A–Z of ADR: the sequel page_ADR... · A–Z of ADR: the sequel Justin Michaelson updates the...
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6 December 2013 | www.newlawjournal.co.uk 30 BACK PAGE LAW BITES A–Z of ADR: the sequel Justin Michaelson updates the need-to-know guide to ADR…a decade on A ADR In legal parlance, the concept of “ADR” has changed over the past 10 years. Post-Woolf, “ADR” or alternative dispute resolution was shorthand for everything but litigation. Even arbitration was seen as one “alternative”. It was the buzzword for how best to clear up the court lists and encourage litigants to look elsewhere to resolve disputes. There was no specific distinction between non-binding and binding adjudicative and non-adjudicative processes. Times have changed. “ADR” as a concept encompasses non-binding and non- adjudicative methods of dispute resolution, the most common being mediation. It most definitely does not now include arbitration. “ADR” is now an aspiration, a drive away from dispute, providing the antidote to the world of litigation lawyers. The Centre for Effective Dispute Resolution (CEDR) and the International Institute for Conflict Preventation and Resolution (CPR) launched recently a “Corporate ADR Pledge” comprising a commitment to apply resources to managing and resolving disputes through negotiation, mediation and other ADR processes, with a view to establishing and practising “global, sustainable dispute management and resolution processes”. According to the Pledge some of the leading UK businesses have signed up, including BP, Glaxo- SmithKline, Microsoft, Pfizer and Shell. Note of caution: the last 10 years have also seen the development of a popular competitor to the acronym “ADR” with which our banking or financial colleagues and clients are more familiar: the American Depositary Receipt. The ADR, as it is known, is a negotiable security of a non-US company trading on the US financial markets. One can never doubt the commitment of the banking community to ADR, but it is always worthwhile checking which one. Adjudication If video killed the radio star, adjudication effectively killed litigation for construction. Not a bad thing. The rules have recently been amended pursuant to changes introduced by Pt 8 of the Local Democracy, Economic Development and Construction Act 2009, which amended Pt II of the Housing Grants, Construction and Regeneration Act 1996 (affectionately still known as the Hugh Grant Act, despite his diminishing popularity). The most noteworthy amendments include clarifying the 28 day time limit for an adjudicator to reach a decision; removing certain peremptory powers of the adjudicator; the inclusion of certain oral obligations within the compulsory referral process; and the bar on so- called “Tolent” clauses, which sought to allocate costs prior to the dispute arising (a concept already prohibited by statute for arbitration under the Arbitration Act 1996). As described 10 years ago, it remains a “quick and cursory” process, enabling the parties to resolve an issue that can allow a project to continue. A construction litigator was last seen turning out the light on an aviation financing contract. B Baseball arbitration Baseball arbitration is also known as “final offer arbitration”. It is the process of two sealed bids—comprising a monetary offer for each party to resolve the issue— which the arbitrator has to choose from. The arbitrator has no jurisdiction outside an acceptance of one of the two sealed bids, which encourages the parties to pitch their offer at the most acceptable reasonable level. This is still used in baseball salary disputes. In fact, over the past 10 years it has become very popular in gas price disputes. In the liquefied natural gas market, price review disputes have led to summary processes such as “final-offer arbitration”. In the supply market, water, electricity and other utilities have adopted the final offer process. Specially tailored dispute resolution clauses in certain corporate transactions will provide for baseball arbitration—for example in post- closing liabilities. It is a viable alternative to other modes of ADR (such as expert determination) where the remedy is quantifiable, but the process for calculating it is in dispute. C Conciliation It is fair to say that conciliation in the UK is not that popular. It is even less popular after the decision of the High Court in Wah (Aka Alan Tang) and Anr. V Grant Thornton International Ltd and Othrs [2012] EWHC 3198 (Ch). In Alan Tang, the court held that a clause requiring “amicable conciliation” prior to a reference to arbitration was an ineffective agreement to agree, because the concept and the process was too uncertain, and lacked sufficient detail. The irony was not lost on the court of a party seeking to enforce a provision as a condition precedent of an obligation to engage in a non-binding, non-adjudicative process. But that is the problem with many of these non-binding, non-adjuicative processes: what do they actually mean? The concept of “conciliation”, as opposed to mediation, is a third party neutral communicating with both parties outside of the format of getting the parties together, in a more private, discreet, less- showmanship way. A conciliator will not necessarily engage in shuttle diplomacy. He will not get the parties in a room to face each other, as is the popular process of the mediator. A conciliator remains flexible on how they determine what is important to both parties; it may involve phone calls, brokering other business deals, targeted meetings, or some other approach. But that flexibility is not popular in a compensation- driven market. The art of conciliation is most popular in Japan, where the concept of litigation is treated with the same amount of disdain that the English Court showed to the concept of conciliation in Alan Tang. NLJ Justin Michaelson, partner, litigation, Fried Frank ([email protected]; www.friedfrank.com). Justin’s original A-Z of ADR series appeared in NLJ in January and February 2003.
Transcript of A–Z of ADR: the sequel page_ADR... · A–Z of ADR: the sequel Justin Michaelson updates the...
6 December 2013 | www.newlawjournal.co.uk30 back page law BITES
A–Z of ADR: the sequelJustin Michaelson updates the need-to-know guide to ADR…a decade on
A
ADRIn legal parlance, the concept of “ADR” has changed over the past 10 years. Post-Woolf, “ADR” or alternative dispute resolution was shorthand for everything but litigation. Even arbitration was seen as one “alternative”. It was the buzzword for how best to clear up the court lists and encourage litigants to look elsewhere to resolve disputes. There was no specific distinction between non-binding and binding adjudicative and non-adjudicative processes. Times have changed. “ADR” as a concept encompasses non-binding and non-adjudicative methods of dispute resolution, the most common being mediation. It most definitely does not now include arbitration. “ADR” is now an aspiration, a drive away from dispute, providing the antidote to the world of litigation lawyers. The Centre for Effective Dispute Resolution (CEDR) and the International Institute for Conflict Preventation and Resolution (CPR) launched recently a “Corporate ADR Pledge” comprising a commitment to apply resources to managing and resolving disputes through negotiation, mediation and other ADR processes, with a view to establishing and practising “global, sustainable dispute management and resolution processes”. According to the Pledge some of the leading UK businesses have signed up, including BP, Glaxo-SmithKline, Microsoft, Pfizer and Shell. Note of caution: the last 10 years have also seen the development of a popular competitor to the acronym “ADR” with which our banking or financial colleagues and clients are more familiar: the American Depositary Receipt. The ADR, as it is known, is a negotiable security of a non-US company trading on the US financial markets. One can never doubt the commitment of the banking community to ADR, but it is always worthwhile checking which one.
AdjudicationIf video killed the radio star, adjudication effectively killed litigation for construction. Not a bad thing. The rules have recently been amended pursuant to changes introduced by Pt 8 of the Local Democracy, Economic Development and Construction Act 2009, which amended
Pt II of the Housing Grants, Construction and Regeneration Act 1996 (affectionately still known as the Hugh Grant Act, despite his diminishing popularity). The most noteworthy amendments include clarifying the 28 day time limit for an adjudicator to reach a decision; removing certain peremptory powers of the adjudicator; the inclusion of certain oral obligations within the compulsory referral process; and the bar on so-called “Tolent” clauses, which sought to allocate costs prior to the dispute arising (a concept already prohibited by statute for arbitration under the Arbitration Act 1996). As described 10 years ago, it remains a “quick and cursory” process, enabling the parties to resolve an issue that can allow a project to continue. A construction litigator was last seen turning out the light on an aviation financing contract.
B
Baseball arbitrationBaseball arbitration is also known as “final offer arbitration”. It is the process of two sealed bids—comprising a monetary offer for each party to resolve the issue—which the arbitrator has to choose from. The arbitrator has no jurisdiction outside an acceptance of one of the two sealed bids, which encourages the parties to pitch their offer at the most acceptable reasonable level.
This is still used in baseball salary disputes. In fact, over the past 10 years it has become very popular in gas price disputes. In the liquefied natural gas market, price review disputes have led to summary processes such as “final-offer arbitration”. In the supply market, water, electricity and other utilities have adopted the final offer process. Specially tailored dispute resolution clauses in certain corporate transactions will provide for baseball arbitration—for example in post-closing liabilities. It is a viable alternative to other modes of ADR (such as expert determination) where the remedy is quantifiable, but the process for calculating it is in dispute.
C
ConciliationIt is fair to say that conciliation in the UK is not that popular. It is even less popular after the decision of the High Court in Wah (Aka Alan Tang) and Anr. V Grant Thornton International Ltd and Othrs [2012] EWHC 3198 (Ch). In Alan Tang, the court held that a clause requiring “amicable conciliation” prior to a reference to arbitration was an ineffective agreement to agree, because the concept and the process was too uncertain, and lacked sufficient detail. The irony was not lost on the court of a party seeking to enforce a provision as a condition precedent of an obligation to engage in a non-binding, non-adjudicative process.
But that is the problem with many of these non-binding, non-adjuicative processes: what do they actually mean? The concept of “conciliation”, as opposed to mediation, is a third party neutral communicating with both parties outside of the format of getting the parties together, in a more private, discreet, less-showmanship way. A conciliator will not necessarily engage in shuttle diplomacy. He will not get the parties in a room to face each other, as is the popular process of the mediator. A conciliator remains flexible on how they determine what is important to both parties; it may involve phone calls, brokering other business deals, targeted meetings, or some other approach. But that flexibility is not popular in a compensation-driven market. The art of conciliation is most popular in Japan, where the concept of litigation is treated with the same amount of disdain that the English Court showed to the concept of conciliation in Alan Tang. NLJ
Justin Michaelson, partner, litigation, Fried Frank ([email protected]; www.friedfrank.com). Justin’s original A-Z of ADR series appeared in NLJ in January and February 2003.
