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CCCA_V3No4_ADR-FIN.qxd:CCCA_V1No1_DriversSeat-FIN.qxd 11/24/09 11:51 AM Page 34 Feature many — and perhaps most — business disputes for several reasons. addition, although it is designed to be speedy, arbitration requires First, litigation is slow. It is governed by complex rules of pro- a complete evidentiary record that requires the arbitrator to make cedure. It must accommodate the scheduling limitations of over- findings of fact. In some cases, those facts may be apparent, but in burdened courts. It involves onerous pre-trial discovery obliga- others the fact-finding process may be protracted and require pre- tions.Trial decisions are subject to appeal,which result in further hearing discovery,complete with motions about the scope of doc- significant delays. Disputes that might otherwise be resolved in umentary production and questioning.This can create significant weeks or months may linger for years. expense and delay that compromises the promised efficiency of Second, litigation is also extraordinarily expensive, not just in arbitration,and that efficiency will be further compromised if one direct legal costs but also in terms of internal resources, which of the parties seeks to appeal the arbitration award,whether or not could match or exceed external costs. the agreement governing the arbitration purports to make that Third, litigation is an unpredictable and very public process award final and binding. In addition, the confidentiality of the that creates not only financial risk but also risks to morale and arbitration process,one of its key advantages,is lost in the event of goodwill. These risks may be out of all proportion to the an appeal. amounts or issues in dispute. In the end, arbitration may amount to a private litigation rather Finally, and perhaps most significantly, lawsuits often settle on than an alternative to it. the brink of trial after years of effort, expense and quite possibly It is therefore appropriate to consider other ADR processes that irreparable harm to important business relationships. may make it unnecessary to resort to either litigation or arbitration. Litigation can become as much a problem as a solution by per- petuating and escalating a business dispute rather than resolving it. ADR Option 2: Early Neutral Evaluation But what is the alternative? Early neutral evaluation is a voluntary process that entails appoint- ing a “neutral,” typically a mediator or expert in the relevant field, The Alternative Model: ADR or both, to review the positions of the parties and provide a non- Alternative Dispute Resolution provides viable alternatives to binding evaluation. In the case of a specialized industry such as litigation that are suitable to almost any business dispute. Let’s construction, a panel of neutrals may be appointed. consider the pros and cons of a few. The key to a successful early neutral evaluation is the compe- tence and credibility of the neutral. If both parties perceive the ADR Option 1: Arbitration neutral’s evaluation as well-reasoned and fair, they may accept it Arbitration is the best-known alternative to litigation; in fact as a means to efficiently resolve the dispute and allow the under- many business contracts include an arbitration clause that lying business relationship to prosper. requires the parties to submit any dispute to arbitration. The Early neutral evaluation is generally underutilized. That is arbitration clause typically stipulates where the arbitration is unfortunate, because it can be an appropriate method to resolve held, how the arbitrator or panel of arbitrators is chosen and disputes at an early stage and at minimal cost, while preserving what procedural rules apply. It often also stipulates that the arbi- the underlying business relationship. trator’s decision is binding, with no right of appeal. ADR Option 3: Mediation Arbitration clauses are used The mediation process is well for a reason: arbitration is a “ “ “ “BB BBuu uutt tt aa aarr rrbb bbii iitt ttrr rraa aatt ttii iioo oonn nn ii iiss ss known and actually mandated by proven means of resolving the rules of court in many jurisdic- business disputes that is speedy, n n n noo oott tt ii iidd ddee eeaa aall ll ii iinn nn aa aall llll ll cc ccaa aass ssee eess ss.. .. tions. The parties exchange briefs confidential and binding. . . . ... .... ..[[ [[AA AA]] ]]rr rrbb bbii iitt ttrr rraa aatt ttii iioo oonn nn,, ,, ll llii iikk kkee ee setting out their positions and But arbitration is not ideal in attaching key documents, as appro- all cases.To begin with,arbitra- l l l lii iitt ttii iigg ggaa aatt ttii iioo oonn nn,, ,, ii iiss ss aa aann nn priate. After an initial session, the tion, like litigation,is an adver- mediator typically meets privately sarial process: someone wins a a a add ddvv vvee eerr rrss ssaa aarr rrii iiaa aall ll pp pprr rroo oocc ccee eess ssss ss:: :: with the parties in a series of cau- and someone loses. Resolving s s s soo oomm mmee eeoo oonn nnee ee ww wwii iinn nnss ss aa aann nndd dd cuses to discuss the issues from each a dispute by arbitration could party’s point of view and receive set- end up damaging a key s s s soo oomm mmee eeoo oonn nnee ee ll lloo ooss ssee eess ss.. ..”” ”” tlement proposals. If the mediation business relationship. In is successful, the terms of settlement 34 CCCA Canadian Corporate Counsel Association WINTER 2009