Reasonableness rewarded in final offer arbitration
Toronto litigator and commercial arbitrator Marvin Huberman says final offer arbitration is a highly effective dispute resolution alternative that can potentially save companies millions of dollars.
In final offer arbitration, the parties each propose resolutions for the issue or issues that are in dispute and the arbitrator decides on one of their proposals, he tells AdvocateDaily.com.
“This dispute resolution strategy allows one side to encourage reasonableness on the part of the other by making a fair offer at the outset,” Huberman says. “An arbitrator can choose one or the other, rather than coming up with a compromise between the two proposals.”
That’s in contrast to conventional interest arbitration where the disputing parties present their evidence and the arbitrator makes the final determination in the award, Huberman points out.
“For the stars to align in commercial arbitration, you need creative thinking, flexibility, innovation and understanding by all parties.”
Huberman, who is in the process of writing a book on arbitration techniques, says regardless of the form arbitration takes, the goal is to achieve a fair and cost-effective determination of the disputes under his charge.
“I’m always looking for innovative ways to design and manage the process,” he says. “I want to achieve an outcome that’s a fair and efficient determination of the dispute, including the delivery of the decision. To do that, you have to create a process that strikes a proper balance between competing claims or interests.”
One reason companies opt to settle disputes in arbitration is to avoid the costs associated with a court trial. In selecting arbitration, they have yet another opportunity to reduce the financial pain associated with resolving disputes, Huberman notes.
Many parties want written reasons for the award and it takes time to craft a well-reasoned decision — sometimes 30 or 60 days, he says. "But awards can be delivered in a variety of ways — orally or in writing, with or without reasons — and the parties can save a lot of money depending on the choice they make,” he says.
In a recent arbitration that lasted about nine weeks, the disputing parties saved millions by opting for a tailor-made process and a simple decision that was delivered without detailed written reasons, Huberman explains.
“When we had the first pre-arbitration conference, we discussed the design of the process as well as how the case would be managed, and I received the full co-operation and collaboration of the parties and their lawyers,” he says. “They agreed that at the end of the process the award would be delivered without written reasons. They received a one-page document that indicated how much one party owed the other — one week after the arbitration hearing concluded.”
“It was a very successful arbitration — no one sought to review the decision, and everyone felt the process was fair, cost-effective and speedy,” he says. “That’s the result you want.”