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

Ostra Co and Belvio Co include a clause in their contract stating that any dispute will be referred to a single independent person chosen by them, whose decision will be final and legally binding on both parties, after hearing each side's case. Which mechanism does this describe?

This describes arbitration. The parties agree to submit the dispute to an independent arbitrator who hears each side and gives a final, binding decision. In negotiation, mediation and conciliation, the outcome is not imposed on the parties.

  1. ANegotiation
  2. BMediation
  3. CArbitrationCorrect
  4. DConciliation

Explanation

Arbitration involves a neutral third party who hears both sides and issues a binding decision (an award) that the parties agreed in advance to accept. Negotiation, mediation and conciliation leave the outcome to the parties, or give only a non-binding recommendation.

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