If the parties have agreed that the arbitration is to be conducted through an arbitration institution, then the rules of that institution will apply. Thus, if the parties have agreed that the arbitration is to be conducted under the auspices of the International Chamber of Commerce in Paris, France, or the British Columbia International Commercial Arbitration Centre in Vancouver, British Columbia, then the rules of those organizations apply.
In addition, some international legal organizations have published rules and agreements for use in mediations, and in arbitrations both domestic and international. These include the United Nations Commission on International Trade Law (UNCITRAL) and the Chartered Institute of Arbitrators.
The websites for some of the main arbitration organizations are as follows:
- International Chamber of Commerce: www.iccwbo.org
- London Court of International Arbitration: www.lcia.org
- Chartered Institute of Arbitrators: www.ciarb.org
- International Centre for Dispute Resolution of the American Arbitration Association: www.adr.org
- British Columbia International Commercial Arbitration Centre: www.bcicac.com
- United Nations Commission on International Trade Law: www.uncitral.org
- ADR Institute of Canada: www.adrcanada.ca
If the parties have not agreed to arbitration through an arbitration institution, then they will want to incorporate into their arbitration agreement, or separately agree upon, the rules of procedure by which the arbitration is to be conducted. Each of the parties will want to consult an experienced lawyer in deciding on the rules for the arbitration. The parties may design their own rules, or adapt rules from those which are published by the various arbitration organizations. Just click on the websites shown above and go to the relevant rules.
ADR occurs by way of agreement. The parties enter into an agreement which sets out their own system or procedure to resolve their dispute. By adopting an ADR procedure, the parties are effectively opting out of the court system, at least temporarily, to resolve their dispute.
Forms of ADR
The two most common forms of ADR are mediation and arbitration. Those two forms are discussed in more detail below. They are distinguished from each other and from court procedures by their degree of voluntariness and formality.
There are a variety of other ADR procedures which adopt, to a greater or lesser extent, some of the features of mediation and arbitration, including Med-Arb and Neutral Evaluation. Both of these procedures are discussed in greater detail below.
Purposes and Advantages of ADR
The purpose of ADR is to offer a variety of procedures by which the parties may resolve their dispute. The variety allows the parties to select the procedure which is most suitable for the dispute. Some of the factors that will affect the selection include:
Privacy: The parties may not want the dispute, or the facts relating to the dispute, to become public. In that event, the parties will stipulate in the agreement to adopt an ADR alternative that the facts to be discussed and the resolution of the dispute shall remain confidential.
Cost: The parties may not wish to incur the costs of court litigation. In a jurisdiction in which costs can be awarded against the loser, a party may not wish to run that risk. If so, an ADR alternative with simple and inexpensive procedures may be more suitable. In the ADR agreement, the parties may make whatever agreement they wish with respect to their costs and the costs of the mediator, arbitrator or neutral evaluator.
Time: The parties may not wish to incur the time involved in court litigation. If so, they may select an ADR alternative with a timetable that will ensure that the dispute is resolved on a timely basis.
Expertise: The dispute may involve a matter of expert knowledge. The parties may prefer that the adjudicator or mediator be an expert in the area, rather than relying on a judge who may have no knowledge of the subject matter of the dispute. The expertise may be from a technical, business, or indeed virtually any sort of expertise. Thus, family disputes are now often resolved by senior matrimonial counsel acting as the mediator or arbitrator.
In addition, the dispute resolution expertise of the ADR specialist may itself be a very good reason to adopt that procedure. Thus, a mediator may be a very good mediator and the selection of that person may be a sufficient reason to mediate the dispute.
Continuing relationship: The parties may have a relationship which will continue long after the dispute. In this case, they may wish the dispute to be resolved in a manner that is least contentious and public, and least likely to disrupt their ongoing relationship.
Cross border or other perceptual issues: The parties to the dispute may be from different countries and may be concerned about the dispute being resolved in the court of the home jurisdiction of one of the parties. There may be other perceptual reasons why the parties do not wish to have their dispute resolved in court. If so, the parties may decide to incorporate an arbitration or mediation clause into their business agreement. Even if they do not do so, but if a dispute arises after that agreement is made, they may then agree to resolve the dispute out of court and by way of an ADR procedure.
The parties may enter into an arbitration agreement before a dispute arises, or after it arises. An example of the first situation is an arbitration agreement in a commercial agreement. If that agreement contains an arbitration clause, then from the beginning of their relationship, the parties have selected arbitration as the means to resolve their disputes.
However, if they do not, and if a dispute later arises, then the parties may enter into an arbitration agreement at that time. Indeed, the parties may have no existing relationship or agreement between them. Their dispute may arise from a tort or other wrong which has allegedly occurred, and in the absence of any contractual relationship. They can still agree to adopt arbitration as the means to resolve their dispute.
The decision to arbitrate is voluntary. The parties must agree to enter into arbitration. If they cannot agree, then their dispute must be determined in court. If they do agree, then the arbitration agreement into which they enter will set forth the procedures for the arbitration.
Since arbitration only arises from an agreement, the terms of the agreement are crucial. While the arbitration statutes, discussed below, do set out some parameters for the agreement, still the arbitration agreement will be the crucial document setting forth how and where the arbitration will occur.
In addition to agreeing to arbitrate, the parties must agree on the composition of the arbitral tribunal. Usually that tribunal is composed of one arbitrator or three arbitrators. The parties must enter into a retainer or appointment agreement with the members of the tribunal.
In this discussion, the original arbitration agreement (if there is one) and the arrangements made to conduct the arbitration after a dispute has arisen, are referred to together as the arbitration agreement. Examples of those kinds of agreements are found on this website under the heading Draft Contracts.
If the parties cannot agree on the arbitral tribunal, then they may apply to the court for the appointment of the tribunal. This matter is dealt with below under the heading Statutory Regime.
The Stages of the Arbitration
Arbitration generally involves three stages.
The first stage is the retention of the arbitral tribunal. At this stage, the parties agree upon the terms upon which the arbitral tribunal is approved. It is usual at this stage for the parties to also agree on the conduct including the (procedures, timing, location and other details) of the arbitration. Those details are discussed under the heading ADR Process below.
The second stage is the pre-hearing process. In this stage, the parties state to each other the facts and the law which they intend to present to the arbitration tribunal. In court terms, these statements are referred to as pleadings. At this stage, the parties usually exchange the documents upon which they will rely. If the parties wish further disclosure during the pre-hearing stage, their agreement may require each party to disclose relevant documents or may require each party to be orally examined prior to the hearing.
The third stage is the actual “hearing” held by the arbitration tribunal. Within the bounds of fairness and the applicable arbitration statutes, the hearing may be as formal or informal as the parties’ desire. At one extreme, it can involve an agreement on the facts and argument about the legal effect of those facts. At the other extreme, it can involve full oral testimony including examinations in chief and cross examination, together with full argument on the facts and law. following the hearing, the arbitral tribunal will render its decision.
In essence, then, the arbitration agreement (both the initial agreement and the agreement relating to the conduct of the arbitration) will determine the extent to which the arbitration has the formal procedures and costs of a court, or more or less informal procedures and more or less costly procedures than a court.
The arbitration agreement will usually state the costs consequences of the arbitration. The parties may agree that the successful party will recover all or some of its costs, and the costs of the arbitrator, from the other party. On the other hand, the parties may agree that each party will bear its own costs and recover no costs against the other party.
Arbitration gives rise to a binding determination. Unless the arbitration tribunal has made some fundamental error of jurisdiction, or unless there are rights of appeal under the agreement or the applicable arbitration statute, then the decision of the arbitration tribunal is final. For this reason, it is vital that the parties have confidence in the procedures they have adopted and the arbitration tribunal they have selected, because they cannot later go back to court to have the dispute re-litigated.
In Canada, the statutory regime governing arbitration is determined by whether the arbitration is a domestic arbitration or an international commercial arbitration.
If the arbitration is a domestic arbitration, then the applicable provincial statutes in Ontario is The Arbitration Act, 1991, c. 17. In the other provinces and territories the statutes are found in: British Columbia, 1986, c. 3; Alberta, 1991, c. A-43.1; Saskatchewan, 1978, c. A-24; Manitoba, CCSM, c. A120; New Brunswick, 1973, c. A-10; Nova Scotia, R.S.N.S. 1989, c. 19; P.E.I, 1988, c. A-16; Newfoundland and Labrador, R.S.N.L 1990, .c.A-14; Northwest Territories, 1988, c. A-15; the Yukon, 1986, c. 7.; Quebec, the Code of Civil Procedure.
If the arbitration is an international commercial arbitration, then the applicable statute in Ontario is the International Commercial Arbitration Act, R.S.O. 1990, c. I-9; for the federal government is R.S.C. 1985, c.17 (2nd Supp.) and in other provinces and territories are: British Columbia, 1986, c. 14; Alberta, 1986, c. I-6.6; Saskatchewan, 1988-89, c. I-10.2; Manitoba, CCSM c. C151; New Brunswick, 1986, c. I-12.2; Nova Scotia, R.S.N.S.1989, c. 234; Newfoundland and Labrador, R.S.N.L. 1990,c. I-15; P.E.I, R.S.P.E.I. 1988, c. I-5; Northwest Territories, R.S.N.W.T.1988, c. I-4; Yukon, 1987, c. 14. In Quebec, the Code of Civil Procedure applies to both international and domestic arbitrations.
Each of these statues incorporates, more or less, the provisions of the Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law (UNCITRAL).
The arbitration statutes enable a party to the arbitration agreement to apply to court for a number of remedies. These remedies include:
- the appointment of the arbitral tribunal if the parties cannot agree on who the arbitrator or arbitrators should be;
- an order setting aside the award if the arbitration board acts unfairly and contrary to the rules of natural justice, or makes errors of law or jurisdiction; or
- an order enforcing the decision of the arbitration tribunal.
If the parties cannot agree on some of the procedures for the arbitration, then the statutes provide for minimum rules.
Some of the statutes, such as Ontario’s Arbitration Act, 1991, allow the parties to seek leave to appeal, on a matter of law, or to agree to an appeal to the court on questions of law, fact or mixed fact and law. The statutes of other provinces, such as Quebec and Newfoundland and Labrador, contemplate no such appeals. There are a variety of other appeal rights in other provincial statutes. All these statutes allow the court to set aside an arbitration award if the board makes a jurisdictional error.
The mediation process is entirely voluntary. The parties must agree to mediate in the first place, and they must agree to continue to mediate. If either party decides that it no longer wishes to mediate, then the mediation is over.
In this respect, mediation is different from arbitration. In arbitration, once the parties agree to arbitrate then they cannot withdraw from the process. They are bound by the arbitration agreement and by the decision of the arbitration board.
Because mediation is an entirely consensual process, it can be adopted at any time and during any other type of proceeding. Thus the parties to an action in court can, at any time, decide to suspend the action and mediate. They can do so at the time the action is started, or during discoveries, or just before trial, or pending appeal. Since mediation is a form of negotiation, the discussions are confidential and without prejudice and cannot be used if mediation is unsuccessful and the action continues. The same applies during arbitration; at any time the parties can decide to mediate, and if they are unsuccessful, then they can resume the arbitration.
The Form and Stages of the Negotiation
The mediation process is simply a form of negotiation in which the parties select a mediator because they believe that with the assistance of a mediator, they will have a better chance of reaching a settlement.
For this reason, the form of the negotiation and the expertise of the mediator are of prime importance. Indeed, they may be the only reason that the parties have selected the mediation process.
The form of the negotiation may vary considerably. At one extreme, it may involve very informal procedures involving little or no paper or preparation; and in which the parties meet with the mediator in one room.
However, a mediation of any significance usually involves two stages. At the first stage, the parties exchange and give to the mediator written briefs of the facts and law. The mediation briefs may be large or small, and may contain statements of fact and law, case authorities, expert reports and witness statements.
In the second stage, the parties meet with each other and the mediator, usually with their legal counsel. It is at this stage that the parties, with the assistance of the mediator, seek to settle the dispute. They may orally present facts and legal arguments to each other and the mediator in a joint session or sessions. They may adjourn to “break-out” rooms so that the mediator may caucus with them separately, seeking to bring their different positions closer together.
The mediator is a key element in the mediation. Indeed, since the parties are always free to negotiate by themselves without the assistance of anyone, the style and expertise of the mediator may be the reason why the parties choose to mediate.
There is a wide range of expertise and style of mediators. No one style and no one range of expertise is “right” or “wrong”. The parties should select a mediator in which they have confidence and whom they believe is suitable for the dispute that they are trying to resolve.
One difference in style is between mediators who tend to be “evaluative” and those who tend to be “consensual”. The former tend to express their views of the merits of the dispute, in the belief that by doing so they will cause the parties to resolve the dispute. The latter tend not to express their views on the merits, in the belief that finding the points of consensus will most likely result in a “win-win” settlement. One of the main decisions that must be made by any party contemplating mediation is which style of mediator is suitable for the mediation, from that party’s standpoint.
If the dispute is resolved during the mediation, then a settlement agreement will be drafted and signed by the parties. That agreement may be enforced in court just as any other agreement.
There are two advantages of one person fulfilling both roles of mediator and arbitrator. First, efficiency (which may translate into cost and time saving), since one person will become familiar with the facts and not have to be re-educated in the arbitration. Second, the parties will retain the expertise of that one person and the confidence of the parties in that person.
The disadvantage of Med-Arb is that it contradicts the basic principles of mediation and arbitration. As mediator, the mediator may hear facts and admissions that he or she will never hear in the arbitration; and the mediator may use personal suasion to try to get the parties to settle, particularly in the final moments of the mediation. If the mediator is to be the arbitrator, the mediator may not want to hear those facts and admissions and to use full persuasive powers to settle the dispute. Indeed, the parties will likely not wish the mediator to do so. Similarly, the arbitrator is supposed to enter the arbitration as a completely neutral party.
The participation in the mediation may make the arbitrator more partisan and less neutral.
In these circumstances, it is unlikely that a party will agree to a Med-Arb unless there are very good and over-riding reasons to do so. Those reasons may include: time or cost constraint that makes the use of one mediator/arbitrator essential; a belief that the mediation can be conducted without any prejudicial information being communicated to the mediator; or if the mediator/arbitrator is so capable and expert that the downsides of Med-Arb should be accepted.
As is apparent, there is an advantage and disadvantage to neutral evaluation.Neutral evaluation is akin to mediation with an evaluative mediator. The additional advantage is that, assuming the parties have selected an evaluator with expertise in the matter being evaluated, the parties obtain a non-biased and respected opinion about the merits of the case. This opinion may allow the parties to come to a more realistic opinion about the case than has been possible up to that point.
Thus, if the lawyer for one side believes that the other side does not have a realistic assessment of the case, perhaps because the other side is not listening to its own lawyer, then neutral evaluation may be a way to bring the parties to their senses. This may particularly be the case if there is a legal issue at stake. If the neutral evaluator is a respected counsel or former judge, then the evaluation may cause the parties to re-assess their positions. Similarly, in a family case a neutral evaluation by an experienced matrimonial counsel concerning the likely amount that a court will award for child or spousal support may increase the chances of settlement.
The downside of neutral evaluation is that it may drive the parties apart. If the parties were capable of settlement and were working in that direction, and the neutral evaluator says “Party X is going to win!”, then party X’s settlement demand will go up, and the likelihood of settlement will go down. Only if Party Y and its lawyer accept that evaluation will the process have accomplished anything. Since the uncertainty of the result at trial is often a prime motivation for settlement, a neutral evaluation may impair the likelihood of settlement.
The multi-party nature of the ADR process may impact each stage of that process. Each of the parties must agree to the selection of the mediator or arbitrator and the procedures to be followed. Each of the parties must participate, or be given the opportunity to participate, in each stages of the process. Each of the parties must be present, or given the opportunity to be present, at the hearing or other process of resolution. The participation of multiple parties has the potential to substantially increase the cost and time of the process.If the parties pro-actively deal with the process issues, then multi-party ADR can be less expensive for each participant because there are more of them to share the costs.
From the mediator’s and arbitrator’s standpoint, there are two steps that can be taken to substantially reduce the cost of multi-party ADR.
Help the mediator or arbitrator to properly prepare for the hearing
Before the hearing, equip the mediator or arbitrator to deal with the dispute. While this point is relevant to any ADR proceedings, it is even more important when there are many parties. In this circumstance, the mediator or arbitrator needs more help in understanding the conflicting positions of all the parties.
Agree upon a cost effective hearing process
Again, this point is relevant to two-party mediations and arbitrations. But it is crucial to a multi-party ADR process, and particularly a multi-party arbitration. If numerous parties enter the pre-hearing or hearing without any agreement on the process, they are inviting the escalation of costs and time. Without such an agreement, it is almost inevitable that there will be disagreements about many things: who goes first, in what order other parties or matters proceed; what documents are used and by whom and when; what experts are called and when, etc. Disputes over these matters will have to be decided by the arbitrator and will disturb the hearing process. If the parties can agree on these matters, they will save themselves time and expense.
Under the heading About Thomas Heintzman, you will find information about me that will help you decide if I am a suitable person to act as the mediator, arbitrator or neutral evaluator. I would be pleased to discuss that decision with you at your convenience.
The agreement will also provide for a cancellation charge if the ADR proceeding is cancelled.
The ADR agreements which are found under Draft Contracts contain some of the usual terms relating to fees, deposits and cancellation charges.
Arbitration Place has very high quality and efficient premises for hearings. To obtain information about Arbitration Place and to make arrangements for hearing and meeting facilities, see www.arbitrationplace.com.
In mediation, the mediator decides nothing – the parties decide everything. The mediator’s task is to maximize the opportunity of the parties to negotiate a settlement agreement. The expertise which the mediator brings to bear is in the subject matter of the dispute and in facilitating the parties’ settlement discussions.
In arbitration, the arbitrator decides everything that the parties cannot decide. That includes any disputes over procedure and the substantial dispute between the parties itself. The arbitrator’s task is to decide the dispute fairly and correctly. The expertise which the arbitrator brings to bear is twofold: in the subject matter of the dispute so that it is decided correctly: and in conducting proceedings, so that the arbitration proceedings are fair and efficient.
The success of the ADR process and the effectiveness of the ADR neutral depend upon the parties maintaining an orderly schedule. The ADR agreement will normally provide for deadlines to maximize the fairness and efficient of the whole process.
Before the hearing, deliver to the ADR neutral the Preparation Materials which will enable the issues to be understood before the commencement of the hearing, whether it be a mediation or arbitration. That will save you time and money because the ADR neutral will be more effective, and you will be more persuasive. But don’t deliver the kitchen sink. Deliver what is persuasive. And allow for the timely delivery of the preparation material in you ADR agreement.
If you know all about the dispute and you need time and materials to prepare for the ADR process, then so does the ADR neutral you have retained.
Under this heading you will find my discussions and analyses concerning recent court decisions relating to arbitration, mediation and construction law. The articles are also organized by subject matters, so you may conduct your search by category of subject matter. You can also use the search button at the top of the home page to find articles on specific subject matters.
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You can link to my construction law site at www.constructionlawcanada.com. As the author of Heintzman & Goldsmith on Canadian Building Contracts, I have a particular interest and expertise in construction law.
All of the statements on this website, including draft suggested agreements and the analysis of cases, are provided as a resource for you to keep up with ADR and construction law. Please note that any statements, drafts, discussions and articles on this website represent my personal views or the suggestions of other persons, and do not constitute legal advice.