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Resolving disputes by arbitration has its pros and its cons

Resolving a dispute by arbitration is usually less expensive than litigation in the ordinary courts. But the downside is that a "wrong" decision by an arbitrator is more difficult to set aside on appeal than a "wrong" decision by a court of law.

The legal costs of resolving a dispute can spiral out of control.

If you get involved in a dispute, there are several possible ways of resolving it. You should not rush into litigation without considering all the alternatives, and particularly, without taking advice on what the legal costs could be, firstly, if you win, and secondly if you lose in court.

Arbitration versus litigation

It is notorious that resorting to litigation in the ordinary courts is very expensive, and it often takes years for the case to reach court.

For this reason, arbitration can seem a more attractive option.

The dispute can then be resolved, not by a judge, but by an arbitrator. Usually, the arbitration hearing can take place more quickly than if one had to go through all of the pre-trial legal processes involved in litigation and then set the matter down for a hearing and wait for the allocation of a trial date.

In addition, arbitration is often less expensive than litigation.

However, arbitration has some significant disadvantages.

One disadvantage is that it is far more difficult to get a wrong decision by an arbitrator overturned on appeal, than it is to overturn a wrong judgment by the courts in a litigated matter.

The criterion for overturning an arbitrator's decision on appeal

If a dispute is heard by the ordinary courts, the losing party usually has the right to appeal against the judgment if he or she believes it to be wrong.

The appeal court then does not hear the matter anew, but it is given the full written transcript of the proceedings in the lower court, and can decide for itself whether the trial judge came to the correct conclusion on the evidence that was laid before the court.

By contrast, where a dispute is resolved by arbitration, and the losing party wishes to appeal against the decision of the arbitrator, the issue before the appeal court is not whether it believes that the decision of the arbitrator was "right" (in other words, whether it would have come to the same conclusion on the evidence) but only whether the decision of the arbitrator was one that could have been reached by "a reasonable decision-maker".

It is only if the appeal court is of the view that the decision of the arbitrator was so indefensible that no reasonable decision-maker could have come to that conclusion, that the arbitrator's decision will be set aside on appeal.

In other words, where an arbitrator's decision is taken on appeal, the court hearing the appeal may very well conclude that it would not have come to the same conclusion as the arbitrator, but that the arbitrator's decision was nonetheless one which a reasonable decision-maker could come to - and that the arbitrator's decision must therefore stand.

An employee appeals against an arbitrator's decision that he be dismissed for misconduct

For example, the recent case of Samson v CCMA [2009] JOL 24164 involved an appeal to the Durban Labour Court against the decision of an arbitrator.

What had happened was that an employee had been dismissed for distributing pornography on his employer company's intranet.

At an internal disciplinary inquiry, the employee in question pleaded guilty to this charge, and was given a final warning.

The company's vice-president then reviewed that decision and decided that the employee must be dismissed.

The employee, believing that dismissal was too severe a sanction, took the matter to the Commission for Conciliation and Arbitration which referred the matter for determination by an arbitrator.

At the arbitration, a number of witnesses were called to testify, and at the end of the proceedings, the arbitrator ruled that the employee's dismissal had been fair and must therefore stand.

Dissatisfied with this outcome, the employee then took the matter on appeal to the Durban Labour Court, where he argued that he should not have been dismissed, and that the arbitrator's decision was wrong and must be set aside.

The Durban Labour Court ruled that, in an appeal against the decision of an arbitrator, the appeal would succeed only if it could be shown, not that the arbitrator's conclusion was wrong, but that it was a decision that no reasonable decision-maker could have reached on the evidence laid before him.

After considering the evidence laid before the arbitrator and his decision that the conduct of the employee warranted dismissal, the Labour Court held that the decision reached by the arbitrator was not one that no reasonable decision-maker could have come to, and that the arbitrator's decision must therefore stand.

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