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Business Law

Alternative Methods of Dispute Resolution


By the end of this section, you should be able to:

Describe alternative methods of dispute resolution. Explain the advantages and disadvantages of it.

Course Content

Introduction Arbitration Mediation/Conciliation Negotiation


The adversarial litigation is time consuming, costly and bound with lots of technicalities Alternative methods of dispute resolution or also known as alternative dispute resolution (ADR) is inexpensive, less time consuming and less technicalities ADR provide alternative modes of dispute resolution through arbitration, mediation, conciliation and negotiation


This is another mechanism for resolving legal disputes The parties agree to allow an independent person (arbitrator) to make a binding decision In Malaysia the Kuala Lumpur Regional Centre for Arbitration was established in 1978 to provide for the arbitration process The governing law is Arbitration Act 2005. The Rules for arbitration are based on UNCITRAL Arbitration Rules of 1976 with certain modification and adaptation as set forth in the rules for Arbitration of Regional Centre for Arbitration Kuala Lumpur The UNCITRAL Rules have been recommended by the United Nations General Assembly by its resolution No.XXXI 98 adopted on the 15 December 1976.


Resembles in certain of its characteristics with litigation Differ from litigation in the following ways:

Not wield judicial authority of the state Conducted according to rules chosen by the parties:

Select arbitrator of their choice The language to be used The place of arbitration


An arbitration clause needs to be inserted in the contract If not done, may be done at any time and choose an existing arbitral forum like Kuala Lumpur Regional Centre for Arbitration and its rules


Apart from Arbitration Act 2005, there are a number of other laws which provide for arbitration:

S44 s46 Trade Unions Act 1959 S3, s27 s42 Workmens Compensation Act 1952 The Co-operative Societies Act 1993 S18 s20 Industrial Relations Act 1967 S69, s75 and s86 Employment Act 1955 O.69 The Rules of High Court 1980


Decisions are called awards Parties agree that these shall have a binding effect A court can enforce an arbitration award if a further dispute arises Less expensive than going to court pay only for the services of an arbitrator May have legal representation unless the agreement says otherwise


Less time to settle a dispute compared to a court hearing Dealt with confidentiality Formality depends on the choice of the parties framing their agreement


Choose arbitrator Informal Rarely any publicity Award may be enforced by court


Public funding is not available Appeals are restricted


Mediation/conciliation is a process in which a neutral party informally brings together the parties to exchange their views in order to reach a settlement Mediation

The parties try to resolve a dispute with the assistance of a neutral third party The purpose over here is to get the parties to reach a compromise The mediator will consult each party and look for common ground Similar to mediation But the 3rd party plays a more active role by proposing solutions



There are institutionalised mediation and conciliation under various professional bodies like PAM (Pertubuhan Akitek Malaysia), Insurance Mediation Bureau and mandatory conciliation under certain enactments like the Law Reform (Marriage and Divorce) Act 1976 (s106)


This neutral person acts as a facilitator Cheaper option Private It is extensively being used in settling industrial, employment, family and consumer disputes In Malaysia, conciliation is used for employment and trade disputes This provided in the Employment Act 1955 and the Trade Unions Act 1959


Very informal No involvement or assistance of a 3rd party The parties resolve the dispute themselves with or without the aid of a lawyer Negotiation is a process in which agreements are sought by offering and seeking compromise Method of give-and-take


Cheapest Private and confidential