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

Delmar Ltd and Oakridge SA have a supply dispute. They appoint a neutral third party who meets each side separately, proposes a non-binding settlement and has no power to impose a decision. Which description best fits this process?

This is conciliation. The neutral third party actively suggests settlement terms, but cannot impose them, so the parties may accept or reject the proposal. Arbitration, litigation and expert determination all give binding decisions, which does not fit the facts described.

  1. AConciliation, in which the neutral proposes terms the parties may accept or rejectCorrect
  2. BArbitration, in which the neutral issues a binding award
  3. CLitigation, in which a court imposes a judgment
  4. DExpert determination, in which the neutral's finding is final and binding

Explanation

A conciliator takes an active part by suggesting settlement terms, but the parties stay free to accept or reject them. Arbitration and expert determination produce binding outcomes, and litigation is a court process, so none of these fits a non-binding proposal.

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