Arbitrations versus court

It’s not necessarily the slumping economy that is driving more complex commercial disputes to seek out mediation or arbitration, practitioners say.

While it may be too early to determine whether parties in dispute are resorting to ADR processes to save costs during the downturn, there are several initiatives to promote alternatives for commercial clients that may be fuelling a volume of cases for some practitioners.

The ADR Chambers, for example, has introduced new Expedited Arbitration Rules tailored for complex commercial cases, which on its web site is touted as “fast and cheap.

And there’s no wiggle room.”
Former Superior Court justice George Adams, who left the bench to establish his own neutral dispute resolution practice, says he is seeing more multiple-day mediations.

“I don’t really see the trends because I’m working in it,” he acknowledges. But that he’s been dealing with commercial disputes that require several days to resolve means the matters are indeed more complex.

“That tells me that more complex cases are being mediated and we’re probably seeing more higher-value cases being started, which tells me that cases are being brought from the courts into mediation.”

Adams points out that in his book, Mediating Justice, he includes statistics that indicate 95 per cent of all cases get resolved outside of court, and during a recession that number surpasses 95 per cent.

The Law Society of Upper Canada also mandates lawyers to encourage compromises or settlements in its rules of professional conduct.

“It happens behind closed doors so people don’t realize how principled and professional those settlements are,” he says.

“Of course, it doesn’t work if there aren’t consequences to not agreeing and these settlements being driven by very ethical professional courts that are there so if you don’t settle, you’re going to be visiting the judge and she is going to decide who wins and who loses and it’s going to be quite costly.”

He says if the recession isn’t driving more parties to mediate or arbitrate their disputes, the alternative is no less catching on, albeit incrementally.

“I think there are more cases going to mediation than might otherwise be the case because it’s cost effective; it produces a more conclusive, early resolution of differences,” says Adams. “I think people are simply unwilling to afford going to court.”

Adams, who does a significant volume of complex commercial matters, says the nature of matters he works with is “fascinating. It’s interesting for somebody like me to see the elegant outcomes you see in mediation.

In court, you win or you lose and it’s black or white. These cases are fabulously complex and saying there ought to be a winner or a loser really doesn’t capture the shades of grey that explain that conflict.”

He notes, “They’re really a product of a failed relationship that has a lot of psychology and sociology involved in them. So when you see these settlements, they are really elegant in the sense that they are tailored to the needs of those clients and the complex reasons behind that conflict.

I think it’s good for business or the organizations that are involved and it’s probably a better place to put their resources than the firepower of a trial.”

Claude Thomson, an internationally recognized arbitrator, mediator, and independent counsel specializing in the resolution of complex commercial disputes, says he’s been making efforts to find out why more lawyers are bringing more cases into alternative processes.

“Over the last two or three months, I’ve had a number of meetings with lawyers who are prominent in both arbitration and litigation in order to explore with them why there aren’t more commercial cases that are being resolved in arbitration rather than litigation and what I’ve been learning is that too often, arbitration becomes an expensive form of litigation conducted before an arbitrator because the arbitrator tends to allow parties to manage the case without any particular kind of supervision.

So the case will be every bit as long,” says Thomson. “What they are looking to are arbitrators who will achieve some form of direction.”

He cites the confidentiality that is provided in arbitration as a significant advantage for commercial parties in dispute, along with an expedited process and lower cost if the arbitrator is efficient. Thomson adds, “This is a complicated problem because counsel themselves are somewhat to blame if they complain proceedings take too long.”

“But I’m also receiving some enthusiastic support from lawyers when I’m talking to them about processes that make arbitration more cost efficient and more desirable and I’m encouraged by that.”

Gerald Ranking, chairman of Fasken Martineau DuMoulin LLP’s litigation group and former head of the firm’s ADR practice, agrees arbitrations can become costly.

“It’s probably safe to say that a great deal more thought is going in to consider what process the clients are going to use to resolve disputes but they aren’t necessarily choosing ADR,” says Ranking.

Depending on the nature of the dispute and degree of acrimony, “arbitration can be almost like another form of court,” says Ranking, whose firm serves many Fortune 500 clients. “But if adverse parties genuinely want to resolve their disputes, ADR can be very effective.”

But he affirms the key to an expeditious process resides with the arbitrator chosen to facilitate the matter along with the management of time and ensuring means to accommodate all the parties involved.
“To get everybody back in the same room can take six months,” he says. “Arbitration can be very expensive but it also can be a lot quicker.”

Beyond the urban centres of Ottawa and the Greater Toronto Area, the economic downturn is prompting more business clients to seek out alternatives to court. In Goderich, mediator Norman Pickell is seeing an increase in business matters.

“There are three reasons why I think people see it as an advantage. It’s faster, it’s cheaper, and of course, it’s private. You don’t air all that laundry out in public,” Pickell says.
“Right now, a conflict takes time and energy, and parties lose productivity. It can be very draining.”

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