Definition: The process through which courts or other tribunals and services (such as alternative dispute resolution [ADR] mechanisms) resolve commercial disputes, for example those concerning the interpretation and enforcement of contracts, the liquidation or rehabilitation of a business, the settlement of property rights disputes, or general adherence to the commercial law.
Commercial Dispute Resolution plays a critical role in the economic growth of developing
countries. Increasingly, empirical evidence supports a direct link between a country’s ability to fairly and effectively resolve disputes and increased foreign investment, trade, and domestic economic development. Furthermore, the ability of courts to settle disputes fairly and efficiently, without exorbitant costs or delays, determines the likelihood of fulfilled business obligations. Businesses act lawfully when there are real legal consequences to acting against the law.
In many developing countries, however, judiciaries function poorly. Courts are inaccessible, slow, inconsistent, biased, unduly formalistic, corrupt, and procedures are cumbersome and opaque. Although there is no quick remedy, prevention and resolution through informal means ought not to be overlooked in the Commercial Dispute Resolution process. In many cases, pre-transaction risk assessment and planning can prevent the occurrence of business disputes. A simple written contract, as opposed to an oral agreement, can prevent unnecessary misunderstanding and noncompliance. But when a business problem does arise, resolution can be reached through fast and informal means such as written warnings, negotiations, and payment suspension. Only when a problem surpasses the reach of informal methods should state-sanctioned forums be used.
The World Bank Doing Business Report has identified reforms that have been shown to improve the commercial dispute resolution process in many countries (see right). At the heart of meaningful reform and an effective Commercial Dispute Resolution system are institutions that support the creation and enforcement of commercial relationships. The commitment of courts and judges to high standards of judicial practice and case management, consistency in treatment of commercial obligations, quality rulings and judgments, understanding of their roles in reviewing execution documents, and willingness to enforce obligations, greatly increases the public’s confidence in a country’s Commercial Dispute Resolution process. Supporting institutions such as judge associations, bar associations, and law schools can also contribute to an effective dispute resolution environment.
The World Bank Doing Business Report identify nine types of reforms that have been shown to improve commercial dispute resolution:
- Establishing information systems in courts
- Taking non-dispute transactions out of the hands of judges
- Reducing procedural complexity
- Eliminating the requirement for “legal justification” of the complaint
- Establishing small claims courts
- Establishing specialized commercial courts
- Introducing case management
- Reducing delays by limiting opportunities to abuse appeals
- Providing better incentives for enforcement
Source: World Bank Doing Business (2004-2006)
