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ACCA Applied Skills · Corporate and Business Law (Global) · Alternative dispute resolution mechanisms

Alpha Ltd and Beta Ltd are in a long-running supply relationship and have fallen out over a late delivery. Both want to keep trading together, avoid publicity and keep control over the outcome. Which method is most suitable?

Mediation is most suitable. A neutral mediator helps the parties reach their own voluntary, confidential settlement, so they keep control of the outcome and protect their relationship, whereas arbitration and litigation both impose a binding decision and are more adversarial.

  1. ALitigation in the national courts, because judgments are public and binding
  2. BArbitration, because the arbitrator will impose a decision on both parties
  3. CMediation, because a neutral helps the parties reach their own voluntary agreementCorrect
  4. DLitigation, because it preserves business relationships better than any other method

Explanation

Mediation is confidential, non-adversarial and leaves the outcome in the parties' hands, so it best preserves the relationship. Arbitration and litigation both impose a decision on the parties, and litigation is public and adversarial, so it tends to damage relationships.

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