OMAN Trends and Developments Contributed by: Abdullah Al Aufi, Al Khalili, Al Ghailani & Co. LLP (K&Co.)
This dynamic can push companies towards decisions driven by cost avoidance rather than any objective assessment of risk and opportunity. A structured approach to dispute management, one that involves continuous legal and financial evaluation, clear objec - tives for each round of negotiation and a deliberate effort to avoid reactive decision-making, is the only reliable way to navigate this stage effectively. III. Settlement: between risk management and the fear of admission Settlement, when handled properly, can serve as a meaningful tool for limiting potential losses compared to the full cost of arbitration, which includes not only legal fees and arbitrators’ remuneration but also the considerable expense of expert witnesses, adminis - trative costs, and the time consumed over months or years of proceedings. That said, many companies remain reluctant to settle out of concern that it will be perceived as an acknowl - edgement of responsibility and that this perception could create additional legal or financial disadvantage down the line. While that concern is not without merit in certain cir - cumstances, it should not lead to the automatic rejec - tion of settlement as an option. Settlement is not inher - ently an admission of anything. When approached within a clear legal framework and executed through a considered negotiation strategy, it can provide the kind of certainty and stability that an unresolved dis - pute, by definition, cannot. The real distinction lies not in the fact of settling but in how it is managed, when it takes place and how the agreement is drafted. A settlement reached at the right moment, with appro - priate legal oversight, can bring genuine relief from the uncertainty that disputes impose on a business. IV. Using arbitration strategically Arbitration costs are frequently viewed in purely accounting terms: the arbitrators’ fees, the institu - tional charges, the lawyers, the experts. But this view misses something important. The cost of arbitration is not merely a line item; it is an active force that shapes the behaviour and decisions of both parties through - out the life of the dispute.
A claimant may inflate its demands precisely because it anticipates that the other side will prefer to settle rather than absorb the expense of defending a full arbitration. A respondent, meanwhile, may offer con - cessions not because its legal position is weak but because the financial uncertainty of protracted pro - ceedings is itself too costly to bear. Arbitration costs, in other words, should be understood not as a fixed factor but as a dynamic one that continuously influ - ences the balance of power and the prospects for negotiated resolution. This reality points towards a broader shift in how companies ought to think about disputes: not as legal questions to be resolved by lawyers alone, but as investment decisions requiring a proper weighing of probabilities, costs and expected returns. Rather than asking simply whether the company will win, the more useful questions are: what is the realistic prob - ability of success; what will it cost in total to reach a final award; what is the likely loss if the case fails; and what does the risk-adjusted return actually look like? To take a concrete example: if a company estimates a 60% chance of success in arbitration with a potential recovery of USD10 million, but the expected cost of the proceedings is USD2 million and there are mean - ingful enforcement risks, settling for USD5 million may well represent the better commercial outcome. This is the logic of expected value, a framework that weighs probabilities, costs and outcomes against one another without displacing legal analysis but rather integrating it into a wider decision-making process. V. Conclusion The choice between settlement and arbitration is ultimately not a purely legal question. It reflects the company’s capacity to manage a dispute as both a strategic and a commercial matter. Success in dispute resolution depends not only on the strength of the legal position but on a genuine understanding of cost, timing, and the effect of the dispute on the business and its relationships. The right decision may also shift as circumstances change. What appears to be the optimal course dur - ing negotiations may no longer be so as arbitration approaches, and the reverse is equally true. Effec -
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