ADR, Mediation

Cost-effective nature of ADR appeals to commercial parties

By Staff

In part one of a two-part series on ADR trends, Toronto lawyer and mediator Eric Gossin discusses the benefits of resolving commercial conflicts using alternative dispute resolution.

The business case for alternative dispute resolution (ADR) in commercial disputes is compelling, Toronto lawyer and mediator Eric Gossin tells

Gossin, partner with Devry Smith Frank LLP, explains the typical lawsuit drains cash at every stage. As well as having a lawyer on retainer, businesses must carry the cost of evidence collection, disclosure, and having their own representatives attend examinations for discovery.

“It all costs money,” he says. “But there are many alternatives available to the court process, all of them cheaper, faster, and as a result, more satisfying too.”

And while business owners hate the legal fees associated with litigation, Gossin says they account for only the most obvious part of the cost of a commercial dispute settled in the traditional way by a court.

“There are also the opportunity costs involved in a lawsuit. Every moment you dedicate to the dispute is time you could be spending on the business,” Gossin says. “Another cost that people don’t always consider is the emotional capital that you expend on a lawsuit. It can be a very draining and distracting process for the individual embroiled in it. Often, people don’t sleep well, and they’re fearful of all the possible outcomes.”

By contrast, he says ADR techniques, including mediation, arbitration, med-arb, or other collaborative models, allow the parties to a commercial dispute to take control of their own process by agreeing to the terms of engagement in clauses — sometimes as a result of clauses built right into their contracts.

Gossin says one of the biggest advantages of ADR methods, such as mediation, is that it can kick in at a very early stage since a skilled mediator doesn’t require the same detailed background that is necessary for a trial.

“If you can get the parties to the table, you don’t even have to start a lawsuit,” he says.

And while there are some additional expenses associated with ADR, such as paying for your own neutral party to act as mediator, Gossin says they are dwarfed by the savings.

“You don’t have to pay a judge to settle you in court, but here, the parties get to choose their own arbitrator or mediator,” he explains. “It’s a real benefit to be able to choose the person you work with and to split the cost. If it’s a large commercial dispute involving multiple parties, then even a sizeable charge for the neutral party will look much better when it’s divided among many parties.”

The flexibility of ADR extends beyond the selection of a neutral, Gossin says. The parties can also design a process that suits them, and dispense with unnecessary formalities.

“You can combine different processes by mediating, and then arbitrating it if it’s unsuccessful,” he says.

Each technique has its own variations, allowing parties the chance to experiment with different styles of dispute resolution. For example, Gossin says some may favour baseball arbitration, a method in which both sides present a single best offer, and the arbitrator is only allowed to select one as the winner.

“You can get together and do all sorts of things that you’re not able to do in a formal court proceeding,” he says.

Stay tuned for part two where Gossin will provide insights on how to craft a solid ADR clause.

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