Law Times

Law times • OctOber 3, 2011 FOCUS Page 13 Arbitration becomes more like litigation Gap between two models of dealing with disputes narrowing BY JULIUS MELNITZER For Law Times narrowing. "There has been a kind of merger in the processes so there's no longer that much to choose between litigation and arbitration," says John Laskin of Torys LLP. "People now realize more that some of the asserted advantages of arbitration were not real or at least a bit overblown." On the other hand, litigation-related horror stories are legend and continue to proliferate. But close examination also reveals a growing number of successes for the court system. Still, arbitration has lost its lustre as a pan- acea for lengthy and drawn-out litigation. As many disappointed parties have discov- ered, arbitration can be slow and expensive, so much so that there aren't many proponents left who base their case for arbitration solely on cost saving and efficacy. "In many cases, arbi- T tration is not cheaper and not quicker," Laskin says. "One reason is that the people we hire as arbitrators tend to have other things to do, and in cases involving three-member pan- els, scheduling is a nightmare that can really slow things down. Also, the discovery pro- cess can be much the same as in court because when it comes down to it, counsel are reluc- tant to give up the knowledge that comes with discovery." There's also the fact that ar- bitrators must get paid and the parties have to absorb the cost of all of the things that the pub- lic system provides for free such as a venue and a stenographer. Nowadays, boosters of arbi- tration rest their case on a num- ber of perceived advantages. "The primary reasons for arbi- tration are choice of decision- maker, a more business-like approach to dispute resolution, and tailoring the rules to suit the parties and the disputes," says Joel Richler of Blake Cas- sels & Graydon LLP. But the 2010 international arbitration survey, sponsored by White & Case LLP, found that 50 per cent of respondents were disappointed with arbi- trator performance. What the survey doesn't pinpoint is whether the 50 per cent were composed solely of the losers. If that's the case, the results might not be very dif- ferent if a similar poll studied the attitude of litigants. But if that's not the case, 50 per cent is a remarkably high dissatis- faction rate given that choice of he gap between litiga- tion and arbitration, it appears, is constantly decision-maker so often comes up as a reason to arbitrate. As for tailoring the rules to suit the parties, litigation is much less formal and structured than it used to be. That's not to say that arbitration doesn't have considerably greater scope in this regard, but it does point out that the issue isn't entirely one-sided. in David versus Goliath situa- tions," Earle says. "Those are the situations that businesses want behind closed doors, out of the public eye, and out of the courts where a judicial decision might set a precedent." What the survey revealed, 'When the parties have agreed on how to resolve a dispute, there tends to be far less procedural messing about,' says Wendy Earle. "However flexible the ju- dicial system tries to be, it never has the flexibility of ad hoc arbitration where parties can design their own process, choose their own judge, have a much greater influence on when things will happen, and have the same decision-maker organize each step in the pro- cess, including the supervision of discoveries if necessary," says Wendy Earle of Borden Ladner Gervais LLP. The argument is that arbi- trators, seized of a case in its entirety, have greater scope to keep the parties in check. "Ar- bitration can get down to the same kind of fighting that oc- curs in litigation, but arbitra- tors have more room and more motivation to rein in the pro- cess," says Barry Leon of Ot- tawa's Perley-Robertson Hill & McDougall LLP. The problem is that they don't always do so. "The arbi- tration process breaks down when people choose arbitrators who let counsel run the arbi- tration process like a private trial," Richler says. What arbitration does do, however, is ensure confiden- tiality, something that's a very limited commodity in the courts. "Confidentiality can be important in a variety of set- tings, particularly where the parties have a relationship and want to keep its terms confi- dential," Laskin says. Arbitration is also preferable when big business meets the un- derdog. "My view is that com- panies should favour arbitration however, was that while con- fidentiality was important to users of arbitration, it wasn't the essential rea- son for resorting to it. Whatever the reasons justifying arbitration, there's no doubt that it's the preferred avenue for many lawyers. By way of example, Richler has two favourite stories that he relies on to back up his fondness for arbitration. One re- lates to a Vancouver case with some $25 million involved and presided over by a retired judge and two senior lawyers. "The hearing took less than two days, and the whole thing took a year overall," says Richler. "But the loser went to the courts to seek leave to appeal. The hear- ing on the application took two days to argue, as long as the argument on the merits before the arbitrator, and the judge reserved for five months before denying leave. Now the other side is appealing the decision denying leave." The second involves an $85-million case between two brothers before a retired judge sitting as a single arbitrator. "The matter was bitterly con- tested with many motions," Richler says. "But we were done in less than a year, and again, the hearing took two days." According to Richler, these aren't exceptional instances. "I have never had an arbitra- tion where I thought that the court process would take less time," he says. "I would say that arbitration is always faster than litigation, where procedural rules are written to suit the low- est common denominator of cases that might come before the courts, so much so that I have done multimillion-dollar cases in a number of weeks by resorting to arbitration." But not all domestic arbitra- tion goes so smoothly. "Domes- tic arbitration is much more likely than international arbitra- tion to resemble litigation, par- ticularly because many domestic arbitration [cases] use the Rules of Civil Procedure as their frame- work," says Michael Schafler of Fraser Milner Casgrain LLP. Then there's the question of whether the arbitration process encourages settlement. Law- yers seem to be all over the map on this question with responses ranging from very low settle- ment rates to estimates that ap- proximate litigation's record on the issue. www.lawtimesnews.com erners_LT_Oct3_11.indd 1 11-09-27 12:36 PM Because arbitration is con- fidential, meaningful statistics are few and far between. But at least one arbitrator believes the settlement rate in litigation is much higher than in arbitra- tion. His explanation is most interesting. "An arbitrator who does virtually only domestic arbitra- tion told me that 90 per cent of cases to go to hearing, whereas 90 per cent of litigation set- tles," Richler says. "He believes arbitrations don't settle more frequently because the parties don't get fed up with the pro- cess as often as litigants do." For his part, Laskin offers another explanation. "It's not unusual for arbitration clauses to have provisions for pre-arbi- tration conciliation and media- tion," he says. "So in custom- built arbitration, parties may be reluctant to settle because most likely they have already tried to do so." Despite the convergence of litigation and arbitration, the greatest divide between the two may be psychological in nature. Alternatively, it may just be that old habits die hard. "Once they get into the courtroom in a civil litigation context, counsel tend to put on their flak jackets and batten down the hatches," says Lisa Constantine of McCarthy Tétrault LLP. There's also the argument arbitrations that tend to go more smoothly because they're consensual in nature. "When the parties have agreed on how to resolve a dispute, there tends to be far less procedural messing about," Earle says. "The mere fact that they've decided to send something to arbitration means that they envisage an efficient process." LT " He wins last, wins " He who " Earl Cherniak, Q.C. Appellate Advocacy Group, Lerners LLP The appeals process demands detailed and discriminating analysis of the existing record. It rewards the insight to identify and articulate a strategy upon which a case will turn. It favours those with an intimate understanding of the procedures and perspectives that define our appeal courts and Supreme Court. It is an unforgiving environment for those who approach unprepared. Whether you won at trial and face an appeal or lost at trial and wish to launch an appeal, we can help you determine the final outcome for your client. Call us. Toronto: 416 867 3076 Toronto: 416 867 3076 London: 519 672 4510 London: 519 672 4510 Earl Cherniak, Q.C., Kirk Boggs, Mark Freiman, Kirk Stevens, Jasmine Akbarali, Brian Radnoff, Cynthia Kuehl Peter Kryworuk, Ian Leach, Andrew Murray, Carolyn Brandow Lerners LLP is 100-plus lawyers with a proud history of 80 years of successful litigation. www.lerners.ca/appeals proud on. Lerners LLP is 100-plus lawyers with a proud history of 80 years of successful litigation. www.lerners.ca/appeals Earl Cherniak, Q.C., Kirk Boggs, Mark Freiman, Kirk Stevens, Jasmine Akbarali, Brian Radnoff, Cynthia Kuehl Peter Kryworuk, Ian Leach, Andrew Murray, Carolyn Brandow

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