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

Lumo Ltd and Verde Ltd have a long-term supply relationship and want to keep trading after a pricing dispute. They want a neutral person to help them reach their own agreement but do not want anyone to impose a decision. Which method should they choose?

Mediation is the right choice. A neutral mediator helps the parties reach their own voluntary settlement without imposing a decision, which preserves the commercial relationship. Litigation and arbitration both end with a binding decision made by someone else and are more adversarial.

  1. ACourt litigation
  2. BArbitration
  3. CMediationCorrect

Explanation

In mediation a neutral third party facilitates discussion, but the parties keep control of the outcome and no decision is imposed. This helps preserve the business relationship. Litigation and arbitration both result in a decision imposed by a judge or arbitrator, which tends to be adversarial.

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