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Moving away from civil trials to private arbitration

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While British Columbia and Alberta alone undertook litigation rule revisions in 2010 in an effort to simplify and speed up the course of civil actions, the other ten provinces maintained the status quo leaving a vacuum. And that vacuum is increasingly being filled as businesses move away from the courts to private arbitration in order to achieve quicker, less expensive results. The issue for businesses facing commercial conflict is whether they can afford the uncertainty, the lost opportunity costs, and the legal expenses of having cases tied up in court for years.

The crisis in our civil courts due to shortages in funding and appointment of judges has caused a five-year backlog of trials in our largest cities. The good news is that most arbitrations can be completed within a year or less. It is not surprising that Individuals and businesses that need and want to resolve disputes quickly are opting for arbitration.

The move toward private arbitration is not just a reflection of frustration with long timelines and legal expense. Equally important in commercial disputes is the need for resolution because many businesses still do business together in spite of their disagreements and want to keep that way. Where prior negotiation or mediation does not work because of an issue of principle that becomes a roadblock, arbitration is the go-to process that guarantees a decision no matter what the result is. Just because businesses find themselves in conflict at times doesn’t mean that they are at war. As well, because of interlocking boards of directors and family relationships, these relationships may suffer the longer it takes to resolve disputes.

For disputes that have a lower dollar value and content that is not particularly technical, using a single arbitrator works well. On the other hand, where the dollars involved are higher and the content is technically complex, disputants often opt for three-person arbitration panels, with each party naming one arbitrator, and both naming a third. The reason for this, assuming a two-party dispute, is that each party gets to choose an arbitrator to his or her liking with expertise in the subject matter. Once named they choose the third arbitrator, often a lawyer with expertise in managing the arbitration.

To begin with, parties who arbitrate have the right to tailor their arbitration agreements as often as necessary. They get to select the arbitrators who have academic and practical knowledge of the subject matter. On the other hand, judges assigned to try civil actions often do not have specific knowledge of the particular subject matter of disputes and need to rely on the guidance of counsel.

One of the most important features of arbitration is confidentiality. If the parties are concerned about publicizing vital financial information or intellectual property data, they can agree to blanket confidentiality that prevents all of the participants from discussing information with the media. For parties who go to court, the rules are different and evidence filed with the courts is generally available to the public. Orders barring publication are exceptional and need court approval.

If there is a single function that distinguishes arbitration from litigation, it lies in the guidance of the arbitrator at the very first meeting of counsel at which the entire process is discussed and mapped out. And during that discussion parties are encouraged to agree to simplified procedures that can result in waiving or limiting the time taken for examinations for discovery, elimination of lengthy affidavits of documents, and simplification of document production, and testimony, including expert evidence at hearings.

It is worth noting that arbitration legislation does not require formal hearings leaving it to the parties to request them. Indeed, arbitrations are regularly conducted without formal hearings where the parties are looking for the arbitrator to value claims made by policyholders on insurance policies, or the correct amount of market rent when commercial leases are renewed.

By using arbitration wisely, parties can avoid the delay and the court costs involved where one side or the other launches interlocutory motions as a means of asserting leverage. The more streamlined the process is the fewer the temptations to use leverage, and the higher the probability of keeping to the agreed timeline.

Just as important are the arbitration statutes whether federal or provincial that give arbitrators the same powers to decide disputes as judges have, and the deference our courts give to arbitrators’ decisions provided that they comply with applicable legislation. Another feature commonly found in arbitration agreements is a waiver of any right of appeal. Eliminating appeals brings an end to conflict and to mounting costs and extended timelines once the arbitrator’s award is delivered.

At times, lawyers who act for clients in arbitration complain that both the time frame and the expense of arbitration are longer than expected. However, when they are asked for specifics, invariably the response is that counsel took it for granted that the procedures during an arbitration would be a carbon copy of the trial court’s Rules of Civil Procedure. In other words, some counsel assumes that all of the complex procedural layers provided for in the Rules of Civil Procedure necessarily apply. When that happens it’s no surprise that arbitration begins to imitate litigation.

The trick for litigators is to recognize that an essential element in arbitration lies in crafting a disciplined, efficient, summary process which is fair to each party while stressing the quality of evidence over quantity. Over presentation at an arbitration will definitely add to a client’s costs. However, it may also harm both the client’s legal and financial interests by burying the essential message.

Over the last 42 years, Jack has helped clients negotiate practical, business-like solutions to a host of contractual, corporate-commercial, property and estate issues. Where disputes have arisen and litigation is unavoidable, he has successfully represented clients in court.

 

 

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