A View from the Nose-Bleeds
By Weston Rudd & Brock Carscallen
Compromise is necessary when settling disputes, but from the perspective of in-house counsel, when it comes to arbitration, the focus of the arbitrator should be on making fair and final procedural decisions. By the time the parties reach arbitration, they have already made extensive efforts to settle and their interests are best served by a firm but fair decision-maker who will follow the dispute resolution agreement and who will bring closure to the dispute.
Clients who hire arbitrators understand the challenging tight rope the arbitrator must walk. It is surely not easy for arbitrators to balance fairness to the parties, remain faithful to the dispute resolution process (DRP) agreement between those parties, deal with counsel who are advocating zealously for their clients, and remain mindful of their professional reputations.
As in-house counsel and end-users of arbitration, we appreciate this difficult balance, but because we are not involved in the day-to-day management of the arbitration, our views may get overlooked. Therefore, here is an end-user’s “view from the nose-bleeds”.
As clients, we expect arbitrators to stay between the lines of the DRP established in the relevant agreement. There is a common complaint that, at the drafting stage of a commercial agreement, the DRP agreement is often overlooked, and sometimes treated as boiler-plate with little thought about its actual use. While this can be true, it is the process the parties agreed to follow. Generally, the parties have been following the DRP, for better or worse, since the dispute started. So, it is not helpful for arbitrators to try to “re-write” the DRP by obtaining the consent of the parties to change it. The arbitrator may be able to suggest procedural changes to the DRP that make sense for a particular hearing, but this can just as easily create issues for the parties to argue about, causing additional delay. Unless the parties all seek, or can quickly agree on a change, it is preferable for the arbitrator to simply follow the existing DRP.
Ideally, every dispute would settle by way of compromise. As businesses, we prefer compromises that make sense for everyone. We work very hard to find these compromises, and by the time the matter comes to arbitration, it is because a compromise cannot be found. From our perspective, some arbitrators seem overly intent on brokering a settlement. While end-users appreciate an arbitrator who periodically “takes the temperature” of the parties, it is important to remember that they have come to the arbitrator precisely because, despite their best efforts, they have been unable to settle the matter on their own. Unless there is a clear indication that a compromise is a possibility, the parties prefer that the arbitrator focus on the task of coming to a decision, and then actually delivering that decision.
We have all heard the adage, “justice delayed is justice denied”. While somewhat hyperbolic, this illustrates the fact that a party that is worried about the merits of its case, but chooses not to settle, may try to avoid the inevitable through procedural wrangling. It is important that arbitrators remember that the parties chose arbitration as opposed to litigation. Parties generally do this because litigation simply takes too long and requires too much effort to reach a conclusion. By choosing arbitration, parties clearly state that they want a forum where a decision can be made more quickly and without the procedural wrangling that is a hallmark of litigation. Of course, the arbitration process requires procedural fairness, but fairness does not mean compromising the process to help a disputing party. For example, if one of the disputing parties misses a deadline, then that party must live with the consequences. If the deadline was fair in the first instance, then the imposition of consequences for missing that deadline is not unfair, but just and appropriate. Allowing procedural delay in a misguided attempt to be fair to a party, actually has the effect of being unfair to the other party. This undermines the parties’ intent when they chose arbitration as the DRP.
Living with the Outcome
When the dust settles, the end-users of an arbitration process must live with the outcome. This risk was understood when the parties chose arbitration. Perhaps the arbitration does not go that party’s way. Maybe the party will be upset and consider appealing if there is an appeal right. Maybe it will choose to lick its wounds and get on with its business. Maybe it will feel vindicated and celebrate. Regardless of how the party reacts, it knew the risk of arbitration. If it could not tolerate that risk, it should have settled. Parties certainly do not hire an arbitrator assuming the arbitrator will decide in its favour. Parties do, however, hire arbitrators who will be fair by enforcing the DRP, and who will marshal the hearing to a swift, efficient and just conclusion.
Weston Rudd is General Counsel at Graham Group Ltd. and has been with Graham since March 2012. He is responsible for the management of Graham’s legal group, and he provides advice to the executive team regarding dispute resolution and claims management, as well as all aspects of project delivery and human resource matters.
Brock Carscallen is Senior Legal counsel for Graham Group Ltd. and has been with Graham since June 2012. He advises Graham’s project execution teams on procurement and execution aspects of construction projects, as well as providing advice regarding dispute resolution and claims management.