Abigail Korbin & Tanisha Merkley
Day two of Canadian Arbitration Week started off with two practical and informative panels hosted by CPR Canada, the Canadian branch of the International Institute for Conflict Prevention & Resolution.
The first panel, moderated by David Ziegler, Partner at Fasken LLP, discussed dispute prevention broadly and in the context of risk management. Ziegler and three panelists discussed various techniques for dispute prevention and risk management, how these techniques can be implemented, and why they are even more important in the COVID era.
Ziegler directed his first question to panelist Verlyn Francis, an Arbitrator and Mediator with Isiko Dispute Resolution Consultants, asking what is dispute prevention and what does it mean to her. Francis stressed that there is a strong need for dispute prevention skills as all parties benefit from preventing disputes. While she recognized that conflict can have positive functions such as promoting growth, Francis emphasized that in an ongoing commercial relationship, preventing conflicts and managing risks before they crystallize into disputes is imperative. She highlighted that parties often need assistance to collaborate in order to restore a mutually satisfactory relationship.
This introduction to the topic was followed by a practical and educational discussion of the tools that corporations and lawyers can use to prevent disputes. Peter Sahagian, Partner and Special Counsel to the Office of CEO at KPMG LLP, suggested that there are three main ways to prevent disputes: internal mechanisms, joint best-practices to collaborate with the counterparty, and utilizing the deal negotiation phase.
Sahagian listed many internal mechanisms that corporations can institute to prevent disputes, such as setting financial incentives internally, implementing early warning systems, utilizing internal at-risk assessments, and most importantly, conducting a post-mortem after a dispute to see where things went wrong. Sahagian described some joint-best practices in collaborating with the counterparty, such as employing a relationship manager within both parties, identifying pre-authorized decision makers, agreeing on a methodology for mitigating losses, and including an ADR clause in the agreement that involves an escalation or step feature. In the deal construction phase, Sahagian recommended having a dispute resolution board and in some cases like a large construction project, having a standing third party neutral to resolve disputes on an inflight basis.
Chloe Snider, Partner at Dentons LLP, offered a refreshing perspective on how external litigation counsel can also facilitate dispute prevention by facilitating discussion between the parties. She suggested that disputes counsel can get involved at the contract drafting stage by helping write a multi-step arbitration or ADR clause which provides for some discussion between the parties. Snider emphasized that definite timeframes in these clauses are very important, as it should be clear to the parties how long these processes will last, not only to avoid pre-mature notices of arbitration or litigation but also to know when the limitations period begins to run.
From there, Ziegler addressed a topic that had been floating throughout the previous discussions: why might it be useful to engage a standing third-party neutral? He commented that these are rare outside of large construction projects. Francis suggested that standing or on-call neutrals are the best tool that we have to prevent disputes. In looking for a third-party neutral, the following characteristics are most important: expertise in the relevant contractual and technological information, training and experience in arbitration, mediation/conciliation, and/or project management, and experience in senior corporate management or governance roles. For drafters that want to include something like a standing third-party neutral in their ADR clause, Ziegler suggested they look to the model clauses on CPR’s website.
Snider emphasized the importance of finding ways to move past protracted litigation, especially for start-ups, when the business relationship is ongoing. While recognizing that early-dispute resolution or prevention is not always possible, she and Sahagian agreed that parties can mitigate the costs inflicted by protracted litigation by using summary judgment mechanisms.
All panelists agreed that the pandemic has changed how lawyers and clients approach dispute prevention. Francis mentioned that the ease of meetings and communication is helpful to preventing a dispute from arising. Sahagian observed that there has been an evolution in management thinking that is changing business culture. Companies are more apt to cooperate and there is a lot more goodwill, especially in ongoing relationships. Snider concurred, and added that the pandemic has helped companies prioritize what is really important and that parties are more willing to engage in dispute resolution.
Ziegler wrapped up by thanking the panelists.
The second panel of the CPR Symposium was on “Arbitrating Banking Disputes: Addressing the Needs of the Financial Services Sector”.
The moderator for this panel was Donny Surtani, a Barrister, Arbitrator, Mediator - Crown Office Chambers in London England. It featured Lauren Tomasich (Partner - Osler, Hoskin & Harcourt LLP), Kevin Nash (Deputy Registrar and Centre Director – Singapore International Arbitration Centre) and Laura McLaren (Associate General Counsel, Litigation & Managing Director, BMO Capital Markets).
Surtani began with a discussion of the reasons that arbitration is not as widely utilized in finance as other sectors: including arbitrators’ due process paranoia, banks needing quick injunctions in cases of fraud, and banks preferring public trials that will create precedents. McLaren, the only in-house banking lawyer on the panel, added that banks are often targets of litigation and need to be able to publicly defend themselves to create precedents and deter other litigants. Tomasich then went on to speak about what the arbitration community can do to ease the concerns of banks, observing that the banking community often has negative preconceptions of arbitration, but can see its value if informed of all the pros and cons.
Nash then spoke about the option of emergency arbitration as an alternative to injunctive relief from the courts. He argued that arbitration has an advantage in time-sensitive issues, as parties can apply for emergency arbitration on a Friday evening and receive a preliminary order the following day. In some jurisdictions, this is just as effective as court-ordered injunctions, as legislation makes arbitrator-ordered interim measures enforceable. McLaren said that from an in-house perspective, banks were more likely to use the courts, as in-house lawyers typically have more experience in those areas and often defer to what they know, which is litigation.
Another benefit of arbitration is parties’ ability to choose their adjudicator. Some parties prefer an arbitrator who is not a lawyer but rather a practitioner with experience in the banking industry. Nash, whose arbitration experience is primarily in Singapore, said that it is common there to see both lawyers and industry specialists. For three-person panels, Nash suggested that a list or strike-and-rank procedure could be beneficial to both parties. Tomasich expressed a strong preference for appointing lawyers from the business law community, since lawyers will be more familiar with arbitral practice and the key procedures necessary to preserve enforceability of an eventual award.
Lastly, the panel spoke about the ramifications of arbitration awards and decisions not being made public. Tomasich mentioned that while publication of awards could be beneficial, arbitration tribunals are not bound by precedent, so their usefulness would be limited.