How businesses can save by embracing arbitration
Rwandan and regional business community have been encouraged to look into the potential of arbitration in dispute settlement without resorting to courts of law.
Arbitration is an internationally recognised procedure whereby a dispute is submitted, by agreement of the parties, to a neutral party to make a binding decision on the dispute as opposed to going to court.
Rwanda’s arbitration institution, the Kigali Arbitration Centre, was set up in 2012 and has to-date handled 68 cases.
However, legal minds and business experts say that with the level of economic activity and investments, there is more value handling disputes through arbitration as opposed to litigation.
They say that for a country working to improve the business environment and improve commercial efficiency, arbitration should be the more popular avenue trough which to handle commercial disputes.
Speaking on the sidelines of a two-day East Africa International Arbitration Conference (EAIAC), in Kigali yesterday, Isabelle Kalihangabo, the permanent secretary at the Ministry of Justice, told The New Times that although courts can now handle disputes in a shorter time, appeals are often time consuming.
“Arbitration is the preferred dispute resolution mechanism, especially for businesses, because it is time conscious and does not take too much time. Our courts can now handle disputes in a shorter time but when it goes to appeals, it can take time, as for arbitration, it only takes one hearing and a dispute is settled,” she said.
The PS added that though most corporations shy away from the mechanism citing high costs compared to litigation, looking at the bigger picture, arbitration makes more business sense.
“Although litigation is considered affordable compared to arbitration, it is up to the two parties to see what is at stake, time or money. It is true that it is more expensive compared to litigation but what is expensive in the long run is time which is more relevant especially from a business point of view,” she added.
Among other things, arbitration guarantees the confidentiality of the disputes at hand as opposed to litigation where high profile cases receive publicity which could affect the reputation of corporations.
Chief Justice Sam Rugege said that the mechanism als0 ensures finality of decisions as well as easier enforcement of the final agreement.
Prof. Rugege said that increased globalisation and business transactions among parties from all across the world increases the likelihood of disputes arising.
“We all agree that arbitration and similar mechanism are a better avenue for solving disputes than litigation in national courts largely because of the expertise, confidentiality, finality of decisions and easier enforcement mechanism, among other factors,” the CJ said.
He explained that, in most incidences, investors and business people prefer their disputes resolved in privacy and confidentially which arbitration guarantees. Others want to ensure that their disputes are resolved by experts who are knowledgeable about the topics at hand which is also provided for by arbitration.
Rugege, however, took issue with the cost of arbitration, which is often quite high and could hinder the uptake of mechanism, as well as the tendency for practitioners to prefer international cases which obviously remunerate better.
“We wish it could be used more locally because it would reduce our case log, but most of you guys are interested in international arbitration with big money,” Rugege said.
To make it more effective, he challenged practitioners to seek to understand why it is not as popular in the country and in the region.
“The question you may ask yourself is whether arbitration is being used as much as it should in Africa and the East African region in particular. Are our arbitration centres being used? If not, why not? Is it because of the high cost? Are your fees perhaps too high? Is it lack of confidence in the arbitral process? How equipped are our arbitration centres?” Rugege posed.
Fidele Masengo, the executive director of Kigali Arbitration Centre, told The New Times that since the centre’s establishment five years ago, they have resolved disputes of an estimated $36 million.
These have involved parties beyond Rwanda including countries such as USA, Kenya, Italy, Pakistan, Senegal, China, Dubai, Germany, among others.
This, he said, shows the growing confidence in the centres considering the fact that most arbitration centre across the world take between three and five years before registering their first case.
He said the cost of arbitration is determined by the value of the dispute at hand.