Dispute Resolution Clauses In Commercial Contracts

I don’t mean to argue against the undeniable wisdom of inserting a dispute resolution clause in a commercial contract at the drafting stage.

What’s not to like… it makes absolute sense to agree a dispute resolution framework before a dispute arises.

But there is a BUT.

Most clauses, and there are hundreds of versions, are drafted on the premise that the dispute should get to mediation sooner rather than later. Definitely before any arbitration/court proceedings are started.

Some are multi layered; 1) first negotiate, 2) move on to mediate, 3) then arbitrate or litigate as a last resort – often with a carve out for injunctive relief.

Many have strict time frames, often measured in days, so a party to a dispute can force the selection of a mediator and convene the mediation within a relatively short time of the dispute occurring.

Because of this, these types of clauses risk pushing parties through the doors of the mediation room too soon… before the dispute is mature, before the raw edges have been knocked off and certainly before the parties have adequate information about their own or the opposite party’s position and interests.

They come to the table without adequately defining to themselves, and each other, what the dispute is all about – upon what it is they can agree and disagree, without adequate document exchange and to be honest without adequately spending time wallowing in the conflict and all that it brings with it.

The realities of the dispute, some that only come with age – the stress, the cost, the creeping doubt – are missing.

Like a ripe cheese, these things take time.

Representing Small Players in Multi Party Mediations

A good piece from Don Swanson, a lawyer out of Omaha, Nebraska, on representing bit players in large multi party mediations – we’ve all been there – other parties focused on the ‘big’ issues and it’s hard to get anyone, including the mediator, to focus on your supporting actor who has lower tier, but still crucial-to-them, issues.

Some extracts follow, but Don’s full article repays reading;

Many small players get run over—and their positions obliterated—in multi-party negotiations.

Small-parties are faced with limited choices on how to proceed;

1. Take an unbending position and hold out to the end—this is an all-or-nothing approach

2. Take an unbending position for as long as possible and then accept the best deal that’s offered

3. State an opening position and engage in active negotiations to achieve the best-possible result

Sometimes, the selection among choices is actually imposed upon a small-party by the dominant ones.

Otherwise, the answer on how-to-proceed is a judgment call in light of all known facts. In large part, the judgment call turns on the traction a party can create for its position. And traction turns on the answer to this question:

How significant is my position for the dominant parties?

Here are some traction-related questions to ponder:

>If I hold out to the end, can they move on without me—or do they need my consent?

>If they can move on without me, how valuable would my consent be to them—and what might I achieve that’s commensurate with that value?

>As a practical or legal matter, what do the dominant parties want or need from me? And what would they be willing to provide to get my consent?

Eat Toast In Bed – Go to Sleep With Crumbs

Sometimes in mediation, I ever so gently broach the subject of responsibility.

Take a construction defect case, and maybe also a joint venture dispute.

In private with the claimant party, I wonder out loud what measure of responsibility might be factored in for their part of the dispute they now found themselves consumed by.

I explain this may be important when evaluating any proposal on the table later in the day.

In the construction defect case I enquire what that measure might be – on the basis they accepted the cheapest tender by far from an outfit that turned out to have a sorry history – sure the builders are now cowboys – but could they not have found this out prior to contract?

In the JV case it was more along the lines – what would they factor in for their own decision to partner with someone who was perfectly honest and competent, but just ended up not being a good cultural fit for them?

The responses are often interesting.

Many resist the exercise. Legal merits trump all.

Some, it turns out, get angry at a rare lapse of judgement and are content to learn (and pay for) a lesson that stands them in good stead for the future.

As one party said recently, a little harshly I felt, ‘if you lie down with dogs – expect to get up with fleas’.

… crumbs or fleas. Hey, I get it.

A Baptism of Fire

Returning to London for a series of mediations this spring my cure for  jet-lag is a one-day Civil Justice Council workshop on the role of ADR in the civil justice system.

90 people packed into the ballroom of a central London hotel: High Court Judges, District Judges, Employment Judges, solicitors, barristers, arbitrators, mediators, the voluntary sector, civil servants from the Ministry of Justice and Her Majesty’s Court Service. As well – a sign of the times, various providers of dispute resolution software.

Chaired by Brick Court’s Bill Wood QC there were no speeches, no talking heads and no power points. Just fast moving discussion;

Why hasn’t the ADR message got through to the public? Are the existing prompts in the system working? If ADR can help parties without representation how is that to be funded and provided? Has ADR been treated as being limited to mediation for too long? Is some form of compulsion or automatic referral to ADR inescapable? If you have to provide at least some opt-outs does that inevitably bog the system down in satellite arguments? How big are the political obstacles in the path of radical reform? Will online access to the Court make all of these questions obsolete or raise new challenges? And what does the overseas experience tell us?

None of us envied the six members of the working group who now have to pick the bones out of it all and write a final report!

Read the CJC ADR Working Group’s Interim Report

In Defence of (Defensive) Mediators

Ask most mediators of a certain stripe and they will be only too willing to tell you the story of long ago when they left their law firm or maybe even chambers to become a mediator…. that giant leap of faith, that alarming drop in revenue.

Some will have run away from practice only to later stumble over mediation. Others will have run, arms outstretched in an embrace, towards mediation. And it usually shows in the sort of mediator they become in the years that follow.

But all mediators of this genre have a certain sensitivity in common.

So it was well into the afternoon of a mediation this past week, one of the lawyers who I had last seen when I was at my firm in the 1990’s said to me; ‘So Geoff, when did you give up real law?’

At this point, two answers are possible.

One for a valued and hopefully future consumer of my mediation services; ‘Ha! Spot on Brian – I haven’t opened a law book since 1998’.

But it was the other, giving life to that sensitivity all these years later, that sprang from my lips;

Well, you know Brian, there’s a lot of paddling under the water for us mediators. I have to be able to understand, very quickly, how you twist your square causation argument into the round hole of the law – and test you on it without, of course, putting you on the spot.

Before I can do that though, I need to actually know the law and have a good eye for legal BS so I can ask you, in the nicest possible way, to explain it to me again so others at the table just might pick up the soft spots I got, but they missed, on your first run through.

Sorry Brian, but it felt good.