Highlight 13/2022 – Traditional litigation vs. Alternative Dispute Resolution
Nargiz Ojagverdiyeva, 25 March 2022
In Switzerland, the largest commercial disputes are mostly brought before the traditional courts or are alternatively settled through the most preferred Alternative Dispute Resolution – arbitration. Arbitration in Switzerland has a very long history which begins in 1872. The famous Alabama Claims case, a dispute between two giants, United States and Great Britain, was addressed to an Arbitral Tribunal based in the Hôtel de Ville in Geneva and is referred as the origin of the arbitration tradition in Switzerland[1].
In order to encourage international trade and follow the global trend in commercial dispute resolution proceedings, industry and services in Switzerland established the Geneva Chamber of Commerce in 1865 and the Zurich Chamber of Commerce in 1911. But this was only the beginning. The history of arbitration in Switzerland was also marked by the ratification of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards[2] in 1965 and its incorporation into Swiss legislation. On 1 January 2004, the Swiss Rules of International Arbitration were adopted by six Swiss Chambers of Commerce and Industry in order to harmonize the individual arbitration rules of the Chambers and to promote institutional arbitration. A new Swiss Code of Civil Procedure entered into force on 1 January 2011 and modernized the Swiss law on domestic arbitration.
Switzerland provides a modern statutory framework for both sets of rules, domestic and international arbitration, but the question remains: is this method of ADR more advantageous than traditional court litigation?
The international survey on dispute resolution in technology transactions carried out by the World Intellectual Property Organization Arbitration and Mediation Centre[3] showed, on a statistical basis, the trends in the current use of ADR methods in technology-related disputes compared to traditional litigation. 94% of respondents noted that negotiating dispute resolution clauses forms part of their contract negotiations. In this respect, Court litigation was the most common stand-alone dispute resolution clause (32%), followed by (expedited) arbitration (30%) and mediation (12%). 20% of respondents also stated that before or during court litigation they had addressed the case to mediation mostly related to contractual patent or copyright[4].
When negotiating dispute resolution clauses, parties take into consideration the time and costs, and of course the enforceability of the decisions. These factors reveal the points of weakness of traditional litigation: the respondents to the above-mentioned survey indicated that they wasted more time in court litigation than in arbitration and mediation. Court litigation takes approximately 3 years than arbitration and mediation which take approximately 8 months to 1 year. The costs of court litigation is also a big disadvantage. Legal costs incurred in court litigation in domestic jurisdiction amounted on average to USD 475,000, and legal costs of court litigation in another jurisdiction amounted to slightly over USD 850,000. On the contrary, costs of mediation may not exceed USD 100.000 while arbitration costs approximately USD 400.000[5].
Apart from the above-mentioned factors, several other advantages of ADR could turn it to be the most preferred dispute resolution mechanism: the establishment of a single procedure, its neutrality and confidentiality, the autonomy of the parties to exercise control over the way of resolving their disputes, the specific nature and enforceability of awards. Of course, in some circumstances, traditional litigation should be preferred : when one of the parties is uncooperative or when a party looks for establishing a legal precedent. All these figures and statistics are enough to conclude that ADR has achieved its objectives and provide parties with effective and sufficient mechanisms to settle their disputes out-of-court.
Nargiz Ojagverdiyeva, Highlight 13/2022 – Traditional litigation vs. Alternative Dispute Resolution, 25 March 2022, available at www.meig.ch
The views expressed in the MEIG Highlights are personal to the author and neither reflect the positions of the MEIG Programme nor those of the University of Geneva.
[1] Manuel Arrayo, Arbitration in Switzerland: The practitioner’s guide, Chapter I, Part 1: History of Arbitration, Introduction, Volume I, Second edition.
[2] See https://www.newyorkconvention.org
[3] WIPO’s Arbitration and Mediation Centre was established in 1994 and is based in Geneva. Since then, it offers arbitration and mediation services to settle international commercial disputes concerning intellectual property, technology and entertainment.
[4] See https://www.wipo.int/amc/en/center/survey/results.html.
[5] Idem.