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.

Paris: The Capital of Negotiation?

Paris has recently had a reputation for confrontation. But a hundred years ago  the allied powers (principally France, the US and Britain led by Clemenceau, Woodrow Wilson and Lloyd George respectively) were in Paris negotiating the Treaty of Versailles. Clemenceau had just survived an assassination attempt. He observed wryly that even after the greatest war in history a Frenchman had taken seven shots at him at close range and only hit him once: proof if it were needed that however dark the circumstances humour always has a role to play.

A hundred years on and the second weekend in February saw the international mediation community (including three of the Brick Court team) descend upon Paris for the festival of negotiation that is the ICC Mediation Competition. Law students from France, the US and Britain and upwards of thirty other countries from all across the globe descend to compete in a mediation moot. Professional mediators conduct the mediations and score the students’ performances.

Political references are still not far away: this year the running gag at the conference was the very notion that Brits should be teaching anybody about process design or negotiation.

The students are hugely enthusiastic and negotiate skilfully, always in English and often a long way from their native language.

They relish the co-operative style of working, clearly enjoying the change from the orthodox models offered in their professional training. Each team gets a confidential briefing setting out their party’s deeper interests and plans for the future. The problems usually offer some crock of gold in terms of future collaboration. One party turns out to have a warehouse full of size 8 left shoes. But wait: the other party has a warehouse full of size 8 right… well you can imagine. Always a win-win. It is great to have the chance of a happy ending and a refreshing change for the jaded ADR hacks who officiate.

And yet, and yet…. It can lead to a relentlessly collaborative approach that ignores the difficult issues and the hard exchanges. We all know that if you don’t acknowledge the anger/disappointment/affront /betrayal that has got you into the mediation you are going to be in trouble later; if you don’t let the monsters into the room they will wait outside and bite you later.

Back in the real world I often recall for parties the shortest opening statement that I have ever heard: three words, the first beginning with “F”, the second being “you”  and the third an anatomical term. As a statement of case it was not only more succinct than the sixteen pages of close contractual analysis offered on the other side, it also kick-started the negotiation far more effectively. Mediators would recognise immediately the opportunity that those words offered. We settled, admittedly at 10 pm. I don’t recommend the three-word approach as a formulation to get you into the finals in Paris. But, as the 2019 winners,  University of Auckland team,  clearly  grasped, some grit in the mix is essential. “This why I am angry. Why are you angry?”

As I sat in the departure lounge I contemplated the zero-sum mediation I was returning to conduct in London; claims on the  aviation insurance market arising from an air crash. Collaboration? Er…no. Future business? Um… with the airline in liquidation probably not.

Sitting at the gate I was surrounded by tired children wearing Micky Mouse ears and their even more tired parents, clearly a tremendous trip. They had all been to Disneyland.

Perhaps we all had.

Geoff Sharp, John Sturrock and Bill Wood attended the Paris competition.

Never Give Up: Persevering in Mediation

 

“If you had not held us back that evening, the deal would not have been done.”

 “Thank you and I wish you well.”

In this post, I return to a familiar theme for mediators and for lawyers acting for clients in mediation: perseverance.

The first of the two quotations above comes from a participant in a mediation spread over four days and nearly one year. It was a complex matter involving many parties and some difficult issues. Towards the evening on day four, a proposal from the claimants was met with a lower counter by the defendants. The parties had laboured hard and the claimants felt that they had gone as far as they could go with the process. Or at least some of them did. Two principals left the building along with leading counsel.

That might have marked the end of the mediation. However, I had a sense that there was more to play for. I expressed my frustration with the situation, spoke with those who remained and suggested a further meeting, one to one, involving one of the claimants’ key advisers and his opposite number. “Let’s give it a go” was the sentiment. I knew that each were keen to find a resolution and that they respected each other. No lawyers were present.

In that meeting, things were said and options were explored that resulted, three weeks later, in a comprehensive deal settling all matters. Only because they went that extra mile. And, perhaps, in hindsight, it was helpful that the others had left early.  They provided the space for someone to step forward who could bring about a change in the pattern.

In the second quotation are the words of the chief executive of a large supplier of services to the public sector. He spoke these words at 9.45 in the morning, less than one hour after the start of the mediation. Breaking with convention, and with the agreement of all concerned, I had arranged to start the mediation with a meeting of the two principals on their own. All of the legal and technical stuff had been well covered by the lawyers in the paperwork: the principals had met previously and they knew each other.

The purpose of the meeting was to explore whether either party would be prepared to move from an earlier stalemate. In a friendly and frank conversation, one explained to the other that, with further inquiries carried out and substantial further costs incurred, he was in fact not even able to start at the previous point. His counterpart responded that, in that event, there was no point in continuing. He departed the meeting with the words set out above.

Four hours later, the parties’ lawyers were drafting a settlement agreement. What had happened? We didn’t accept things at face value. We stuck at it. By “we”, I mean myself and the two principals, supported by their teams. We continued to explore, to dig deeper, to try to understand what was really going on and what each needed. We reminded ourselves of the cost of the alternatives to a settlement. It was a classic piece of positional bargaining in one respect, each trying to find out how far the other would actually go – or give. But without the structure and safety of mediation and a mediator with whom to talk frankly and confidentially, it is unlikely that the principals would have had the ability to reach an outcome. The lawyers supported them well throughout.

One of Scotland’s lesser known music groups was a band known as Pilot. They had a lovely little song entitled “Never Give Up”. It remains one of my favourites – and an inspiration in my work.

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?

Mediation and Cups of Tea

“If only we’d had this conversation over a cup of tea fifteen years ago.” The client expressed frustration at the time which had passed, during which she and her opposite numbers had spent hundreds of thousands of pounds in litigation. That had got them no nearer to solving the underlying problem about which a court action had been raised all those years ago.

Now at mediation, remarkably this was the first occasion the clients had met during that period. Three different court actions, with a fourth pending, had left them financially impoverished and deeply angry at the legal system.

The (fairly recently instructed) lawyers at the mediation could only acknowledge the shocking nature of the situation. There was no rational explanation. Things had got out of hand. That of course had led to the well known problem of sunk costs – and who bears them. There was a possible route to pursue recovery of some of these but it would take that fourth litigation to open that up. Meantime, the real practical issue on the ground still needed to be addressed.

A “cup of tea policy” seems a rather quaint notion. But as a metaphor for meaningful negotiations it works well. Negotiating over a cuppa eases the tension. There is choreography in it too. Mediators can set up these moments well in order to make the very best of the opportunity.

Much more poignantly, the idea of a “cup of tea policy” was proposed at a mediation seminar in Edinburgh last week by Jo Berry, daughter of the murdered British MP Sir Anthony Berry, as an antidote to violence in political conflicts. She did so while sitting next to Patrick Magee, the one time IRA member who planted the bomb which killed her father at the Conservative Party conference in 1984. For seventeen years they have been speaking together about what it takes to overcome hatred and violence and consider healing and reconciliation. The key point they made, though, was the need for real understanding of the “other side”. Conversation over a real or metaphorical cup of tea can help achieve that.

“I did not understand where you were coming from.” “We felt misunderstood, demonised, not heard properly.” “Their political allegiance meant they couldn’t see beyond the uniforms…” “Your lawyers didn’t even try to make contact to find out what we really needed.”

Political malfunction and legal malfunction are not that far apart. For lawyers representing clients in claims handling and dispute resolution, whether in negotiation or mediation, it is critical to make – and take – time to listen and understand as well as to explain and be understood. For mediators, enabling that to happen is one of our primary roles. We must not underestimate its importance.