Sky-High Legal Fees One Reason Directors Must Consider Alternative Dispute Resolution
Monday, 05 August 2013
SKY-HIGH LEGAL FEES ONE REASON DIRECTORS MUST CONSIDER
ALTERNATIVE DISPUTE RESOLUTION
With the country’s legal fees reportedly higher than those in Washington
or New York—according to Jeff Radebe, Minister of Justice—it is no surprise
that company boards are increasingly using arbitration and other methods of
alternative dispute resolution to avoid costly litigation. 
This is just one reason why such methods are enshrined in King III,
which recommends directors ensure that the company has in place mechanisms
through which to resolve commercial disputes effectively and without incurring
unnecessary cost. In practice, this means alternate dispute resolution via
mediation, conciliation or arbitration.
"Alternative dispute resolution has become an important element of good
governance because it enables directors to resolve a dispute quickly and
cost-effectively,” said Mervyn King, chairperson of the King Committee,
addressing members of the Institute of Directors in Southern Africa (IoDSA) on
directors’ fiduciary responsibilities relating to dispute resolution.
Another important benefit for companies is that arbitration is a private
process, which means that confidential company information does not enter the
public realm, as it does during the conventional legal process. Companies who
have their dirty linen washed in public via a court case almost inevitably
suffer some reputational damage.
Speaking at the same function, Michael Kuper SC, chairperson of The
Arbitration Foundation of Southern Africa (AFSA), explained that the
Constitutional Court has found that private arbitration is not incompatible
with the inalienable right of all citizens to have their disputes settled in
the courts—provided that both parties opted for arbitration. This decision
aligned South Africa with the rest of the world, where arbitration has come to
play an increasingly important role.
"The United Nations has called arbitration the most important legal
development since the Second World War,” Kuper said. "Here in South
Africa, it has grown in importance since a robust, objective process
administered by a neutral body was created via the founding of AFSA.” AFSA is
the fruit of cross-disciplinary collaboration between all interested parties,
including advocates, attorneys, accountants and business. It offers
parties in dispute an accepted process and trained arbitrators to shortcut the
time and expense of the legal process.
Kuper went on to argue that as trade between African countries grew, it
was becoming essential to create a pan-African arbitration body through a
similar collaborative process. "At present, companies operating across Africa have
no ‘litigation safety nets’,” Kuper said. "Multinationals must either rely on
litigation in the courts of the country in which the dispute occurred—something
that is extremely risky for them—or on extremely expensive arbitrators from
Europe or America.”
AFSA has launched just such an initiative, Africa ADR, to create an
African arbitral authority in collaboration with players across the continent.
"We need to create an African solution that will support Africa’s continued
business growth by providing a way to resolve commercial disputes quickly and
cost-effectively,” Kuper concluded.
 "SA’s legal fees
too high—minister”, The New Age, 22 May 2012, available at