In the Introduction to the King III Report (2009), published by the Institute of Directors (IOD), the Chairman of the King Committee, Mervyn King SC, writes as follows:
“It is accepted around the world that ADR is not a reflection on a judicial system of any country, but that it has become an important element of good governance. Directors should preserve business relationships. Consequently, when a dispute arises, in exercising their duty of care, they should endeavour to resolve it expeditiously, efficiently and effectively. Also, mediation enables novel solutions, which a court may not achieve, as it is constrained to enforce legal rights and obligations. In mediation, the parties’ needs are considered, rather than their rights and obligations. It is in this context that the Institute of Directors in South Africa (IoD) advocates administered mediation and, if it fails, expedited arbitration.
ADR is also in line with the principle of Ubuntu.”
Principle 8.6 of the King III Report, under the heading of “Dispute Resolution”, reads as follows:
“Principle 8.6: The board should ensure disputes are resolved as effectively, efficiently and expeditiously as possible.”
In the explanatory notes of the King III Report (2009) under the heading “Dispute Resolution” the following points are made:
- It is incumbent upon directors and executives, in carrying out their duty of care to a company, to ensure that disputes are resolved as effectively, efficiently and expeditiously as possible [par 38];
- Alternative dispute resolution (ADR) has been a most effective and efficient methodology to address the costly and time consuming features associated with more formal litigation. Statistics related to success range from a low of 50%, for those situations in which the courts have handed down a case for ADR, to an average of 85% – 90% where both parties are willing participants [par 39];
- ADR has become the intervention of choice in many instances and so it is appropriate for specialists to improve the overall rate of intake and success [par 40];
- External disputes may be referred to arbitration or a court. However these are not always the appropriate or most effective means of resolving such disputes. Mediation is often more appropriate where interests of the disputing parties need to be addressed and where commercial relationships need to be preserved and even enhanced [par 43];
- In respect of all dispute resolution institutions and regardless of the dispute resolution process or processes adopted by each, an indispensable requirement is its independence and impartiality in relation to the parties in dispute [par 45];
- Successful resolution of disputes entails selecting a dispute resolution method that best serves the interests of the company. This would, in turn, entail giving consideration to such issues as the preservation of business relationships and costs, both in money and time, especially executive time [par 47];
- Mediation is often suggested as an ADR method with the assumption that the parties are willing to engage fully in the process. A process of screening is undertaken by many mediators, which excludes those who fall short of the criteria of will and capacity [par 48];
- It is also important to recognise that the use of mediation allows the parties to create options for resolution that are generally not available to the parties in a court process or in arbitration. Further the Act makes provision for alternative dispute resolution processes to be conducted in private [par 49];
- Mediation is not defined in the Act. The concept has an accepted meaning in practice in South Africa. Mediation may be defined as a process where parties in dispute involve the services of an acceptable, impartial and neutral third party to assist them in negotiating a resolution to their dispute, by way of a settlement agreement. The mediator has no independent authority and does not render a decision. All decision-making powers in regard to the dispute remain with the parties. Mediation is a voluntary process both in its initiation, its continuation and its conclusion [par 50];
- Similarly conciliation is not defined in the Act. Conciliation is, like mediation, a structured negotiation process involving the services of an impartial third party. The conciliator will, in addition to playing the role of a mediator, make a formal recommendation to the parties as to how the dispute can be resolved [par 51];
- Adjudication is also not defined in the Act but the process will not differ significantly from arbitration [par 52];
- Mediation and conciliation require the participation and presence of persons empowered and mandated to resolve the dispute [par 54].
