ADR-A CATALTST IN COMMERCIAL DEVELOPMENT(A CASE STUDY FROM UGANDA) BY JUSTICE GEOFFREY KIRYABWIRE

Introduction• Vibrant commercial sector is critical to

overall development of a nation• There is need for an effective commercial

legal system to enforce contracts• Uganda economic indicators-average annual growth in GDP 6.9%-overall private investment as a share of

GDP 76.8%

Poor contract enforcement mechanisms as a disincentive to commercial development1. Few judicial officers to handle disputes- Delays- Case backlog- Self help techniques by disputants

2. Bureaucratic Judicial Procedures

Poor contract enforcement mechanisms as a disincentive to commercial developmentTable 1

5855

1411

0

10

20

30

40

50

60

70

Sierra Leone Egypt Norway Australia

Countries

Proc

edur

es

(Source doing business in 2005)

Poor contract enforcement mechanisms as a disincentive to commercial development

Table 2 421 Poor countries

417 Middle Income countries 280 Rich countries

Days from filing case to enforcement (Source doing business in 2005)

3. Delays/Time

Poor contract enforcement mechanisms as a disincentive to commercial development

Table 3

1999 UJSS Study

Respondents with experiences of commercial cases in Court

Those who rated delay as a serious problem

Business - Magistrates Courts

- Commercial Court

62

30

66%

50%

Professional

- Magistrates Courts

- Commercial Court

40

37

53%

46% (Source DFID Uganda Commercial Sector Study 1999)

Poor contract enforcement mechanisms as a disincentive to commercial development4. Lack of awareness of commercial law

and practice by Judges and Magistrates

5. Problems of enforcement of Judgments.

6. corruption/corrupt Practices.

7. High Costs.

Poor contract enforcement mechanisms as a disincentive to commercial development

Table 4

Country

Debt US$

Cost of Court and Attorney fees US$

Venezuela

Philippines

Indonesia

5,000

2,000

2,000

2,500

1,000

2,000 (plus)

(Source doing business in 2005)

Effects of poor enforcement and dispute resolution mechanisms• Leads to fewer investment and business

transactions resulting in

- loss of confidence in the system

- Escalation of under hand business practices

- Retardation of county’s growth and development

Effects of poor enforcement and dispute resolution mechanismsTable 5

Investment as a percent of GDP

19

19.5

20

20.5

21

21.5

22

22.5

23

23.5

Shortest Longest

Countries ranked by days to enforce a contract, quintiles (Source: Doing business in 2005)

Effects of poor enforcement and dispute resolution mechanismsTable 6

Trade as a percent of GDP

92.5

84 82

72

53.2

0

10

20

30

40

50

60

70

80

90

100

Least Most

Countries ranked by days to enforce a contract, quintiles (Source Doing Business in 2005)

Traditional approach to dispute resolution

• The traditional approach is to resolve a dispute by going to court and suing

• However private sector perceptions of suing in the courts have not always been good though they have now greatly improved

(review two studies in Uganda one in 1999 and the other in 2004)

Traditional approach to dispute resolution

Table 7 Private Sector Perceptions of accessibility to Commercial Justice Institutions

Perceptions of Accessibility Nationwide

Perception of Accessibility (Kampala)

Commercial Dispute Resolution

No. of Institutions in Uganda

Informal Sector % N=607

Formal Sector %=488

Informal Sector %N=314

Formal Sector %=264

LC Court 4000 67 59 69 55 Mag. Courts 508 43 59 56 76 Comm.Court 1 19 27 44 52 High Court 1 18 23 36 44 Court of Appeal 8 17 22 52 67 Supreme Court 1 15 17 30 49 Industrial Court 1 9 14 27 42 Tax Appeals Tribunal

1 9 17 26 31

CADER 1 8 12 19 26

What possible solutions exist?• There is need to develop other dispute

resolution mechanisms that are

- efficient and accessible

- Faster

- cheaper

What possible solutions exist?1. This where ADR comes inADR can be defined as“That ADR is a structured negotiation

process whereby the parties to a dispute themselves negotiate their own settlement with the help of help of an independent intermediary who is a neutral and trained in the techniques of ADR”

What possible solutions exist?There are various types of ADR i.e.

- Negotiation- Conciliation- Mediation- Mini-trial/early neutral evaluation- Court annexed ADR- Arbitration

What possible solutions exist?2. Enactment of a comprehensive and

modern legal framework for the use of ADR outside court.

- The Arbitration and Conciliation Act (Cap 4)

. Based on the UNCITRAL MODEL LAW

. Centre for Arbitration and Dispute Resolution (CADER)

What possible solutions exist?3. The enactment of a legal framework to

allow for Court annexed ADR.- The Constitutional Commercial Division

(Mediation Pilot Project Rules) Practice Direction legal Notice 7 of 2003.

- The Commercial Court Division (Mediation Pilot Project) Rules Statutory Instrument No 71 Of 2003

What possible solutions exist?Characteristics of the mediation pilot projecti. It makes mediation compulsory before

litigation (with strict time frames)ii. Mediation is managed by CADER under

a strict code of conductiii. Has CADER staff mediators who are

freeiv. Allows for enforcement as a consent

judgment of the court.

Results of using ADR1. Of cases that go straight to court- 80% were settled by the Judges through

ADR techniques leading to consent Judgments

- Shows increased willingness of parties to settle disputes out of court even after filling a case.

2. Of cases that go to The pilot project

Results of using ADRTable 8

CADER Mediation Case Settlement Rate

Media cases settled (Part settled cases included)

Mediation cases complete but unsuccessful

% Success Rate

Oct-03 to Dec 03 17 12 58% Jan-04 to Dec 04 88 149 37% Jan-05 to June 05 47 67 41% TOTAL 152 228

(Source CADER)

Results of using ADRTable 9

Judgments recorded by Court

Mediation cases complete but unsuccessful

Cases discontinued

Settlement recorded by Court from MUS cases

Settlements recorded by Court from DC cases MUC DC

(MUS) (DC) Oct-03 to Dec 03 12 22 0 Jan-04 to Dec 04 149 114 82 3 29 1 Jan-05 to June 05 67 86 40 1 6 1 TOTAL 228 222

(Source CADER)

Results of using ADR

Table 10 Private cases filed in CADER

Year Cases filed Completed Pending 2001 (up to August)

99

99

0

2002

293

293

0

2003

140

240

0 (Source: CADER)

3. Of Cases that go to CADER as a Private ADR provider

Existing challenges and possible solutions.1. Strong perceptions that Litigation is better

than ADR

Verner V Gen and Commercial invest. Trust(1894) 2 CH 239 at 264

Lord Justice Lindley“A proceeding may be perfectly legal and yet

opposed to sound commercial principles”

Existing challenges and possible solutions.2. ADR used as a time wasting fishing

expedition.

- Dunnett V Rail Track [2002] 2 All ER 850

3. Inadequate ADR training

4. Sustainability and self-Funding

Conclusion

With appropriate training and a good legal framework ADR can be a catalyst for commercial development by providing an efficient, expeditious and cost effective alternative mode of dispute resolution

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