Benefits of ADR

The Advocate - April, 1999

At a recent lunch with a solicitor friend, I was explaining my responsibility to develop and facilitate the use of Alternative Dispute Resolution (ADR) for the commercial community, as well as the benefits of an administered mediation and/or arbitration. His reply was to tell me it is a simple matter: "Tell them about the advantages and then, more importantly, why anyone should name the Centre as the administrator of the process. If lawyers truly understand the benefits, they will ensure their clients are properly counseled". This is my answer to my friend Bill. This is what I would hope he and other solicitors would say to their clients about ADR.

Why use ADR?

A dispute is the last thing you want to think about when you enter into a legally binding contract for any commercial purpose. But you can save yourself a lot of expense, time and grief if you do think about it at the time you negotiate that contract.

Of course you do not plan to have disputes. But you know they can happen. Parties may find they have different ideas of what the contract means. One party may not perform. It makes sense to plan how to deal with a dispute in advance.

You can always go to court. A trial date can be obtained usually one to two years from the date of filing. The judgment is subject to appeal which may add many years before a final judgment is obtained. Court procedures must be followed and the parties must accept the judge assigned when airing their dispute in a public forum.

ADR (mediation and arbitration) provide effective alternatives. If you put the right clauses into your contract you can make sure that the dispute is dealt with effectively, in a way over which you have control. You can include enforceable agreements to arbitrate disputes (or mediate first and arbitrate only if necessary). Consider the advantages:

• flexibility: the procedures may be designed to suit the dispute, rather than follow the "one size fits all" Rules of Court. A mediator assists the parties to negotiate their own solution. An arbitrator is not bound by the Rules of Court, but must allow the parties an equal and fair opportunity to present their cases, and make a decision in accordance with the law governing the dispute.

• less expense: a streamlined procedure means lower costs.

• speed and finality: a streamlined procedure saves time. Unless the parties agree to preserve the option, an arbitrator's award is much less likely to be appealed.

• confidentiality: the process is not open to the media or any other third parties for that matter, except by agreement.

• choice of decision maker: the parties choose their mediator or arbitrator. It generally makes sense to appoint someone who knows the business or has other relevant expertise. The parties can have an experienced professional appointed by the Centre.

• certainty and enforceability: an arbitral award is final and binding, and enforceable as an Order of the Court. Ironically, an award is easier to enforce in another country than a Court Judgment.

• relationship: for all of these reasons, mediation and arbitration are less damaging to business relationships than litigation in the Courts. The procedures are less adversarial, and more supportive of a continuing relationship. Because it is quicker the dispute is finished sooner, allowing the parties to get on with business.

If you are persuaded, then you will endeavor to insert an ADR clause into new contracts you negotiate. But you also need to think about what to say in the clause. What process do you want to use instead of litigation? You can choose from a variety of processes and rules. You could agree to mediate first, and arbitrate if necessary. The Centre recommends you adopt that approach.

The Centre also recommends that you use its model clauses for the purpose. If you insert into your contract one or more of the Centre's model clauses, you agree to have the dispute resolution process administered by the Centre. There is no legal requirement for an administered process, and the Centre charges for its administration services. So why would you want to name the Centre?

There is no answer to that question if you can be sure the parties will be cooperative in the event they find themselves in dispute. It is difficult to answer the question persuasively even if the cooperation is limited to an agreement on an arbitrator, providing of course the arbitrator they appoint is effective and capable of handling contested procedural issues as well as the merits of the dispute. The Centre's rules apply unless the parties agree otherwise (Commercial Arbitration Act, RSBC c. 55, s. 22). It is interesting to note that the Centre's rules require that the Centre administer the process. The problem is that when you write that ADR clause it is seldom possible to reliably predict the parties will cooperate when they become embroiled in a dispute. In the real world, when a dispute arises the parties are not inclined to cooperate. If the parties do not have administrative support and they cannot agree on an arbitrator, an application to court will be required under the Commercial Arbitration Act, s. 17 in order to get an arbitrator. The cost of that application alone will exceed the Centre's commencement fees. The ability of the Centre to move the process along, as provided by the rules, reduces time, frustration and acrimony to a minimum.

The Centre will appoint an arbitrator, acceptable to the parties, from its panel of experienced and capable arbitrators for no extra charge. Under the Centre's Domestic Rules, it provides a number of other services:

• dealing with and deciding challenges to the arbitrator

• holding deposits, including security against costs, security against liability and advances against the arbitrator's fees

• arranging meetings and hearings

• handling formal offers to settle

• vetting a draft award at the arbitrator's request

• generally, providing continuity, maintaining momentum and ensuring an orderly and efficient process.

* Peter Grove is a Chartered Accountant and a Certified Mediator. He is Past Executive Director of the British Columbia International Commercial Arbitration Centre