Law Times

Law timeS • September 19, 2011 An online resource 1.800.263.3269 Focus On BUSINESS/COMPETITION LAW ADR flourishing in construction law Parties increasingly look to alternatives to resolve disputes BY JULIUS MELNITZER For Law Times has evolved over the past 30 years, construction law is one area where it appears to have fl ourished. "Th e trend is clear: fewer A and fewer construction cases are reaching the courts where the law is developed," wrote Supreme Court of Canada Chief Justice Beverley McLachlin recently. "Increasingly, instead of being resolved by judges, construction disputes are being sent to media- tion, arbitration or other forms of alternative dispute resolution." Th e potential benefi ts of ar- bitration — an expert decision- maker, shorter resolution times, confi dentiality, cost savings, and fi nality — are among the key reasons the process is popu- lar in construction disputes. "I've conducted arbitrations where there have been multiple complex claims, where the gov- erning law has been that of a jurisdiction other than Ontar- io, and where there have been a multitude of lay and expert witnesses," says Harvey Kirsh, the Toronto-based co-chairman of Osler Hoskin & Harcourt LLP's construction and infra- structure group and a panel member of the global engineer- ing and construction group of alternative dispute resolution provider JAMS. "And in my experience, it is rare for the process to exceed one year or so from the date it is launched un- til the date of hearing." Still, arbitration has its chal- lenges, even in construction law. "It is not a one-size-fi ts-all remedy, as evidenced by the saying, 'Arbitration can be good, fast, and cheap, but pick two,'" Kirsh says. "Th e process is always being re-evaluated and critically reviewed." Five key developments are in play here. "Contractors from Italy, Germany, and Brazil are bid- ding on multimillion-dollar construction projects around the world, including Canada," Kirsh says. "At the same time, Canadian companies are mov- ing into other countries and even hemispheres." By way of example, Ellis- Don Corp. has established re- gional offi ces in both Dubai and Abu Dhabi. "Th is means that the seat or venue of hear- ing will often be abroad, and lthough the arbitration process has attracted no shortage of critics as it arbitrators and counsel must be prepared to travel widely and accept the fact that they will be dealing with diff erent cultures, foreign governing laws, and the unique and diff erent rules of various in- stitutional ADR service pro- viders," Kirsh says. As well, arbitrators must not have any confl ict of in- terest that would aff ect their neutrality. But while institu- tions like JAMS go as far as re- quiring arbitrators to disclose whether they've participated in social networking sites such as Facebook, Twitter or LinkedIn in order to determine whether a contact amounts to a prior business relationship capable of creating a reasonable ap- prehension of bias, the standards aren't uniform. "Th ere appears to be an in- formal spectrum ranging from the individual who conducts a thorough investigation and makes full disclosure to the in- dividual who undertakes no inquiry and simply asks for a waiver," Kirsh says. "Th e dif- fi culty, however, is that many arbitration awards have been vacated on the basis that one of the parties determined — even after the award was rendered — that the arbitrator had an undis- closed confl ict of interest." A third important develop- ment is the emergence of rapid resolution proceedings. "Most of the institutional ADR service providers have a distinct and separate set of streamlined or expedited pro- cedures for arbitration," Kirsh says. "But the process is rarely used, perhaps because choos- ing fast and cheap implies a compromise on quality." Fourth, the use of collabora- tive approaches to the electron- ic production of exhibits, man- aged by the panel, is helping to mitigate the tension between the requirement to produce all that is relevant as opposed to a more limited range of docu- ments that counsel, essentially using their own discretion, feel are generally relevant. "Experience dictates that in arbitration, the latter approach is less expensive, more expedient, much preferred, and usually man- dated," Kirsh says. "Panels can facilitate that approach by keep- ing counsels' feet to the fi re and encouraging the parties to main- tain the proceeding's momentum with reasonable dispatch." Still, as the editors of Proto- cols, a College of Commercial Streamlined ADR methods are 'rarely used, perhaps because choosing fast and cheap implies a compromise on quality,' says Harvey Kirsh. Arbitrators' publication, ob- served in 2010, the migration of commercial cases to arbitration has brought some of the prac- tices associated with litigation. Th ey went on to raise the question of whether construc- tion arbitration has become too much like construction litiga- tion. Th ey answered it in the affi rmative and went on to con- clude that changes were in order. Th eir primary recommen- dation was that arbitrators must aggressively manage the process from Day 1 of their ap- pointment, particularly with regard to the discovery process and the overall schedule. "Construction arbitration continues to be the subject of an evolving and highly technical body of rules, procedures, jurispru- dence, and statutory authority," Kirsh says. "But that's a good thing because arbitration should continue to aspire to be good, fast, and cheap with- out having to settle for picking two of the three." Meanwhile, mediation continues to make great strides. "Mediation in construc- tion law is becoming increas- ingly sophisticated and pop- ular," says Duncan Glaholt of Toronto's Glaholt LLP. "Governments have given mediation some real shape and strength by formulating supportive rules that make settlements binding and pro- ceedings confi dential, pro- tect parties and mediators, and generally endorse and enhance mediation as a dispute resolution technique." By way of example, Glaholt points to the European Union's 2008 directive on mediation. Its purpose was to facilitate access to dispute resolution and pro- mote the amicable settlement of matters by encouraging the use of mediation and by ensuring a See ADR, page 13 MILITARY JUSTICE INTO ACTION MILITARY JUSTICE IN ACTION: ANNOTATED NATIONAL DEFENCE LEGISLATION THE HONOURABLE MR. 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