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?

New Appointment for John Sturrock

News from Scotland that our colleague John Sturrock QC has been appointed by the Scottish Government to conduct a review into allegations of bullying at NHS Highland. This short life inquiry will continue alongside his mediation work in London, Edinburgh, Belfast, Dublin and internationally.

As well as his extensive commercial experience, John has worked at high levels on industrial and organisational management issues, in addition to his involvement in domestic and inter-governmental policy and political strategies.

On his NHS Highland appointment, John comments

These are difficult and sensitive issues. I know from my work as a mediator how important it is to listen to people’s concerns. My primary role, therefore, is to provide a safe and confidential place for people to be heard and to explore with them what the underlying issues might be

Read more here

Following the publication of the recent report on mediation in England and Wales by the CJC ADR Working Group chaired by Brick Court’s Bill Wood, John Sturrock has also taken on a similar role in Scotland where he has been appointed co-chair of a major review into mediation there.

John’s recent blog on the role of mediators in the political space here

CJC ADR Working Group Final Report

The ADR working group of the Civil Justice Council has published its final report.

Highlights include stopping short of recommending a ‘presumption’ that parties will agree to alternative dispute resolution as a condition for issuing proceedings (that is, no mandatory mediation) and setting up a Judicial/ADR liaison committee.

The Master of the Rolls, Sir Terence Etherton said ‘The working group is to be commended on producing an impressive report that proposes a number of reforms to the current system’.

Brick Court’s Bill Wood QC and Chair of the Working Group:

We have done our best to set out what seem to us the most promising options for the future. We are particularly pleased that our proposal for continuing liaison between judges and ADR professionals is already being acted upon by the Master of the Rolls

CJC ADR Working Group Report

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.

Trick or Treat? It’s Directory Time

Ah vanitas vanitatum! Which of us is happy in this world? Which of us has his desire? Or, having it, is satisfied?

Thackeray, Vanity Fair

Autumn is upon us, the clocks have gone back, mists and mellow fruitfulness prevail. And, fittingly, on Halloween itself the legal directories, TripAdvisor for the vexatious litigant, complete their 2018 editions.

Both halves of the profession are racked with anxiety in advance. As the polythene is torn off the books and the uploaded versions flicker on to the screen either fist pumps or a slight tremble of the lip will follow. Trick or treat?

Mediators, we have to admit, are not immune from this bonfire of the vanities. But the Brick Court Chambers team are pretty pleased with this year‘s harvest. Before we set out one two of the highlights (sorry!) we thought we would offer some pointers. We are keen to help the uninitiated appreciate the finer aspects a good directory entry.

  • Anybody who has run into Bill Wood in the last few months will not have escaped being told that he is (per Who’s Who Legal) the 2018 Mediator of the Year. They may be a touch surprised to see him described by Legal 500 this year as “immensely modest”.
  • Geoff Sharp, our New Zealand correspondent, has well and truly marked his increasing presence in London by crashing into Who’s Who Legal and Chambers at the first attempt.
  • Good news too for the indefatigable Tony Willis who this year has been spared ageist references to him being the “grandfather of mediation”, remarks that would have troubled a more flappable man.

We also enjoy the school report flavour that comes with the use of surnames.

Ruttle specialises in ships

Sturrock is the leading mediator in Scotland

Wood is in detention again

There seems to be a set vocabulary and there are clearly subtleties in the choice of epithet. The ones we like include “energetic” and “committed”.

We are less sure about some of the following (however well-intentioned);

“Hard-working” (bit of a plodder?) “Affable” (elderly? Under-prepared?) “Cerebral”(on another planet for most of the day?) “Puts clients at their ease” (likes to be loved and will not challenge even the most absurd aspects of your opponents case?). Enjoy!

John Sturrock QC

“He has tremendous presence and personality but his technical skills as a mediator are also excellent’ L500 2018

A “spellbinding mediator and great thinker”… “by far the best in the market” WWL 2018

“Singled out for praise by clients for his “relaxed, soft approach at outset” and yet for his ability to “still push hard to get a deal at the end of the day.” Chambers 2018

Geoff Sharp

“Leading mediator” in the field ….engaging manner, charm and intelligence” WWL 2018

“Really tenacious and determined to look at things from every angle to get the parties to talk” “He’s really sharp, asks the right questions, and knows when to intervene and when to give clients space” Chambers 2018

Stephen Ruttle QC

“always excellent” “outstanding” WWL 2018

“brings the experience that clients would expect from one of the top mediators in the business and clients are left impressed” L500 2018

a standout mediator who “is really on the ball. He can get into a party’s mind, find out what they care about, then get them over the line and find a resolution” Chambers 2018

Tony Willis

“A top practitioner in the market, specialising in commercial and regulatory disputes” WWL 2018

“… Has conducted over 1000 mediations” L500 2018

“Stands out among practitioners and clients for his tremendous experience” Chambers 2018

William Wood QC 

“The number-one mediator in the UK today” …”rare blend of good humour, professionalism and experience” WWL 2018

“Extraordinarily well-prepared”…. “such an effective mediator because he is extremely cerebral and, at the same time, immensely modest” L500 2018

“You always feel confident when he is there that a mediation will resolve” Chambers 2018

Our collective thanks to our referees who take time to answer the phone or return that researcher’s email and who continue to instruct us year in and year out.
We are very grateful.

Of Team Selection And Other Trials

Mediators think they probably have the best job in the world and they do not often make a plea for sympathy. But here goes.

As parties using mediation grow in confidence they have increasingly firm ideas as to how to conduct the mediation day. They are likely to have firm plans, for example, as to who should speak in the plenary session, when the first offer should be made and when and if clients should speak direct. All good.

Interestingly they also have firm ideas as to how the other side should conduct themselves. More difficult. We frequently mediate between parties who approach the mediation day in radically different ways and a conflict develops over process as intense as the dispute itself. One side may want the first offer at 10:15 am. The other wants an exhaustive series of meetings between the experts before any negotiation can happen. Choice of representative is particularly tricky. It could be “Where is Mr. Jones. None of the people attending know anything about this dispute” or as easily “Why is Jones coming? He is far too close to this dispute. He will never let them settle.”

This sort of dispute can start bubbling away well in advance of the mediation and the parties try to get the mediator involved. It happened today. I was copied in on an exchange in which one party suggested that both sides’ experts should attend next week’s mediation. His opposite number went straight into Caps Lock: “Our Mr. Jones will NOT BE ATTENDING”.

Unsurprisingly attempts to pick the other side’s team can touch a nerve.

“Good morning Sir Alex.

Arsene, how nice to hear from you. How can I help?

Well, I just wanted to share a few ideas about your back four for Saturday’s game.

Yes absolutely. Always worth listening to. Fire away…”

These rows can be an unhelpful start to the mediator’s involvement in the dispute. It is hard to build rapport with a party when your first telephone call   apparently adopts criticism of their strategy.   One has to tread carefully to avoid seeming to have adopted the opponent’s position. Following a volcanic discussion with Party A you call Party B. “Am I right in getting a slight sense that the parties have different views about representation?”

We will try to resolve these issues. They can give the mediator lots of clues to the psychology of the dispute. And parties do sometimes agree to review and change their approach. But in the end both sides only have the sanction of withdrawal as their sure remedy. The other side’s approach is the other side’s approach and you either work with it or you don’t mediate at all.

So, we will do our best but in the end it is your call.

The Singapore Convention

Settlements reached in cross border mediation will soon be enforceable internationally just like arbitral awards when UNCITAL’s Singapore Convention, the first UN treaty named after Singapore, comes into force in August next year provided sufficient countries ratify.

As a result, there is an expectation by Singaporean authorities that the city state’s most favoured status as an international mediation venue will be further confirmed.

Seen as mediation’s answer to the New York Convention that allows for the easy enforcement of arbitration awards, the Singapore Convention comes on top of much mediation activity in Singapore having last year also enacted a Mediation Act whereby mediated agreements can be recorded as orders of Singapore’s courts, allowing parties to enforce their terms more easily.

Key terms of the Singapore Convention include*;

Article 1 outlines the scope, applying the Convention to cross-border commercial disputes resolved through mediation where “at least two parties to the [written] settlement agreement have their places of business in different States” or in which parties “have their places of business different from either the State in which a substantial part of the obligations under the settlement agreement is performed or the State in which the subject matter of the settlement agreement is most closely connected.” Article 1 specifically excludes settlement agreements related to consumer, family, inheritance, and employment matters, as well as those enforceable as a judgment or as an arbitral award.

Article 2 defines key terms used in the Convention such as “place of business,” “in writing,” including in electronic form, and even “mediation.”

Article 3 summarizes the general principles and obligates member States that ratify the Convention and also permits a party subject of the Convention to invoke a defense and to subsequently prove that a particular dispute being raised was already previously resolved by a settlement agreement.

Article 4 provides a specific but broad checklist of what a party must supply for enforcement of the international settlement agreements that result from mediation. Article 4 includes submission of a “settlement agreement signed by the parties” and “evidence that the settlement agreement resulted from mediation.” Evidence includes items “such as” a “mediator’s signature on the settlement agreement,” or “a document signed by the mediator,” or “an attestation by the institution” administering the mediation. In the absence of such proof, Article 4 allows a party to submit “other evidence” acceptable or required by a competent authority of the member State where relief is sought. Article 4 also addresses key issues related to electronic communication, translation of settlement agreements, and calls for the competent authority of the member States enforcing the settlement agreements to “act expeditiously.”

Article 5 was vigorously debated and certain overlaps within the Article are intentional to accommodate the concerns of a member State’s domestic legal systems. Article 5 includes the grounds when a competent authority may refuse to grant enforcement. These circumstances include incapacity of a party, or where the settlement agreement a) is null and void, inoperative or incapable of being performed; b) not binding or not final; c) was subsequently modified; d) was performed; e) is not clear or comprehensible; or where granting relief would be contrary to terms of the settlement agreement or contrary to public policy, and subject matter is not capable of settlement by mediation under the law of that party. A competent authority may also refuse to grant relief where there is a serious breach by the mediation of standards applicable to the mediator or the failure by the mediator to disclose to the parties’ circumstances as to the mediator’s impartiality or independence.

Article 6 addresses issues of parallel applications or claims and draws inspiration from the New York Convention. It grants, to the competent authority of the member State where relief is being sought, wide discretion to adjourn its decision under the Convention where an application or claim relating to a settlement agreement was made in a court, an arbitral tribunal, or other competent authority.

Article 7 also draws inspiration from the New York Convention and allows member States flexibility to enact national legislation in their countries to expand the scope of settlement agreements excluded by Article 1, Paragraphs 2 and 3 of the Singapore Convention.

Article 8 allows for a tailored adoption of the Convention by each member State, allowing for two reservations when ratifying the Convention. The first reservation is one which relates to the member State or its own governmental agency. The second allows for a declaration that the Convention applies only where the parties to the settlement agreement resulting from mediation have agreed to the application of the Convention.

* Singapore Convention: A First Look by Deborah Masucci and M. Salman Ravala

Brick Court mediators are active in Singapore and Hong Kong and would be delighted to talk to you about mediating in Asia.