” In advisory arbitration, the parties can choose whether or not to abide by the arbitrator(s) decision.

Some proponents on arbitration, apart two kinds of arbitrations: as binding and non- binding, refuse the applicability of the word arbitration for non- binding decision of arbitrator(s). As to these people, the word arbitration is used only to show a process in which an arbitrator would give an award which is binding upon the conflicting parties.  Agreement of the disputing parties to submit their dispute to third party and  the latter to give his opinion (non- binding decision) upon dispute could not be called as arbitration as to the above opinion. The most widely applicable meaning of arbitration is the former.

Early History of Arbitration

So as to grasp some of the incidents on the progress of arbitration as one of dominant alternative dispute resolution, we consider worth mentioning its historical development in India and England as one can appreciate different content of arbitration law in both countries at different time.

A) In india

To begin with, while every arbitration is the result of consent of the parties in each case, but there was no such element of individual consent in’ panchayat’ proceeding in India. The jurisdiction of the village panchayat seems to be custom.

Though panchayat system of arbitration was not abrogated totally, the advent of British rule in India resulted in the coming in to existence of the Bengal Regulation of 1772. This regulation came up with a provision which recommends parties in a dispute to submit their dispute to arbitrator and considers arbitration award as if it were given by the court. Following Bengal Regulation of 1772, there were consecutive regulations 1780 and 1781 to provide further facilities for arbitration. Regulation of 1781 affirms the finality of arbitration award made by the arbitrator except the corruption or impartiality of arbitrators, on the case arbitrated, is proved by oath of two witnesses.

The original Hindu idea of panchayati arbitration provided for appeal to higher tribunals, but the regulation of 1781 imported the idea that as the arbitration tribunal was of the parties own choice, the parties must be held bound by its decision, except in the case of misconduct of the arbitrator.

The Bengal Regulation of 1993, on the other hand , came up with additional concepts: it empowered the court to refer certain suits to arbitration with the consent of parties where the value of the suit did not go  80 beyond sicca’ Rs 200 and the suits were for counts, partner ship debts, non performance of contracts etc . Apart this substantive issue to refer case to arbitration by court, where parties in a dispute agree, 1793 Regulation specifies procedures to be followed during arbitration.

The first civil procedure (C.P.C) was placed on the statute book in 1959 and the law relating to arbitration was incorporated in chapter six of the same code. Even the procedure code enacted 1908 incorporated provision regarding arbitration in the second schedule and section 89 and clauses (a-f) of subsection (1) of section 104. Parallel to these provisions were the provisions contained in the Indian arbitration Act. Act of 1899, which apply to cases where, if the matters submitted to arbitration were subject of a suit, the suit could, whether with the leave or otherwise, be institute in a presidency town.

Then came the Arbitration Act of 1940 which repealed and replaced the arbitration Act of 1899 and also the second schedule of the code of civil procedure of 1908 and section 89 and clauses (a) to (f) of subsection(1) of section 104.

As to Sujan, in India, “The practice obtained in the beginning was that each party appoints his own arbitrator usually his advocate engaged for the case, who while sitting as arbitrator, normally advocates the cause of his client.”  Since arbitrators advocate the interest of their client, it was hardly possible to reach in agreement and they were forced to refer the case to a single arbitrator, umpire. This was found to be time consuming and it was realized that if ultimately the dispute had to be determined by the decision of a single person, umpire, why go through the process of dual arbitration? Why not appoint a sole arbitrator to begin with. Then the question of selection a sole arbitrator had to be settled either named in the agreement itself or left to be appointed the designated authority or institution.

It was also progressively realized that the selection of arbitrator had to be tailored to the dispute as the real advantage of arbitration over court litigation was that the parties could select a specialist in the line in tune with the nature of the dispute while parties in court could not. This advantage would be lost to the parties if the arbitrator was named in the agreement in advance as the nature of the dispute could not be predicted at that time. Again it was realized that empowerment of designated authority had also its own minus- the named arbitrators, most often, favor to one disputing parties with some relation. Latter on government to reduce corruption and subtle act of arbitrator who is appointed by government, introduce a term in the arbitration clause that arbitrator must give reasons for award he/she made on a claim quantified for more than Rs 50,000.

In order to avoid corruption, curb it and control the same government of India gave emphasis for the establishment of arbitral tribunal. As of the 1940 Indian Arbitration act, the award of on arbitrator will not have a legal   effect unless it get the blessing of the court. As to this arbitration act, the court can: (1) remit the award back to the arbitrator (2) set it aside (3) Pass a decree in terms thereof. Final supervisory power was rested in the court of law.

The 1996 Arbitration and conciliation Act substituted the arbitration act of 1940 and curtailed the power of court and the arbitration award is given teeth.

B)  In England

Arbitration has an ancient origin in England, namely in the practice adopted by merchants and traders by which they referred disputes arising form matters of accounts or other trading for settlement to persons specially selected for the same purpose. Initially only disputes related with personal chattels or personal wrong could be submitted to arbitrator, however, later on dispute on other maters including dispute related on real state also were referred. But the practice was governed by the common law.

The English courts started with violent prejudice against arbitrations as attempts at ousting the jurisdiction of the king’s court, and at common law the authority of an arbitrator, at any time before the award, could be revoked at the pleasure of any of the parties to the agreement for arbitration even where the submission was in writing, by bond or deed, or by the judge’s order or rule the court.

It was identified that the common law applicable to arbitration was not satisfactory and demanded more clarification and as the result Arbitration Act of 1697 was enacted. And farther amendment was made by Procedure Act 1854. The main purpose of this Act, as Sujan, was to make arbitration submission more binding on the parties ; to make decision  of arbitrators more easily enforceable; and  to remedy other defects which were brought in to light as the importance of arbitration increased.

From the above description about the development of arbitration rules in England and India, one can easily understand the contents of arbitration rules in each era and what its development looks. This in turn would enhance the understanding of the subject matter, i.e arbitration, by the reader of this material.

Meaning of mediation /Conciliation

The history of mediation only begins to define what it is. Many questions about mediation are answered by understanding what mediation is and what it is not. The practice falls along a spectrum that defies a strict definition. The specifics of mediation depend on what is being mediated, the parties in a dispute, who is doing the mediating and the setting in which mediation is offered.

Mediation / conciliation is an alternative to violence, self –help or litigation that differs from the process of counseling, negotiation, and arbitration. It can be defined as the processes by which the participants, together with the assistance of neutral person or persons, systematically isolate disputed issues in order to develop optional alternatives and reach a consensual settlement that will accommodate their needs. Mediation/conciliation is a process that emphasizes the participants’ own responsibility for making decisions that affects their lives. It is therefore a self-empowering process. Thus , it is purely different from negotiation so long as there exist a third party involvement.

The more useful way of looking at mediation / conciliation is to see it as a goal –directed, problem –solving intervention. It is intended to resolve disputes and reduce conflict as well as provide a forum for decision making. Even if all elements of the dispute may not be resolved, the underlying conflict can be understood by the participants and reduced to manageable level.

Though some people mention the difference in meaning between mediation and conciliation, others unlike argue that both words are to mean the same thing. And the argument which supports the interchangeability of the two words prevails. In both procedures a successful completion of the proceedings results in a mutually agreed settlement of disputes between the parties though, in some jurisdiction, mediation is treated as distinct from conciliation in as much as in mediation the emphasis is the more positive role of the neutral third party than conciliation. Still others say that conciliation is “non-binding arbitration” whereas mediation is merely “assisted negotiation.”  As already said, these factors where the role that the neutral third party can play depend on the nature of the disputes, the degree of the willingness of the parties and the skill of the individual neutral. In this teaching material mediation and conciliation are as synonymous. In Ethiopia the word conciliation is used.

Features of Mediation /Conciliation

Mediation, differ from arbitration where the outsider decides for the parties (their behalf) how the matter is to be resolved. Although a mediator may recommend or try to influence a party, he or she has no comparable decision making powers and practical or legal ability to compel any party to do or refrain from doing anything. This is to mean that mediation is not binding.

Practical purpose of mediation is settlement. To facilitate the settlement, parties normally insert “without prejudice clause” in their discussion. A “without prejudice” process does not alter a party‘s legal right.  No admission or inferences are drawn from the fact of participation. A” without prejudice “communication is a protected one that shelters under the confide settlement attempts and cannot latter be used to harm the communicator. Admissions against interests made during the course of without prejudice discussions are not be used against the admitting party to its detriment, such as to prove facts or issues in a law suit.

Mediation could be annexed to the court system, so as to become a judgment of the court if the agreement is reached. The parties may define the issues to be settled by themselves or the mediator may assist them in this regard. The extent to which the mediator interferes in the negotiation process can  vary widely , on a continuum ranging from mere as chairperson , to very structured process in which the mediator go so far as to suggest settlements to the parties.

Perceived advantages of mediation

When used in the contested of ongoing relationships, mediation allows underlying issues and emotion to be addressed and resolved, and so allows the relationship to be continued in the future. Thus, mediation is commonly used in the area of family law. As the decision is reached by the parties to the dispute instead of being imposed on them, there is a great satisfaction with the dispute resolution process and outcome, and consequently, greater compliance with the result. The process is less confrontational than adjudication and so reduces the likely hood of win or loss mentality and provides a frame work for the future dispute between the parties. As opposed to adjudication, mediation process is faster, cheaper and less formalized, both in terms of process and in tailoring results. This increased flexibility allows the needs of particular parties to be addressed.

Perceived disadvantages of mediation

As of the perceived advantages, there are also short comings of mediation: it is inappropriate where parties to a dispute are at an imbalance of power, or where there is a history of physical violence, as one intimidate the other; it also increase cost if mediation fails and arbitration follows; unrepresented party by a lawyer may be disadvantaged than the presented one. It is also questionable whether the perceived advantages of mediation are possible if the process is involuntary. There are concerns regarding the ability and qualification of mediators, and whether they should be subject to professional standards. Finally, the use of mediator as alternative to court adjudication may result in second class justice for low –income and disadvantaged peoples.

Mediation proceedings and the roles of mediator(s)

Mediation involves an impartial, independent third party, mediator, helping disputing parties to reach a voluntary, mutually agreed solution. The disputant, not the mediator decides the terms of the agreement. The only function of mediator is to assist the disputants to over come any obstacles during their negotiation, to determine the dispute in the hope that disputants and mediator will develop creative solutions that satisfy their interest.

To achieve this purpose there are various stages in mediation with their own characteristics which demand different skills of arbitrator. Writers divided these steps in to different stages: some of them make the steps ten and others make it seven. Here under you will see various stages of mediation (mediation proceeding) and the function of mediator in each stage.

A) Introduction and setting frame work

The mediator is responsible for the condition which prevails at the mediation. After the mediator welcome the disputing parties, he will explain the process and his/her approach to the disputants and try to make them at ease with the process.  The mediator at this stage should inform the disputants that he his impartial and neutral. Further more, apart fro his impartiality and neutrality, he should tell the parties that he does not have the role of judge or arbitrator since he is there just to facilitate the negotiation process between the parties. At the same time mediator set ground rules /rules of courtesy and introduces the same to the disputants so as to attain full cooperation of parties to listening each other, to be open for the persuasion and to have a forward looking to avoid their difference through smooth dialogue.

The rules of courtesy may include the following contents and others depending on the nature of dispute or issues involved thereof.

1)      Disputants should respect the view of the other party.

2)      Disputants can leave the mediation at any time and they will not be coerced in the solution.

3)      Mediation could be taken place with the presence of mediator and parties in the same ceiling or private meeting with the mediator.

4)      Information discussed in mediation is confidential:  issues revealed during mediation process remain secret.

5)      A mediator cannot be called as a witness at the future proceedings and that the mediator notes cannot be cited.

B) Statement taking

After the ground rules have been set and accepted by the parties, each party in a dispute explains the dispute from his perspectives. Depending on the case or the emotion of the parties involved, the process may or may not take longer period. At this juncture, the mediator makes sure that   there is no interruption while one of the parties expresses his feeling. In addition he would take note concerning the interest of disputing parties and the preliminary ideas for settlement. In this regard, for instance, Art. 3320 Civil Code of Ethiopia imposes duty upon conciliator (mediator) to ensure that parties in mediation process express their view. Other important functions of mediator at this stage of proceeding is summarizing and checking the accuracy of the arguments of parties.

C) List /agenda construction

This stage is for the mediator to conduct open sessions to ask the disputants questions, to clarify perceptions and underlying interests. Parties suggest topics, agree on the list of the issues, and agree on the priority of agenda to be discussed. While the parties forward their opinion on the matter, there might be words which offend the other party and the mediator need to substitute these words with positive language. Generally the mediator here attempts to identify agreed upon facts and issues.

D) Exploration

Following determination of the agendum, parties will discuss the lists. The mediator here encourages parties to talk each other directly as far as the dispute or the issue is their. The mediator directs parties move from blame to understand each other‘s position. At the point where parties face difficult items, mediator assists them on resolving the issue.

E) Separate meeting(caucuses)

A separate meeting (caucuses) is one of the techniques used by the mediator in conducting the meditation process. At the open session of mediator and disputants, real intention and interest of the latter may not be revealed and to get the real intention of parties mediator can arrange separate meeting with each of the disputants. Such meetings are an opportunity for the mediator and each party to explore frankly and in confidence the issue in the case and option for settlement. The benefits of having caucuses by neutral party include;

1. It enables mediator to build closer relationship with parties
2. It avoids firm position of disputing parties that they hold as the time of joint session.
3. Allow for deeper and sustainable discussion on the issue without argument or interruption

 

F) Option generation, negotiation

There are several ways of generating options. These ways include: writing, interview, survey, bench marking and brain storming session. One of the main ways to generate option is brain storming. It is conducted by out lining the aims of the session by mediator. It is conducted to identify problems to generate feasible ideas as a solution to the problem identified by drawing on people’s own experience and to the problems, and to help the participants to develop a new skill that they could use themselves in the future.

After generating all possible ideas or options, it is useful for an efficient brainstorming that the facilitator looks for common theme or categories and grouping the problems and ideas.

1. Selecting an option

At this stage of mediation process, the mediator will allow the disputants to assess the options generated and comment on options that may be feasible or that may be impractical. The mediator may afford objective criteria or bench marks to help disputants in choosing a best option and the ones which is conceived as fair by both parties.  Mediation would be much more effective if the participants do have standards by which they rely on   their proposed solution for amicable solution. The criteria may include market value, depreciation cost, etc.

1. Closure

As discussed in the previous sub-sections parties in a dispute often put the BATNA while they negotiate to end their dispute amicably. Based on the BATNA they evaluate the proposed solution suggested by the other party and accept the proposal if it is better than their BATNA. If the disputants reach an agreement, they can put their agreement in writing. The parties can then determine with the assistance of the mediator, what steps they need to take to implement the agreement. Such as when, where and how the agreement has to implement will be determined.

If there is no agreement, the mediator   can assist the disputants to determine whether there are any issues that they can agree on.

The roles of lawyers in mediation

Lawyers may assume different participatory roles in mediation. A lawyer may represent his client and negotiate on his behalf. In case of court annexed mediation particularly, clients would favour if their lawyers involved in that process.

Lawyers would enable their clients to assess litigation consequences if the latter take their dispute to courts, and also disputants would get sufficient information about the working atmosphere in court.

Lawyers should be able to inform disputants of the relevant law and suggest possible court out come. However, the extent of his help should be limited to general information, to the extent of defining the legal issues.  Lawyers should not serve as legal advisors or should not direct the decision of the clients in line with their interpretation of the law as applied to the fact of the situation. Even after agreement of disputing parties is reached, lawyers can play great role to draft the agreement of their clients through mediation process.

Indeed, there are various arguments about the appropriate roles of lawyers who serve as mediators. The first line of argument is the one which equates mediation with presentation and raises ethical values that prohibits the practice of attorney mediation. Second argument on the opposite supports the role of lawyer as mediator in carefully prescribed conditions.

Legal effects of mediated agreement

The purpose of mediation is to enable the parties to arrive at a mutually acceptable resolution of the dispute in a cooperative and informal manner.  If the matter is settled at mediation, the mediation agreement, as observed from practice and contents of laws on this regard, is considered to be a contract and is enforced under the general principle of contract law. The Ethiopian law, for instance, has the similar position. Art. 3320 of the civil code requires conciliator to draw up the terms of compromise when the parties settled their dispute amicably, i.e. through mediation.  Art. 3307 C.C also defined compromise as one forms of contract. The provision reads as “A compromise is a contract whereby the parties, through mutual concession, terminate an existing dispute or prevent a dispute arising in the future.”   If one of parties in their compromise renounced all of his rights, actions and claims, he will lose such rights, actions and claims  for good. We can also understand from art.1731 of the C.C that contractual agreement is a law between contracting parties and parties are duty bound to respect their promise.

Settlement is the primary way people adjust dispute, alter ownership, and rearrange their relationships. Because we reach settlements by negotiating, bargaining pervades personal, commercial, social and political life.

Even though some writers try to distinguish negotiation from bargaining, in popular usage the terms are interchangeable. Hence, the terms are used interchangeably in this material and as defined here, negotiating or` bargaining’, as to Chorniki, means “the method by which two or more parties communicate in an effort to agree to change or refrain from changing: their relationship with each other; their relationship with others; their relationship with respect to an object or object. “

Negotiation can also be defined as: a non-binding procedure involving direct interaction of the disputing parties where in a party approaches the other with the offer of a negotiated settlement based on an objective assessment of each other’s position.

Primary Consideration of Negotiation

Selection is at the heart of ADR use. Whether your client or yourself are making an ad-hoc decision to use ADR for current controversy or are designing a systematic ADR program, it is vital to make appropriate choice for appropriate case. It is blunt fact that the one who makes the choice has to know the features of each ADR mechanisms. Here under are some primary concepts of negotiation.

When is negotiation appropriate Dispute resolution?

Selection is a challenging in ADR. Confusion about what choice to make is one reason that ADR sometimes generates resistance. According to Chorniki, there are criteria either to use one type of ADR or not. As to him negotiation remedy is appropriate when:

1)      Collaboration among parties is probable with respect to subject –matter of the dispute.

2)      Collaboration among parties is probable with respect to the process ;

3)      There is  no desire or need to resolve contested evidence ;

4)      There is no desire or need to resolve contested legal issues;

5)      There are some concerns about the cost and negative consequences of failing to achieve out come –cost may relate to relationships , reputation ,probable damage awards , transaction or opportunity costs;

6)      The parties are able to and willing to make responsibility for the out come ( since negotiation is highly participatory)

7)      There is no need for involvement from an outsider because the necessary skills and wisdom ( to manage the discussion to analyze the conflict etc.) reside with the parties ; and

8)      There are no public interest concerns that would demand public attention and scrutiny.

The above measurements are best ways of identifying the situations when negotiation would be preferred dispute resolution mechanism.

Nature of bargaining power

The other crucial factor in negotiation and the negotiator need to know is the nature of bargaining power as no negotiation without bargaining power.

In general terms, power is the capacity to exert influence .It is the ability of a person or a group to cause change,” to overcome resistance in achieving desired objectives or results.” It is also defined as the probability that one actor within a social relationship will be in a position to impose his will despite resistance. Implemented in negotiating relationship, bargaining power is party’s capacity   in influencing  the out- comes of negotiation towards its own goals.  Chamberlain explained, therefore, that bargaining power is the ability to secure another agreement on one’s own terms.

Bargaining power must exist for there be bargaining. If one party has no power over the other, there is no bargaining relationship. Rather, either it is relationship involving a different type of power such as hierarchical power or a relationship equal with common goals seeking to discover through discussion the means for maximum achievement of those goals. Essential elements of bargaining are lacking in situations in which one party has total control over the other. For instance, master-slaves, or lord serf relationships are not bargaining relationships if the slave or serf is totally devoid of power to affect the interest of the lord or master. In contrast, where the parties have something to exchange and have alternative to submitting to the other’s will, they have bargaining power.

When we speak of ‘Bargaining power’, we must also remember that, as others have noted, it is not an attribute that exists by itself. It is not a quantity that an individual can own, hoard or stockpile for future use against any other party. Bargaining power does not exist independently of bargaining relationship with a particular party or parties and with respect to particular or potential transaction.

The cost benefit model helps to understand the nature of bargaining power that analyzes the elements of bargaining power shows the relationship among those elements and reveals the dynamics of their transactions.

Element affecting of bargaining power;

Perception (P), offers to meet the other’s  needs (OMON) ,Best Alternative to proposed  agreement (BAPA) , Accrued cost (AC) , cost of impending negotiation (COIN), probability of performance , and  Predictive accuracy (PA) ,  among other things are factors which affects bargaining power as illustrated by Goldman and Rojot in their book. Here are the excerpts taken from their book to show these elements.

A) Perception (p). One of the elements of bargaining power is perception. Much of what we believe is based on inadequate or inaccurate data. Yet, those short comings rarely detract from our confidence in those beliefs. Every skilled negotiator understands that what counts in bargaining is not the reality; what counts are the parties’ perceptions of reality. The element of bargaing power exists only to the extent that they are perceived as existing in the minds of the transaction participants. The situation, the environment and the context may contain abundant resources and formidable opportunities to build up the bargaining power of one or both parties.  However, if parties are not aware of these opportunities or neglect them, they are unlikely to affect the bargaining out come.

Thus, a significant factor in developing bargaining power requires:

1) Bring your perception in line with the reality;

2) Ascertaining the other side’s perceptions of the proposed transaction and available alternatives and

3) Finding ways to favorably alter the other side’s perception.

Perception, therefore, is an element that has direct impact upon all other elements of bargaining power.

When negotiating, each party’s bargaining power is based on his opponent’s perception of the cost of agreeing and the cost of disagreeing with other’s proposals. Therefore, in large measure our bargaining power is a function of the way the bargaining situation is perceived by our opponent not by ourselves. Accordingly parties aiming at increasing their own bargaining power must influence the other side’s perception.

B) Offer to Meet the others needs (OMON)

People enter negotiation to achieve particular objectives. Bargaining objectives can be analyzed as a range between two salient points which constitute the limits of the parties’ objectives; an ideal goal and a resistance point. That is the most preferred result (the goal) and the least acceptable result (the resistant point.)  In negotiation each party is looking to obtain something from the other side that he does not think he can obtain more easily in some other manner.

A party will stay in negotiating relationship given what the other party expects of him and settle on the other’s terms if he wants badly enough what other party has to offer. The more one side depends on other to satisfy his needs, the more he will be inclined to settle on the terms proposed by the other side. Thus, a core element of bargaining power is the offer to meet the other’s needs. The perceived needs of negotiating parties are related to each other in one of four ways. They may be perceived to be: common, compatible, conflicting or incompatible. Common needs exist when opposing parties stand to mutually benefit from a particular resolution or facet of the resolution of the conflict. Compatible needs are found when one side , though not gaining any particular benefit for itself , can accommodate the other’s special need with out scarifying any thing that it needs.  Needs conflict when one side’s gain is the other side’s loss , with respect to particular need. A negotiated resolution represents only a partial accommodation of this aspect of each side’s needs.  Incompatible needs are involved in a transaction if one side’s needs could be met only at the expense of not meeting some need of the other side. For example , if A’s packing machines are designed to package parts in sets of 10 but B’s manufacturing process uses 12 of these parts at a time , then  the contractual terms respecting the packaging of shipments involves incompatible needs.

When a negotiation involves only common or compatible needs it can be called an integrative or problem solving transaction. In many negotiating situations the parties’ needs are wholly conflicting or incompatible. If this is the case, the bargaining is distributive. In purely distributive situation, sometimes called an exchange transaction, each side has the ability to accommodate some or all of the other’s needs but only by failing to meet part or all of its own needs.

C) Best Alternative to the proposed Agreement (BAPA)

Sound guidance for effective negotiating of integrative (problem solving)  transaction is identifying the best alternative to searching a settlement  agreement known as best alternative to negotiating agreement(BATNA).  The Authors of the book entitled ‘Negotiation: theory and practice’ uses another phrase, Best Alternative to Proposed Agreement (BAPA). According to these author’s the phrase, Best Alternative to negotiated Agreement is misleading to the extent that it indicates that the negotiator’s bargaining power depends only on available alternative form of conflict resolution (that is, something other than a negotiated agreement). Often, however, the best alternative for a negotiator is to reach a negotiated agreement with some other party –for example, one who perceives his or her needs in a way that more compatible with the moving party’s to satisfy those needs. Otherwise, the best alternative may be to seek other conflict resolution methods for accomplishing one’s goals. As to the scholars on negotiation, a skilled negotiator should be innovative as well as rigorous in exploring what is best alternative as to the proposed agreement.

D) Accrued cost

Whether successful or not, bargaining has its costs. These costs always include time and effort, and often include out of pocket expenditure for research, personal, consultants, presentation materials, telecommunications, and the like. Research shows that typically the more people invest in project, the more willing to put their money on it. It follows that the more that is invested in a conflict resolution transaction, the greater will be the desire to resolve the conflict through that transactions rather than incur a whole new set of transaction costs in different efforts that might not produce a more favourable result. Indeed, at some point the budget resources available for the transaction might preclude opening negotiating with others.

E) Costs of impending negotiation (COIN)

The greater the cost a negotiator expects will be required to continue the negotiations, the greater is the bargainer’s motivation to abandons that transaction and seeks the best alternative to the proposed agreement (BAPA).

F) Probability of performance (POP)

Another element affecting negotiating power is each side’s perception of the likelihood that the opponents will in fact do what it promises. That is, each side’s perception of other’s offer to meet its needs is discounted by the extent to which it anticipates that in fact the other may fail to do what it promises. Another way to put this is that the perceived probability of other’s performance alters the net value placed in the other side’s offer to meet one’s needs (OMON).

g) Predictive Accuracy

One lesson taught by the concept of bounded rationality is that  one can rarely  assess with 100 percent reliability the true net either of what is proposed or the alternatives to that proposal. Unforeseeable events, lapses in logical analysis, and gaps and mistaken information, all detract from the predictive Accuracy (PA) of the BAPA or COIN. Therefore, in weighing whether to turn to the alternative to the proposed agreement, a negotiation should discount the attractiveness of that alternative to the extent that he or she has a high or low level of confidence in the accuracy with which that alternative has been assessed. And, not surprisingly, research confirms that greater the uncertainty respecting the value of the alternatives to the proposed bargaining proposal, the greater is the prospect that a negotiator will accept a proposed settlement.

Perceived advantages of negotiation

One special attribute of negotiation as a method of resolving difference is flexibility, both with regard to the manner in which the parties proceed and with respect to the ultimate accommodation reached. It allows difference to be adjusted in a way that either maximum mutual gains or meets at least some needs of all parties to settlement. A third attribute is that it implicitly recognizes the dignity and worth of all participants since negotiated resolution requires the parties assent. Finally, unlike some other methods of resolving difference, negotiation takes in to account unofficial as well as official values –that is, it can reflect values that are important to the parties even though these values not have legal status.

Perceived disadvantages of negotiations

The following points might be taken as the disadvantages of negotiation. Firstly, as negotiation is all about bargaining, the parties have no assurance that they will reach a settlement. Nevertheless, the process requires an investment of time, effort, and often other expenses. Secondly, the soundness of the resolution may be impaired if the parties miss present their goal or the back ground information or if, after agreement is reached, circumstances change from what one or more parties anticipated during bargaining. Thirdly, sometimes negotiated settlement does not satisfy community mores or relevant and lawful interest of third parties and thus, may be unenforceable or subject to one or more participants to criminal penalties. Accordingly, it is not always the most desirable means of resolving conflict.

Legal effects of negotiation agreement

Negotiation settlement is a daily practice in any society. After back and forth communication between disputing parties on their disagreement, they will reach an agreement and their agreement also has legal effect provided that parties respect what the law prescribed as requirements. The law not only imposes limits that shape both the procedure and substance of negotiation, but also its effects among the negotiating parties. In some situations the law prohibits negotiated settlement. The most obvious example is where the agreement requires one or more parties to engage in unlawful conduct such as a non complete agreement or other agreement which might constitute a restraint of trade.

If the parties conclude negotiation in line with the law, this agreement will have effect on the agreed parties. Currently, the general policy of the law favors negotiated settlement of current and future disputes for the obvious benefit that which settlement brings- less litigation and cost in terms of time and money for the parties and the courts. Settlement agreement is, therefore, considered as contracts between negotiating parties.

In general, terms of agreement lawfully concluded by the negotiating parties shall be binding on them as though they were law. This is to mean that though the requirements for valid negotiation agreement differ from country to country, an agreement which is established with the free consent of the parties in dispute and as to the specific requirement specified by the   law at hand, the agreement will be binding upon the parties.