A Matter of Choice

Most of us abhor disputes. Getting into an argument can be a huge emotional strain at best. At worst it can be destructive and expensive.

In the world of business, reputation is probably one of the most valuable assets. Reputations take years to build and yet can be destroyed in a flash. More often that not, the destruction comes as the result of a dispute. Disputes about the quality of goods or services provided; meeting commitments and deadlines; delivering on time and so on.

Such disputes are bound to happen in business at some time or another. The trick is to deal with them in ways which will protect the all important business relationships and reputations.

I plan to provide you with some anecdotes in this column, over the next few weeks, about how various businesses have dealt with disputes and how they plan to handle them in the future. I hope to cover disputes in the securities, construction, marine, insurance and real estate industries and the options available to them.

But first it is important that I go back to basics to ensure that we all understand some of the terminology and the options we have been reading and hearing about more and more frequently over the last couple of years.

Of course the best way to resolve an argument is by sitting down with the other side and working it out together. This can be hard to do, especially if one side feels that the other is more powerful. Most of us are ill equipped to negotiate a solution to disputes. We learn from an early age to try to satisfy our demands and be confrontational when they are not met.

Unfortunately, in far too many cases, as soon as negotiations break down writs begin to fly. Litigation takes over. Although 90% of cases that go to litigation actually settle before trial, most do within a few days or even hours before the court date. The Vancouver courts are setting dates for civil disputes some one to two years in the future. That?s a long time for a business to go with an unresolved problem and its a long time over which the costs of litigation will grow.

In the meantime, of course, there are unhappy people involved with unresolved problems and they are doing nothing to improve the reputation and the business of the other side to the dispute.

If negotiation doesn?t work, the parties to a dispute would do well to investigate the option of a mediation. Very simply, a mediation is an assisted negotiation. The parties sit down with a mediator who is neutral and trained to ensure that both sides get to say their piece and to understand the interests of the other. Statistics indicate that over 80% of mediated disputes are resolved by the parties reaching their own agreement rather than an imposed decision.

It is important to understand that what happens in the mediation is confidential and without prejudice. That means what is discussed cannot be used by either party in court against the other, at a later date. Neither can the mediator be called to give evidence. The consequence is that the discussions are open, as all involved strive to reach an agreement.

Arbitration is an option where the parties, in effect, hire an individual or individuals to reach a decision about their dispute, just as a judge would do. The parties choose their arbitrator(s) and the process moves forward, fairly formally but far less so than court procedures. The final award is binding and can rarely be successfully appealed.

The binding nature of the award makes some people nervous. However it should be remembered that the parties have selected a person to hear their case who they believe is competent and able to understand what the business is about. In court, while we have first class and experienced judges, there is no guarantee that the judge selected to hear your case will understand your business and its peculiarities.

Mediation and arbitration are voluntary processes unless they are written into a contract in, what is known as, an Alternative Dispute Resolution (ADR) clause. In its simplest form such a clause would require that disputes be resolved first by an attempt to negotiate, followed by mediation if the negotiation is unsuccessful and finally, by arbitration.

Due to the confidential nature of mediation and arbitration, there are no statistics on numbers which are taking place. We do know that the numbers of cases ?bumped? due to overbooking in the courts has dropped significantly over the last couple of years and court dates are being set sooner than we saw in the past. The resolution of disputes through the alternative methods I have been discussing has played a significant role in these changes and, I expect, will continue to do so.