Legal news and trends for Canadian in-house counsel and c-suite executives
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FEATURE Other issues to consider Vimal Kotecha, director of LECG Canada, an economic consulting firm whose experts determine valuations and quantum of damages in both litigation and arbitration cases, says lawyers need to realize each dispute resolution method requires a different set of tasks from its people. He says arbitration only provides a short window for experts to present their findings, usually 15 or 20 minutes. In litigation, they can take as much time as they want. Because a particular testimony can go a long way towards winning or losing a case, Kotecha says lawyers should evaluate experts' history and whether they've done this kind of work previously. Their presentation skills could also prove pivotal in wooing a judge or arbitrator, he says. Kotecha adds because there typically isn't a discovery process in arbitration, experts don't have the ability to ask the other side certain questions. "It means a lot more research on our side," he says. Sometimes, the best option is neither arbitration nor litigation. Angela Avery, senior solicitor at ConocoPhillips Canada, says both arbitrators and judges are good about granting adjournments during proceedings so both parties can talk things over. "Sometimes during the break, you're both better able to assess your case, and that can motivate people to go for the most certain outcome: a negotiated settlement. You know what you're getting with a negotiated settlement. You never know what an arbitrator or a court is going to give you," she says. 8 JUNE 2008 C ANADIAN Lawyer INHOUSE you, and the courthouse is free. He says he also doubts that arbitrations are necessarily faster than court cases, as he has seen many arbitrators whose schedules are far more jam-packed than those of judges. "It's a coin toss in terms of cost and timing," he says. Jonathan Kroft, executive vice presi- dent of risk management at Winnipeg- based financial services firm Wellington West Capital, says while most in-house counsel focus on the arbitration-versus- litigation question, an often overlooked element is what should be negotiated into an arbitration clause. Problems can arise when the clause is drafted during the honeymoon phase and both sides are optimistic about a suc- cessful partnership, he says. "It's a downer to think about the po- tential that the relationship is going to go badly. Frequently, the parties are suf- fering from deal fatigue. They've negoti- ated the deal and the arbitration clause is sometimes put in with little thought. Sometimes it's boilerplate. [The lawyers] haven't really examined whether arbitra- tion is appropriate, and if it is, what form of arbitration is appropriate," he says. Kroft notes there are also tactical ele- ments to consider before choosing a resolution strategy, such as the relative positions of the parties and the nature of the disputes that are likely to arise. For example, it may not be advantageous for one side to have its dirty legal laundry aired in a courtroom in front of reporters and cameras. "If they're sensitive to publicity, and you're prepared to go to court and they're not, then you may actually have an ad- vantage in negotiating the terms of the dispute," he says. Arbitration also carries with it a certain finality, because such decisions are usu- ally final and can't be appealed. In court, however, you have no assurance that an appeal will not be filed. It can be a dou- ble-edged sword, Leipsic says. "It cuts both ways. Arbitrators often make decisions where they come to the wrong conclusion but you have to live with it," he says. Leipsic says that as global commerce continues to expand, arbitration is in- creasingly used to settle disputes that cross international borders because nei- ther side wants to rely on the judicial sys- tem of the other. "It's a growth industry. You'd expect to have more disputes by virtue of the in- crease in economic activity," he says. Kroft says litigation is more of a one- size-fits-all approach, as there are court rules that have to be followed, and the scope for flexibility and tailoring your dispute resolution process is much more limited. "In a commercial context, it may be that parties say the resolution of a dis- pute done quickly, cheaply, and privately is more valuable to them than the perfec- tion of the justice," he says. Kroft says there are times when a dis- agreement will end up in court even with an arbitration clause. For example, if two parties join forces to provide a certain ser- vice to a third party, a dispute could arise over who is responsible for any damage sustained by the customer. "Unless they consent to arbitration, you can't force the third party to arbi- trate if they're not part of the arbitration contract. You end up in court anyway," he says. Kroft says it's important for lawyers to take the time to anticipate what sort of disputes might arise in a commercial transaction and what attributes of arbi- tration are advantageous or problematic in each individual case, he says. Angela Avery, senior solicitor at Cal- gary-based ConocoPhillips Canada, the third biggest producer of oil and gas in the country, says she thinks the bloom has largely come off the arbitration rose in the last 15 years. "Everybody used to be really keen on arbitration and thought it was the pana- cea for business disputes. That view has changed over time; people are more skep- tical that it is so far superior to litigation," she says. Avery says lawyers used to prefer arbi- tration because it seemed like an expedit- ed process where you could avoid lengthy and unhelpful discovery. Unfortunately,