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The pandemic highlighted poor purchasing behavior in fashion. STTI advocates responsible practices with functioning complaints procedures. Mediation and arbitration offer efficient, cost-effective dispute resolution. STTI explores creating an industry complaints mechanism for accountability.

Part of STTI’s contribution is a substantive conversation around recourse in case such poor purchasing behaviour is seen. During the pandemic many producers did not have any recourse: many purchase orders are oral contracts, and written contracts are typically one-sided and shift the costs of cancellation to producers.

And where do you go if there is a dispute? Local courts are too costly and take too long; enforcement of court orders is inconsistent and not very effective; and arbitration centres, which could be faster, are usually far away. Anyway, going to litigation disrupts commercial relations: what’s the point of winning a case if you lose your biggest client?

To answer these questions, STTI wants to offer a few resources to producers and sector stakeholders alike. First a quick dictionary on the topic of purchasing practises and supplier complaints.

Frequently Asked Questions (FAQs) – Supplier Complaints

What is mediation?

Mediation is voluntary and non-adversarial ways of resolving disputes. If there is a disagreement about a contract and bilateral negotiations don’t settle the dispute, parties engage the services of a third person. This mediator can be either an expert in the sector or a specialised mediator – to help them negotiate and come to agreement. Where mediation is available to disputing parties, about 80% of disputes are settled in this way. And parties typically continue their commercial relations.

What is arbitration?

Arbitration is a mandatory and binding form of private litigation. It has fewer rules than courts, and the arbitrators are more specialised in commercial transactions than domestic judges. As well, most countries are party to an international treaty that allows for enforcement of arbitration awards in one party that is issued in another party. But arbitration requires the involvement of lawyers, which is costly; it is adversarial, so it disturbs the business relationship. And many arbitration centres are far away from producers.

How to proceed with mediation and/or arbitration?

The textile sector in many topics is a pioneering sector. As contractual disputes always have existed and will most likely remain, the sector was one of the early adopters of sector-specific mediation and arbitration centres. STTI would like to provide some resources for the avenues that a producer would wish to take, mediation and/or arbitration.

Information and or access on funding can be found via the Impact funding grant program, Aristata capital, The Power of Litigation Funding or the Asian Dialogues online seminar on Arbitration. A number of resources online provide a directory for lawyers in the region, for example Legal 500 directory. Should you look for some commercial arbitration centers you may contact the International Chamber of Commerce; Singapore International Arbitration Centre; Hong Kong International Arbitration Centre; London Centre for International Arbitration; and the International Centre for Dispute Resolution. 

How can producers benefit from mediation?

Resolution and maintaining relations: Experience with sectoral and international mediation frameworks shows that 80% of disputes are resolved through mediation and in 10% of cases the issues in dispute are significantly narrowed through mediation, making arbitration less complex and disruptive.

Efficient: Mediation timeframes are significantly shorter than arbitration and litigation. Depending on the complexity of a dispute, mediation can result in effective resolution within 30-60 days. 

Cost-and-resource effective: There are different models of “mediation” services. Some are funded through membership subscriptions, others on as-use basis. Mediation typically costs less than $2500, or about 10% of the costs of arbitration. This figure does not include the commitment of internal resources by a company to managing a dispute: for mediation, this would be about 30 days, for arbitration, on average 22 months.

What alternative mechanism does STTI propose to solve complaints?

STTI recognizes that the pandemic highlighted long-standing problems in the sector and existing institutions were not up to the task. But it is time for the sector to lead the way in innovative institutions again. Thus, STTI explores the feasibility of an establishment of a specialized venue comprising brands, purchasers, and producers – and supported by participating governments – with the following three mandates:

  • Conciliation and mediation of commercial or contractual disputes with emphasis on expert-driven, non-adversarial processes, and arbitration with mix of lawyers and sectoral experts as last resort.
  • A secretariat with a light footprint with the responsibility and mandate to:
    • collect and analyse data, and engage in trilateral convening
    • enter into agreements for venue use with national arbitration centres
    • engage in outreach, technical assistance, and training.
  • A complaints or ombuds mechanism to hear and resolve non-contractual and third-party complaints.
What were the findings of the complaints mechanism pilot by STTI?

STTI is exploring the creation of an industry complaints mechanism potentially leading up to dispute resolution in several ways and has commissioned research on the modalities of such a system. Furthermore, testing this in a smaller scale didn’t lead to a successful procedure. The mechanism was set up through an MSI in order to start with key brands and retailers and scale to a wider industry level later. However, no complaints were submitted. Based on reports by actors such as Better Buying™ it is clear that the conditions in the sector prevail and the STTI White Paper recommendations are still not met. If the cause for complaints remain, this shows that the mechanisms was not successful. Certain conditions were not met to the standard needed for complaints to be handed in. This includes trust in the MSI to handle the complaint fairly, the brands and retailers welcoming complaints as a constructive tool for improvement, the scope of the pilot. Furthermore, the current lack of trust and transparent communication between the supplier and buyer side, as well as a lack of trust in the wider ecosystem hinder the effective use of complaints as a constructive tool for improvement right now. STTI remains committed to finding tools that are trust building and constructive in creating accountability for brand commitments.