No room for adversarial antics in ADR
There's a growing trend to include dispute resolution clauses in commercial contracts to avoid costly court battles to settle disputes, says Toronto litigator and commercial arbitrator Marvin Huberman.
Alternative Dispute Resolution (ADR) clauses, which give parties greater involvement in negotiating or mediating a resolution, are becoming more common in business contracts, he tells AdvocateDaily.com.
Known as escalating dispute resolution clauses, the process begins with negotiation and then moves to mediation and ultimately arbitration if necessary, Huberman explains.
"They start off with an obligation for the parties to engage in good-faith negotiation and if that does not result in a settlement, it could escalate to mandatory mediation by the parties with a third-party facilitator," he says.
If that fails, the provisions say the parties are obligated to proceed to arbitration but not to court, Huberman says.
"Traditional court litigation can be expensive. The dispute resolution process allows the parties to present their cases before an arbitrator,” he says.
Huberman points out that ADR — specifically mediation and arbitration — procedures are being used in a variety of commercial disputes in real estate, partnership and shareholder agreements, as well as landlord and tenant matters.
"My view is that effective commercial arbitration should be the goal of disputants who have been unable to resolve their conflict, as it is frequently a faster, cheaper and better commercial resolution process than traditional adversarial litigation in court," he says.
To a large degree, the success of commercial arbitration depends on how well the process is managed from the outset, beginning with the pre-hearing conference, Huberman explains.
"A key tool that should be used is an early discussion otherwise known as a pre-hearing meeting or conference with the arbitrator,” he says, noting that it should result in a written order that clearly and unambiguously sets out the procedures, time frames and cut-off dates with respect to several concerns.
"The goal of the pre-hearing conference is to achieve a balance between discipline and flexibility to address expedited procedures without reducing the quality of the proceeding and the right of all parties to be heard," Huberman says.
The pre-hearing conference covers a number of key procedures, including those that clarify the nature and scope of the claim and the defences, as well as document filings by the parties and their representatives. It also determines the number of witnesses to be called, their written statements, how the witnesses will be questioned and in what languages, among other issues, he explains.
"Sometimes these matters can be dealt with in writing, but if we're going to have an in-person hearing, there should be one single hearing to deal with all the issues," Huberman says. The final step in the pre-arbitration process is setting the date, time and place of the hearing.
The to-do list to prepare the arbitration hearing appears long, but Huberman says it can be done quickly.
"I would say the average pre-hearing conference can last anywhere from 20 minutes to several hours, and more complex cases with multiple parties could increase the time needed to prepare," he says.
The decorum of an arbitration hearing is focused on problem-solving, so it’s important that parties and their representatives check their intentions or expectations of an adversarial confrontation at the door, Huberman stresses.
"First and foremost there has to be a paradigm shift in terms of attitude," he says. "Instead of being adversarial, they can be strategic, but they really should try to tailor a process that helps not only their client but also the resolution of the dispute."
Huberman cited one case he was party to where the pre-hearing meeting lasted 15 minutes and "the whole procedure got out of the gate in a very efficient manner. In contrast, the longest one he's been involved with was five hours.
"The parties really weren't prepared to try to work things out although they were obligated to go to arbitration because of an ADR clause they were not in agreement with, and it was very adversarial," he says. "It became a fight right from the outset."
Generally, commercial arbitration involves disputes and disagreements in business-to-business, individual to business, labour and business, and government, he says. But the business-like environment doesn't mean emotions won't flare.
"There isn't much emotion most of the time,' Huberman says. "But there can be at times when the stakes are high, reputations are at stake, mistakes are being uncovered and an allegation of misconduct, and sometimes fraud is being alleged.
"So yes, it most certainly can get emotional," he says. "I think the arbitrator has to be sensitive to the personalities and character traits of the parties and their representatives, and to how to effectively case manage the proceeding. They have to apply some dispute resolution skills even in a pre-hearing conference to effectively address emotionalism and aggression.
Huberman says arbitrators are prepared to tiptoe through the emotional minefields by using "the carrot" to reward proper behaviour or “the stick," which involves using procedural orders to make the hearing run smoother. Additionally, effective arbitrators use various case management models, which can be tailored to the task at hand.