What are the main methods of resolving commercial disputes?
Depending on the nature of the underlying dispute, there a number of methods through which commercial disputes can be resolved in Pakistan. One is through the formal court mechanism. If they adopt this route, the parties can always request the court under Section 89-A of the Civil Procedure Code, 1908 to refer the matter to alternate dispute resolution including mediation and conciliation.
Another option is to resolve a commercial dispute completely outside of the formal court structure. This is common in a number of contracts where parties have agreed ex ante to arbitrate their disputes under the Arbitration Act, 1940.
In some cases, where the counter-party is a government, or government owned entity, it might be possible to sidestep the ordinary procedure and invoke the writ jurisdiction of the High Court under Article 199 of the Constitution. It should be noted however that the High Court does not have the power to conduct a trial in its writ jurisdiction and it therefore avoids hearing cases involving factual controversies. Since this option can be used only where the public body is exceeding its statutory authority as part of a commercial transaction, it is not frequently used.
Commercial disputes are generally resolved through recourse to the Civil Courts of Malta however the Laws of Malta also provide for the establishment of specialised tribunals which are vested with the jurisdiction to determine commercial disputes of a specific commercial nature relating to a particular law. Additionally, if parties agree that any commercial dispute shall be settled in Arbitration. Maltese law fully registeres arbitration awards delivered in domestic arbitration and Malta is a signatory of the New York Convention (1958).
Civil litigation by trial is a common method of resolving commercial disputes in Singapore. Civil proceedings may be commenced in the Supreme Court or the State Courts. The recently established Singapore International Commercial Court (“SICC”) also provides litigants the option of having their commercial disputes adjudicated by a panel of specialist commercial judges from Singapore, other common law traditions, as well as from civil law traditions.
Alternative methods of commercial dispute resolution include arbitration and mediation, both of which enjoy the benefit of confidentiality in comparison to the traditional litigation process. Today, Singapore is one of the most preferred seats of arbitration in the world. It is also home to the Singapore International Arbitration Centre, which is supported by its own set of rules and panel of arbitrators. Alternatively, parties may choose to mediate in the State Courts Centre for Dispute Resolution or the Singapore Mediation Centre, in seeking to reach a settlement quickly and at a relatively lower cost.
There are several statutorily regulated methods of resolving commercial disputes. The first of them is mediation, i.e. amicable pre-trial settlement reached by the parties with the assistance of a professional mediator (available also after the trial is commenced). Although this institute was introduced in Russia fairly long time ago, it is still rarely applied among companies and entrepreneurs.
Another resort for resolving business controversies available in Russia is arbitration (which shall not be confused with arbitrazh, i.e. commercial litigation administered by state courts – the subject-matter of this guide). The legal framework applicable to arbitration varies to certain extent depending on whether the case at hand is purely domestic or cross-border (involving a foreign party or foreign assets). Recently, the major changes were introduced into Russian arbitration law aimed at making the arbitration procedure more consistent with the best world practices and trends. However, there are certain limitations to the types of disputes which can be arbitrable under Russian law (e.g. some kinds of corporate disputes and all public procurement disputes are non-arbitrable, concession disputes are arbitrable with certain reservations).
The vast majority of commercial disputes arising in Russia are settled in state commercial (arbitrazh) courts. It should be noted, that in 2016, the mandatory pre-trial procedure was introduced into the proceedings before commercial courts in respect of certain categories of disputes – the claimant is allowed to apply to the court only after expiry of 30 days after sending a pre-trial complaint (see Section 7).
Litigation is a very common method of resolving commercial disputes. Alternative dispute resolution methods are also provided for in the Spanish Civil Procedure Act and have been gaining popularity in recent years. These mainly consist of mediation and arbitration.
The methods of resolving commercial disputes in Indonesia are:
b. Dispute resolution, including but not limited to, arbitration.
a. Adjudication through courts
There are 4 types of courts in Indonesia: (a) general courts, (b) military courts, (c) administrative courts, and (d) religious courts. Each type of court has its own separate competence. General commercial disputes fall under the jurisdiction of the general courts. Except the commercial disputes that concern Sharia transaction, they shall be brought before the religious courts based on Indonesia's Constitutional Court Decision Number 93/PUU-X/2012.
Additionally, Indonesian laws also established the commercial court for commercial disputes related to insolvency and bankruptcy issues.
b. Alternative Dispute Resolution (e.g. Arbitration)
Other than the above, Indonesian Law Number 30 of 1999 also recognizes several means of alternative dispute resolution as follows:
- Binding opinion.
Please note that alternative dispute resolution is subject to agreement between the disputing parties. As such, the decision resulted from alternative dispute resolution has absolute authority and - theoretically speaking – does not subject to any court’s jurisdiction.
In Germany, parties to commercial disputes mainly resort to litigation and arbitration. In some cases, mediation offers an appropriate means of ADR for the parties involved.
The main methods of resolving commercial disputes in México are: a) ordinary commercial trial, b) executive commercial trial, c) special proceedings, d) oral commercial trial, e) bankruptcy proceedings (concurso mercantil), f) arbitration, and g) mediation.
The main methods of resolving commercial disputes in Greece are litigation and arbitration.
The main method is judicial. However, it is possible to follow arbitration but it is not a common method to resolve disputes.
In Hong Kong, the main methods of resolving commercial disputes are litigation and arbitration. In addition, mediation has become the recommended alternative dispute resolution by the court in Hong Kong since the Civil Justice Reform came into effect in 2009.
The main methods of resolving commercial disputes in the Italian jurisdiction are i) proceedings before the ordinary Judge; ii) arbitration, if the contract underlying the dispute contains an arbitration clause; iii) mediation procedure, in the presence of a third-party conciliator who has the task of helping parties reach an agreement (procedure regulated by Legislative Decree 28/2010); iv) assisted negotiation procedure, which takes place in the presence of the parties and their respective attorneys, but without a third party conciliator (procedure regulated by Law 162/2014).
Traditional litigation remains the most frequently used method of resolving commercial disputes. In 2004, a division of the High Court known as the Commercial Court (or Commercial List) was established to provide effective, efficient resolution of commercial disputes. Parties who wish to have their case admitted to the Commercial List must, when making an application to do so, demonstrate that it satisfies a number of criteria to include that the dispute is of a ‘commercial nature’, and that the value of the claim is at least €1 million (subject to certain exceptions).
Although traditional litigation is still most commonly used, parties are increasingly turning to alternative dispute resolution (ADR) methods of resolving disputes.
The most commonly engaged ADR mechanisms in Ireland are arbitration and mediation. Arbitration in particular is often chosen by parties to commercial agreements as an alternative to litigation, because of the binding nature of the award and the formalised process (which often mirrors court proceedings in terms of steps taken). In that regard, commercial agreements themselves very often include a clause that any disputes arising under the agreement must be referred to arbitration.
Commercial disputes the parties cannot resolve out of court, are mainly resolved by the Swiss state courts (starting with the district courts or specialized commercial courts).
The Swiss judicial system generally attaches great importance to an amicable settlement of disputes. Accordingly, the courts usually try to reach an amicable solution between the parties at a relatively early stage of the litigation proceedings within the framework of a settlement hearing (e.g. after a first exchange of submissions, which is the practice of the Commercial Court of Zurich). Under such a settlement agreement, it is customary that the court costs (usually reduced in order not to jeopardise a settlement) are borne equally by the parties and the parties waive any indemnity payments, i.e. bear their own costs.
Furthermore, a so-called conciliation hearing before the Justice of Peace (prior to the ordinary proceeding) is mandatory for most cases. If no settlement can be reached during such hearing (which is often the case in complex and/or long lasting disputes), the claimant party needs to file its claim during a certain period of time (usually within three months) with the competent court. However, no such hearing takes place, i.e. the lawsuit has to be filed directly with the court, if the commercial court has jurisdiction. This is usually the case for certain subject matters (e.g. unfair competition disputes) or if (i) the dispute concerns the commercial activity of at least one party and reaches a certain amount in dispute, and (ii) the parties are registered in the Swiss Commercial Registry or in an equivalent foreign registry. As of today, the cantons of Zurich, St. Gallen, Bern and Aargau have such specialized commercial courts at which a mixed panel of judges and experts ("expert judges") of the economic sector in question decide over a case.
Commercial disputes are mainly resolved by ordinary trials before Chilean Civil Courts and increasingly used during last years- by alternative dispute resolution mechanisms, such as mediation, negotiation processes and specially arbitration.
Court litigation and arbitration are the most common methods of resolving commercial disputes in Sweden, with arbitration being the preferred method for major commercial disputes. Mediation is a method which has gained some popularity in recent years but it still remains a rarity.
The main method is still judicial, with the parties bringing their disputes to Court by means of different types of proceedings (Injunctions, Enforcement Proceedings, Declaratory Actions or others). However, as a result of the need for swift decisions, the demand for extrajudicial methods is increasing, with the parties using Arbitration, Mediation or Civil Courts/Justices of the Peace (that follow a simplified regime).
The main method of resolving commercial disputes is litigation before the local courts. However, there are other means of dispute resolution such as arbitration and the Dubai International Financial Court which is a free zone court.
The main method of resolving commercial disputes in Saudi Arabia is litigation before the Commercial Court, which became operational in October 2017 as successor to the Commercial Circuits of the Board of Grievances. The judges and judges and support staff of the Commercial Circuits of the Board of Grievances were transferred to the Commercial Court, thus ensuring continuity in the decision-making, but there now are considerably more commercial circuits and judges than before.
Certain types of commercial disputes must be submitted to specialized statutory tribunals, as follows:
- Disputes between banks and their customers are adjudicated by the Committee for Banking Disputes.
- The Committee for the Resolution of Securities Disputes has jurisdiction in disputes arising in connection with the Capital Market Regulation and related legislation.
- The Committee for the Determination of Financing Violations and Disputes has jurisdiction in disputes concerning real estate financings and other form of financing regulated under the Regulation for the Supervision of Finance Companies.
- The Committee for the Adjudication of Insurance Disputes and Violations has jurisdiction in disputes arising under contracts of insurance and claims to which insurers are subrogated.
- Complaints in respect of copyright infringements come under the jurisdiction of the Committee for the Adjudication of Copyright Disputes and Infringements of the Ministry of Culture and Information.
- Patent cases come under the jurisdiction of the Patents Committee of King Abdulaziz City for Science and Technology.
Until 2012, there was an automatic right to appeal from arbitration awards to the Board of Grievances, which made arbitration an unattractive option to resolve disputes. The enactment of the Arbitration Regulation of 2012, which is based on the UNCITRAL model, coupled with the establishment of the Saudi Center for Commercial Arbitration, is expected to make arbitration more popular in Saudi Arabia.
Most commercial disputes that are not solved amicably, are decided by the ordinary courts. All ordinary courts offer judicial mediation, which often leads to a settlement if both parties accept to try mediation. In some commercial disputes the parties have agreed on arbitration, in which case the arbitration tribunal will resolve the dispute.
In the United States, litigation, arbitration, mediation and informal negotiation are the primary dispute resolution methods. Mediation, in particular, has been quite popular, with 98 percent of companies reporting that they had participated in mediation during the prior three years based on a 2011 study.
The Austrian legal system provides two main dispute resolution methods: the ordinary court system and arbitration. In addition, other forms of alternative dispute resolution, in particular mediation, are also possible means for resolving commercial disputes.
The main method of resolving commercial disputes in Japan is litigation. However, arbitration is also used as a method of resolving commercial dispute, especially in international cases. The parties may even prefer arbitration to litigation because of confidentiality and expedition.
In the case where the place of arbitration is in Japan, the arbitration procedures are governed by the Arbitration Act, which is principally based on the UNCITRAL Model Law on International Commercial Arbitration. The parties are free to agree on the procedure to be followed by the arbitration tribunal as long as the procedure is not in violation of the provisions of the Arbitration Act relating to public policy (Article 26 (1)). Arbitration awards have the same effect as final and binding court judgments, and their enforceability is guaranteed under the Arbitration Act (Articles 45 and 46). Other methods of resolving disputes including mediations are also used.
The three main methods in the UK for resolving commercial disputes are litigation, arbitration and mediation. Litigation would usually commence in the High Court in London according to the Civil Procedure Rules. Arbitration is governed by the Arbitration Act 1996 and the New York Convention. Both are adversarial processes. Mediation is a non-adversarial structured negotiation led by a neutral mediator with a view to agreeing a settlement. It is also not uncommon for parties to resolve a matter through negotiation either directly or through their legal representatives.
The most common way to solve commercial disputes in Denmark is through the court system. However, this is not the general tendency in all legal fields in Denmark. Particularly within the field of construction arbitration is the primary dispute resolution mechanism. The majority of Danish construction contracts incorporate the General Conditions for the Provision of Work and Supplies within Building and Engineering (In Danish: Almindelige Betingelser 92 (AB 92)) which provides for arbitration.
AB 92 has been revised in June 2018 and is now referred to as AB 18. Arbitration has been maintained as the primary dispute resolution method in AB 18 but it also introduces new dispute resolution mechanisms such as mediation and conciliation as well as DAB/DRB.
In France, there are three main methods of resolving commercial disputes: litigation, arbitration and alternative dispute resolution methods.
As regards litigation, France’s court system is organised in a three-tier structure, composed of first instance courts, Courts of Appeal and the French Supreme court (Cour de cassation) (see question 3).
Commercial disputes in France are often resolved by way of arbitration.
The development of arbitration as a method for resolving commercial disputes is notably due to the arbitration-friendly French regime and to the fact that the International Chamber of Commerce has its headquarters in France.
France is also a party to the 1958 United Nations Convention on the recognition and enforcement of foreign arbitral awards.
Alternative dispute resolution methods
The French Code of Civil Procedure provides three main alternative dispute resolution methods:
- mediation, which is conducted by extra-judicial mediators, which are either chosen by the parties or appointed by the judge with the parties’ consent;
- conciliation, which is conducted by a judicial conciliator; and
- participatory procedure (procedure participative) which, in contrast to mediation and conciliation, does not involve a third party. If the agreement to engage in a participatory procedure is entered into by the parties before any dispute is brought before the court, any judicial claim will be declared inadmissible as long as the procedure is ongoing, except for provisional or conservatory measures in case of urgent matters.
A new law “of modernisation of justice for the 21st century” has widened the scope of the participatory procedure, which can now be entered into pending the outcome of trial. In this case, the dispute will be withdrawn from the court’s docket.
Commercial disputes in India are typically resolved either by way of litigation in courts/ tribunals or by way of alternate dispute resolution, which includes arbitration, mediation and conciliation.
In litigation, commercial matters are contested before the civil courts and the High Courts of each State. For this purpose, the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 (Commercial Courts Act) has also been enacted, which provides for the constitution of commercial courts at district level and Commercial Division and Commercial Appellate Division in the High Courts for adjudicating commercial disputes of a specified value.
Further, certain specialised courts/tribunals along with their appellate bodies have also been created for resolving commercial disputes under various statutes, which include forums such as the National Company Law Tribunal (NCLT), Debt Recovery Tribunal (DRT), etc.
The alternate dispute resolution mechanism is governed by the Arbitration & Conciliation Act, 1996 (Arbitration Act), which provides for resolution of disputes by means of arbitration, conciliation and mediation. Section 30(1) of the Arbitration Act, in particular, authorises the arbitral tribunal to, with the agreement of the parties, use mediation, conciliation or other procedures at any time during the arbitral proceedings to encourage settlement.