DISPUTE RESOLUTION NEWSLETTER
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1 SUMMER 2012 DISPUTE RESOLUTION NEWSLETTER CHOOSING A DISPUTE RESOLUTION MECHANISM Business people and corporate counsel often seem not to pay much attention to their choice of dispute resolution mechanism when negotiating a contract. They often seem treat dispute resolution as just part of the contractual boilerplate. If they give much thought to it at all, they probably plug in a choice of litigation jurisdiction or arbitration provision from a previous contract. More likely, they don t consider the issue at all. So the contract ends up saying nothing about dispute resolution. That leads to any disputes which arise under it being resolved by litigation. As we ll see, that s likely the worst possible alternative. This article reviews the basic characteristics of the most common dispute resolution mechanisms, so that business people and corporate counsel can make better informed choices on this issue. It is helpful to consider negotiation, mediation, arbitration and litigation as lying along a continuum. The negotiation end of the continuum is characterized by values like acceptable results, flexibility and efficiency; the litigation end by values like risk of unacceptable results, expense and delay, and publicity. Looked at that way, it s not hard to see which end of the continuum most businesses would prefer be on. NEGOTIATION Let s start with negotiation. There is no mystery about what negotiation is: the parties compromise toward an agreed resolution of their dispute. Negotiation has several advantages over other dispute resolution mechanisms. By definition, it produces an acceptable result. If both parties don t agree, there s no resolution. IN THIS ISSUE 1 Choosing a Dispute Resolution Mechanism Stephen Antle 5 Practical Tips for Efficient Arbitration Sarah McEachern Hunter Parsons 8 Letters Rogatory: Inter-jurisdictional Evidence Gathering Michelle Maniago
2 2 DISPUTE RESOLUTION NEWSLETTER SUMMER 2012 negotiation is almost always the best dispute resolution mechanism. Negotiation is infinitely flexible it can accommodate anything the parties can dream up and agree on. In particular, it can accommodate solutions based on the parties ongoing business interests, rather than just their strict legal rights and obligations. While negotiation can certainly be complex, and therefore expensive and time consuming, it is usually more cost and time efficient than the alternatives. Negotiations, and their results, are generally confidential. That can be important in sensitive business contexts. For all those reasons, negotiation is almost always the best dispute resolution mechanism. There are good reasons most disputes are resolved by negotiated settlements. Businesses should always try to negotiate the resolution of a dispute (whatever their contracts say). They should never close the door on negotiation. Not that negotiation is the perfect mechanism. Again, by definition, it requires compromise. So it s highly unlikely either party will get everything they want. It also involves significant uncertainty. Because both parties must agree on a solution, both have a veto over that solution. There s always the possibility the other side will just say no to any reasonable resolution. (To answer one client s question: No, the court won t order a party to agree to a resolution.) In that case, negotiation just won t work. What then? MEDIATION Mediation is just negotiation facilitated b y an agreed neutral, normally a trained and experienced mediator. Ideally, if the parties are rational and competently advised, they should be able to negotiate a resolution of their own. But, sometimes that s just not the case. Other times, something about the situation produces a negotiating impasse. In those situations, mediation can be a very useful tool to achieve a negotiated resolution. Mediation has essentially the same advantages (acceptability, flexibility, efficiency, confidentiality) and disadvantages (necessity to compromise, uncertainty) as negotiation. The differences are of degree rather than kind. Most importantly, there is undoubtedly some kind of magic about mediation. It s hard to explain, and the reasons for it may be different in every case, but there is no doubt that the vast majority of commercial disputes which are mediated are resolved through that process. There is just something about involving a neutral in the negotiation that greatly facilitates resolution. So, mediation is more certain to produce an acceptable result than negotiation. One problem with mediation is that, not only must the parties agree on a resolution, they must also agree to mediate in the first place, and then on a mediator. Sometimes they can t, or just won t. A practical downside of mediation, compared to negotiation, is that competent, experienced mediators are not cheap, nor readily available. So mediation can be less cost and time efficient than negotiation. But, if it achieves an acceptable result, that cost and time may be well worth it. ARBITRATION With arbitration we move to a fundamentally different kind of dispute resolution mechanism. (This is why the mediation-arbitration hybrids can be so tricky.) In arbitration the parties agree to give a neutral the power, not to facilitate an agreed resolution of their dispute, as in mediation, but to impose a legally binding resolution on them, whether they agree with it or not. Arbitration is essentially private litigation. But, in the hands of experienced counsel, it can have important advantages over litigation. Arbitration is usually based on the parties legal rights and obligations, not their business interests. Contrary to popular belief, an arbitrator does not (or at least should not) just cut the baby in half. They find the facts based on the evidence. They apply the relevant law to those facts. They then determine the parties legal rights and obligations and resolve the dispute as the law requires, based on those facts. That process presents the opportunity for a party to win the dispute to hit a home run. Of course, that necessarily also presents the risk of losing of being the pitcher who gives up that home run. Arbitration has significant potential advantages. The parties have (at least) input into the choice of their decision maker. That can give comfort
3 3 that the result will be at least acceptable, if not necessarily ideal. Arbitration has tremendous procedural flexibility. Experienced counsel can tailor its procedures to focus on exactly what is needed to resolve the particular dispute. That can lead to significant cost and time efficiency compared with litigation. See the following article by Sarah McEachern and Hunter Parsons for more on this issue. Arbitration provides certainty. It is virtually certain that the arbitrator will resolve the dispute. It provides finality. It is very hard to appeal an arbitral award, and relatively easy to enforce one around the world. Like negotiation and mediation, arbitration is generally confidential. However, the fundamental nature of arbitration involves one big potential disadvantage: the possibility that the decision imposed on the parties by the arbitrator is unacceptable to one (or both!) of them. There s no avoiding that. It s inherent in the nature of arbitration (and litigation), as opposed to negotiation or mediation. In addition, while arbitration procedures are very flexible, and promote efficiency, they are much closer to those of litigation than those of negotiation or mediation. Cost and time efficiency therefore suffer by comparison. LITIGATION Litigation is fundamentally the same kind of process as arbitration: a neutral has the power to impose a legally binding resolution on the parties. But instead of the parties agreeing on that neutral, they re appointed by the state, in the person of a judge. It is crucial to understand that litigation, warts and all, is our society s default dispute resolution mechanism. If the parties don t agree on another mechanism, their dispute will be resolved by litigation, in any jurisdiction whose courts are willing to take it on. While litigation has its place, it should be obvious from a consideration of its advantages and disadvantages that it is not usually the best option. Litigation generally has only one significant advantage: certainty. As with arbitration, the process will almost certainly resolve the parties dispute. But that s it. There are generally no other advantages to litigation. On the other hand, there are a host of disadvantages. The parties have essentially no input into their choice of decision maker. Their dispute is resolved by whoever the relevant court s bureaucracy assigns to it. In Canada, where (outside Toronto) there is no specialized roster of experienced commercial judges, that can be a real problem in complex commercial cases. As with arbitration, there is the possibility of an unacceptable decision being imposed. Litigation procedures, despite some recent tinkering designed to make them more efficient and user-friendly, are relatively inflexible. The mandatory disclosure of relevant documents to the other parties, which is such an essential part of litigation, can be a real burden in the age. Litigation is usually the most expensive and time consuming dispute resolution mechanism. Compared to arbitration, there is a lack of finality. Either party can appeal a trial decision as of right. Then the parties have to do it all over again (not quite) in an appellate court. Enforcement of a judgment around the world is more difficult than enforcement of an arbitral award. Absent a sealing order, which the courts are reluctant to grant in commercial cases, the parties dispute will be played out in public, with all the evidence, arguments and results available to anyone who cares to look (and circulate on the internet), including the media. All in all, not a pretty picture. One to be avoided if possible. CONCLUSION Negotiation and mediation on the one hand, and arbitration and litigation on the other, are fundamentally different kinds of dispute resolution mechanisms. Each has distinct advantages and disadvantages. Business people and corporate house counsel should carefully consider the kinds of dispute which are likely to arise under the contracts they negotiate, and chose a dispute resolution Arbitration has tremendous procedural flexibility.
4 4 DISPUTE RESOLUTION NEWSLETTER SUMMER 2012 mechanism (or combination of mechanisms) which is best suited to resolve those kinds of dispute. If they don t chose wisely, they may end up being committed to a mechanism which is inappropriate for the disputes which do arise. If they don t chose at all, then by default they chose litigation. There is usually a better choice. PRACTICAL TIPS FOR EFFICIENT ARBITRATION Stephen Antle santle@ Arbitration is often touted as a quicker, more cost-effective alternative to resolving commercial disputes through litigation, and there s no reason it shouldn t be. But, just as litigation can be unpredictable and lead to unforeseen cost and delay, arbitration can be more costly and complex than anticipated. This is particularly true where counsel and arbitrators approach arbitration as though it was the same as litigation, leading to litigation-style discovery, lengthy hearings and long waits for decisions. So, how can you avoid having your arbitration take on the undesirable characteristics of litigation? Here are some practical tips. 1. Draft a good arbitration agreement. If an arbitration agreement is poorly drafted, the parties may waste time debating how to interpret it. They may even end up in court, asking a judge to decide whether the agreement applies to the dispute at all. (See Craig Chiasson s article on International Arbitration Best Practices in the winter 2012 edition of Dispute Resolution for a discussion of what an arbitration agreement should include.) You can t do much about a poorly drafted arbitration agreement once you re involved in the arbitration. The time to address it is when the relevant contract is being drafted. Get involved in that process! Be cautious about multi-step or tiered dispute resolution provisions, which can be used to delay arbitration. Although it may seem counterintuitive, avoid specifying unrealistic deadlines in the arbitration agreement. Obstructive counsel could take the position that the arbitrator has lost jurisdiction, or that the arbitration clause is no longer effective, once those time limits have expired. (And they won t likely be met anyway.) 2. Choose and use procedural rules (and specify them in the arbitration agreement). One of the attractions of arbitration is that parties can choose their own procedural rules for their dispute, and can even agree to modify those rules to best fit the dispute. This can avoid some of the rigidity, delay and burden of conducting cases under litigation procedures. Do not lose this opportunity!
5 5 For arbitrations in B.C., if no arbitration rules are specified in the arbitration agreement the rules of the B.C. International Commercial Arbitration Centre apply by default. Most arbitration rules, including the BCICAC s rules, encourage efficiency and are intended to prevent delay tactics. Be aware of the applicable rules (especially the ones that can help you) and hold the arbitrator and the other parties to them. This could mean asking for a hearing with the arbitrator, by telephone or in person, and applying for a procedural order that the other party comply with the rules. 3. Choose counsel and an arbitrator experienced in commercial arbitration. Experienced arbitration counsel will be aware of the common pitfalls and able to save you expense and delay by helping you steer clear of them. Counsel and arbitrators unfamiliar with arbitration may conduct the arbitration as though it were a traditional lawsuit, and so lose the benefits of arbitration s flexible procedures. 4. Keep your case succinct and focus on your best points. While it can be tempting to load up your arbitration pleadings with all possible claims and defences, this is an inefficient, litigation, approach. Focusing on the claims and defences that actually have the best chance of success will be more beneficial overall. It will also reduce the numbers of documents, witness statements and expert opinions needed to establish or defend your case. 5. Have a procedural meeting with the arbitrator early on. Even if the procedural rules you have adopted don t require one, ask for a meeting with the arbitrator early on, and apply for a procedural order, setting out timeframes and clear procedures that will be followed from the document production stage through to the hearing. Hold the other parties to the procedural order. Cases often grow to meet the time allowed for them. Barring exceptional circumstances, strive to meet the timeframes initially set out. 6. Be wary of litigation-style document disclosure. A key difference between litigation and arbitration is that in arbitration you do not have to disclose to the other side all your documents relevant to the issues in dispute. Most arbitral rules only require that parties disclose the documents they actually want to rely on, and those that are responsive to specific requests made by the other parties. Conducting document disclosure in a focused way can reduce the significant costs and delays caused by litigation-style document dumps and fishing expedition document requests. When confronted with counsel and parties that favor a litigation-style approach to documents, apply to the arbitrator for an interim award reining in document disclosure. Adopt a set of guidelines, such as the International Bar Association s Rules on the Taking of Evidence in International Arbitration, which limits document disclosure and requires clear reasons for requesting additional categories of documents. 7. Eliminate evidentiary redundancies. Avoid unnecessary rounds of pleadings and other materials. Best arbitration practices usually involve minimal pleadings, and submitting all written witness statements, documents and expert opinions in one complete package. Obtaining the evidence of expert witnesses can be expensive and time consuming. Most arbitral rules only require that parties disclose the documents they actually want to rely on...
6 6 DISPUTE RESOLUTION NEWSLETTER SUMMER 2012 Consider the possibilities for reducing the number of experts (and whether they re needed at all). Ask opposing counsel about retaining experts jointly or having the arbitrator appoint them. Or propose that the experts (or other witnesses) be cross examined in groups, to reduce hearing time and easily highlight conflicts in the evidence. Consider whether cross examination of witnesses is really necessary. It may be that cross examination is unnecessary and refraining will actually benefit your case. Sarah McEachern Hunter Parsons (Summer articling student) LETTERS ROGATORY: INTER-JURISDICTIONAL EVIDENCE GATHERING When faced with an uncooperative potential witness resident in British Columbia, parties to foreign lawsuits may use letters rogatory (sometimes called letters of request) which, if enforced by the British Columbia courts, can compel the witness to produce documents and be examined under oath. The resulting evidence can then be used at the foreign trial. British Columbia businesses should be familiar with how the British Columbia courts deal with letters rogatory, in case one of their employees is such a witness or they are involved in foreign litigation and need the evidence of a British Columbia resident. ENFORCEMENT CONSIDERATIONS Enforcement of foreign letters rogatory in British Columbia is governed by both the British Columbia and Canada Evidence Acts. Requests from foreign courts are usually granted, unless the request is contrary to Canadian public policy or otherwise prejudicial to Canadian sovereignty or citizens. In exercising their discretion to enforce foreign letters rogatory, the British Columbia courts consider: (1) whether the evidence sought is relevant to the foreign trial; (2) whether the evidence is necessary for the foreign trial and will be introduced at that trial if admissible; (3) whether the evidence is obtainable in some other way; (4) whether enforcing the letters rogatory would be contrary to Canadian public policy; (5) whether any documents sought are identified with reasonable specificity; and (6) whether enforcing the letters rogatory would be unduly burdensome on the witness, having in mind what he or she would be required to do were the lawsuit tried in British Columbia.
7 7 Previously foreign requests would not be granted if directed to discovery (rather than to evidence for trial), but recent decisions have modified that position. The key questions now to be considered in discovery situations are the relevance of the evidence to the foreign trial and the burden imposed on the witness. LETTERS ROGATORY TIPS When in need of a witness evidence for use in a foreign trial, businesses should consult with counsel in that foreign jurisdiction and in the witness resident jurisdiction before obtaining letters rogatory from a foreign court, as requirements for obtaining and enforcing letters rogatory may differ between jurisdictions. For foreign letters rogatory that are intended to be enforced in British Columbia, British Columbia businesses should bear in mind the following tips, to save time and money: (1) Be Detailed British Columbia courts reject broadranging fishing expeditions for evidence. So, be specific in your requests for documents and topics for examination. Explain the relevance of all information sought. Failure to be detailed may result in the letters rogatory not being enforced, regardless of what additional information is supplied to the British Columbia courts by counsel. (2) Set Out Everything Needed The letters rogatory will be read strictly, so be sure to include the correct personal and corporate names of the witnesses. If you want a transcript or videotape of the examination, ask for it in the letters rogatory. If you want a specific person to oversee the process (as a commissioner ), ask for that person by name or title. Make sure that appropriate alternative language is included, so that the British Columbia courts can substitute a different commissioner in place of the requested one if necessary. (3) Talk to Opposing Counsel Obtain several dates for the examination of the witness that work for all the parties involved in the foreign litigation. This will allow British Columbia counsel to more easily schedule the examination. (4) Be Wary of Confidentiality Issues To enforce the letters rogatory, British Columbia counsel must file a petition with supporting materials (usually an affidavit sworn by a foreign lawyer who deposes that the facts on which the petition is based are true). The supporting material may include documents subject to a confidentiality order or agreement in the foreign jurisdiction. Be sure to obtain prior approval for use of such documents in enforcing the letters rogatory, as they will be public once filed with the British Columbia court. (5) Costs Will Increase with Poor Drafting If the foreign application materials for obtaining the letters rogatory are thin, the British Columbia courts may refuse to enforce them. They may allow the parties to apply again if better materials are supplied to the foreign court and new letters rogatory issued. Avoid the extra costs of that process by drafting complete material in the first place. (6) You May have to Pay Costs of the Witness As the witness is being compelled to give evidence, the British Columbia courts will likely grant him or her some compensation for his or her preparation and examination. The amount is entirely within the discretion of the court. In a documentheavy case, it could be significant. Before embarking on this process, consider how important the witness evidence is to the foreign trial. Perhaps consider a costsharing agreement with opposing parties in the foreign litigation. Be sure to preserve any rights you may have to obtain costs related to the examination in the foreign litigation. (7) Timing is a Key Consideration Once the letters rogatory is issued by the foreign court, British Columbia counsel must file a petition with supporting materials to enforce it. If British Columbia counsel has worked alongside the foreign...be specific in your requests for documents and topics for examination.
8 counsel from the outset preparing the letters rogatory materials, there should be little delay between the issuance of the letters rogatory and the filing of the petition in British Columbia to enforce it. British Columbia counsel will then serve the filed petition and supporting materials on the witness and the other foreign parties. If the address of the witness is unknown, it may take some time to find him or her. Once served, the witness will have 21 days to respond to the petition. The other parties may have longer, depending on where they are. An application to enforce can be heard ten days after the time for everyone to respond has expired. Be sure to consider any discovery cut-offs in the foreign lawsuit, and allow enough time to enforce the letter rogatory and examine the witness. Ideally, the terms of an examination under letters rogatory will be resolved through negotiation with the witness and other foreign parties. However, if this proves impossible, you must make sure that you are in the best possible position to enforce the letters rogatory in the British Columbia courts. This is best done through detailed communication between counsel obtaining and enforcing the letters rogatory, and filing complete materials in the foreign and British Columbia courts. BORDEN LADNER GERVAIS LAWYERS PATENT & TRADE-MARK AGENTS Michelle Maniago Calgary Centennial Place, East Tower 1900, rd Ave S W Calgary, AB, Canada T2P 0R3 T F Toronto Scotia Plaza, 40 King St W Toronto, ON, Canada M5H 3Y4 T F VANCOUVER DISPUTE RESOLUTION DEPARTMENT MANAGER Gordon R. Johnson gjohnson@ EDITOR Stephen Antle santle@ Montréal 1000, De La Gauchetière St W Suite 900 Montréal, QC, Canada H3B 5H4 Tél Téléc Ottawa World Exchange Plaza 100 Queen St, Suite 1100 Ottawa, ON, Canada K1P 1J9 T F (Legal) F (IP) ipinfo@ (IP) Vancouver 1200 Waterfront Centre 200 Burrard St, P.O. Box Vancouver, BC, Canada V7X 1T2 T F Waterloo Region Waterloo City Centre 100 Regina St S, Suite 220 Waterloo, ON, Canada N2J 4P9 T F F (IP) This newsletter is prepared as a service for our clients and other persons dealing with dispute resolution issues. It is not intended to be a complete statement of the law or an opinion on any subject. Although we endeavour to ensure its accuracy, no one should act upon it without a thorough examination of the law after the facts of a specific situation are considered. No part of this publication may be reproduced without prior written permission of Borden Ladner Gervais LLP (BLG). This newsletter has been sent to you courtesy of BLG. We respect your privacy, and wish to point out that our privacy policy relative to newsletters may be found at If you have received this newsletter in error, or if you do not wish to receive further newsletters, you may ask to have your contact information removed from our mailing lists by phoning BLG.LAW1 or by ing unsubscribe@ Borden Ladner Gervais LLP Borden Ladner Gervais LLP is an Ontario Limited Liability Partnership.
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