ADRRUC LAW SCHOOL

CLASS 1

ADRRUC LAW SCHOOL

CLASS 1

Stephen Leonard (李文）Sleonard18@gmail.comStephen Leonard (李文）Sleonard18@gmail.com

My experience as a dispute resolutionlawyer is, save for 2 cases in France, in thecommon law world of England, the US,Bermuda and Hong Kong.

My comments will mainly be about ADR in these places and where possible I willtell you about what actually happens inpractice.

Dispute resolution is a very importantsubject for business lawyers.

You must be able to give clients advice about the options for dispute resolutionwith the benefits and disadvantages sothe client can decide what to do. This coursewill help you do this.

The best time to do this is when the clientis negotiating a contract and so cannegotiate an appropriate dispute

resolution clause in a contract . Allcommercial contracts should contain adispute resolution clause.We will look at some of these later on.

Your client will also need advice if adispute arises that is not covered by adispute resolution clause in a contract.

In my experience a client usually wishesto resolve a dispute in the mostefficient and cost effective way with the

minimum disruption to its business.

It is vital to always think about how toquickly and cheaply resolve disputes in the best interests of the client. You musttry to find the best dispute resolutionoption to achieve this. The aim is to have aclient trust you!

For centuries lawyers have had the reputation of using disputes to make the most money for themselves!

Q: What's the difference between a good lawyer and a bad lawyer?

A: A bad lawyer makes your case drag on for years. A good lawyer makes it last even longer.This is now new. Here is what Charles

Dickens says about law in his novelBleak House published in 1853

‘The one great principle of the English law is, to make

business for itself. There is no other principle distinctly,

certainly, and consistently maintained through all its

narrow turnings. Viewed by this light it becomes a

coherent scheme, and not the monstrous maze the laity

are apt to think it.

Let them but once clearly perceive that its grand

principle is to make business for itself at their expense,

and surely they will cease to grumble.’

It is better to be a mouse in a cat's mouth than a man in a lawyer's hands.Spanish Proverb

Litigation: A machine which you go into as a pig and come out of as a sausage.Ambrose BierceThe Devil's Dictionary.A Lawyer will do anything to win a case, sometimes he will even tell the truth.Patrick Murray“The first thing we do, let's kill all the lawyers.”Shakespeare - Henry VI part 2 (Act IV Scene II)

There are a number of forms of ADR butI will concentrate on the popular onesthat are used to resolve business disputes

• arbitration - England, the US and HK have different arbitration regimes - HKapplies the UNCITRAL Model Law onInternational Commercial arbitration (asdoes Bermuda and a few states in the USbut not the UK). We will look at theseregimes in more detail in later classes.

• Mediation where the parties try tonegotiate a settlement using a mediator.I like mediations and we will talk moreabout how they work next class

• Conciliation - similar to mediation - Wewill consider the UNCITRAL Model lawAnd rules on conciliation. Not so popularin the common law world in my experience. Only 6 countries have adoptedincluding Canada.

Useful Resources

I will produce a note a day or so beforeeach class and then have a powerpoint thatwill be posted after each class.

Some useful resources are set out on pages2-4 of the notes.

Let’s have a quick look.

Why is dispute resolution important?

It is vital for the social and economicwell-being of society that disputes areresolved

• fairly

•transparently and

•consistently using properly regulateddispute resolution techniques

The development of dispute resolution techniques in the common law world provided an alternative to dispute resolutionby violence or abuse of economic or political power.

In the 18th and 19th centuries in England and the USA some people resolveddisputes by fighting duelsA famous instance involved vice presidentAaron Burr and Alexander Hamilton

July 11 1804Burr kills Hamilton

Nowadays some lawyers in the US and UK want to appear to be tough andaggressive and so use violent languagesuch as “kick ass”I usually laugh when I meet suchlawyers as invariably the most aggressive lawyers are the smallestand the weakest. I suppose it makes thesepeople feel more important if they say theyspend their days “kicking ass” rather thanwriting letters or attending meetings..

In the common law world the originaltype of dispute resolution was throughthe courts and judges and juries. InEngland the monarch was regarded asthe source of justice and so the monarchintroduced courts to resolve disputesbetween the people.

In modern times there are procedural differences between a civil action in HK, England and the USA.

However, the basic structure is similarFirst, pleadings -the parties set out their case and identify the issues in dispute;

followed by evidence production -

this isproduction of documents (discovery) and fact and expert witnesses (by written statements in HK and England and depositions in the USA). Parties must produce documents that harm their case!

Finally, there is a trial before a judge and (in the US usually) a jury.

Witnesses usually have to attend to be crossexamined by the parties.This and the obligation to produce harmfuldocuments are big differences with the civilcourt system

However, over the last 30 or so years there has been growing dissatisfaction with thissystem especially in the business

community. In particular, there areproblems with:•The tremendous cost of litigation. •In England and HK, the risk is evengreater as the party who loses a case usually has to pay the costs of the winner.•Uncertainty about the outcome and in particular with cases involving witnesses. •Delay. It depends on how busy the judges are, but a large case can take several years to get to trial.

•The delay and time-consuming nature of litigation means that the parties have to devote a lot of management time and resources to each case.•Sometimes complicated business cases may be heard by non-specialist judges or (in the case of the US) juries. Obviously, the parties have no control over who hears their case in Court. •There are greater risks in the US as many civil cases are decided by juries.Obviously, juries may not be so interested

in technical legal arguments and they often award very high damages.•There is also the risk of punitive damages in the USA. •Finally, the parties have very little control over the procedure that is used in a case. They must use the procedural rules of the court and so there may be a lack of flexibility.

In particular, the US is regarded as themost litigious place on earth and most

businesses are careful to reduce the risksof having to litigate before the courts.

It is against this background that thebusiness community started to developalternative forms of dispute resolution.Let us look at these and see what advantages they have over litigation.

I personally think the US system, and in particular the tort system is stupid. Seewhat Lord Denning has to say at para 15 ofthe notes.

The options

Arbitration - known as binding orcompulsory ADR as there is an adversarial trial (similar to a Court case) after which a decision is then given that is legally binding on the parties and can, if necessary, be recognized and enforced by the Courts.

Its benefits include•Arbitraton may sometimes be quicker and cheaper. This may not always be the case as arbitrations can be as complicated

as litigation and also the arbitrators must be paid. •The parties do have control over who the arbitrators are and what their experience/qualifications are. Lawyers spend a hugeamount of time deciding who to pick. Wewill discuss this in later classes.•The parties have greater control over the procedure used and can usually decide what procedure applies.

•Proceedings are much more informal than court. For example, pleadings do not have to follow the technical rules used in litigation. Nor the technical rules relating to admissibility of evidence.• Because of the provisions of the New York Convention 1958, arbitration awards may generally be easier to enforce in other nations than court judgments. We will talk about this in a later class.

•Arbitrations are usually private and confidential. This is usually attractive to businesses who do not want the confidential details of their business made public.• The parties can also decide what power the arbitrators have to order the losing party to pay the costs of the winner.

The law in the USA, UK and HK activelyprotects and promotes arbitration. So if aparty brings an action in a court that fallswithin an arbitration clause, then the

Courts will usually stop the litigation andcompel the party to honour the arbitrationclause.

See the provisions of UK, US and HK/Model Law set out at paragraph 7 of thenotes.

I have first hand experience of this when aTexas court stopped an action against myclient and ordered the party to arbitrate in

Bermuda in accordance with the agreedarbitration clause.

Mediation/Conciliation

These operate in a completely different wayand are often referred to as non-bindingor voluntary ADR.Mediation and conciliation are really means of helping people negotiate a settlement. I like mediations and have been involved in a number in London, Bermuda and the US. Obviously the key difference from usual negotiations is the involvement of a mediator or conciliator to help the

negotiations. We will discuss this in more detail in the next class.

Benefits over the parties just negotiatingthemselves include:•The parties can agree a structure to their negotiations and so this can help the parties focus on the important issues.•Sometimes the parties and their lawyers hate one another or do not trust each other. The involvement of an independent mediator/conciliator can help to build

trust between the parties. The parties donot have to deal face to face but throughthe mediator - this can help reduce someof the emotion and animosity.•Sometimes a client may have an unrealistic view of the strength of its case. It can be useful for an independent mediator/conciliator to point out the weaknesses of each party’s case and the risks they face.

•Most mediators/conciliators are trained and experienced and they are therefore skilled in trying to find the areas of agreement between parties.•Litigation and arbitration are adversarial and often ruin business relationships. The parties stand a better chance of preserving their future business relations by negotiating a settlement.•There is tremendous flexibility in procedure. The parties/the mediator can agree a procedure they think best suited

to the dispute.•A negotiated settlement obviously reduces legal costs and avoids the risk of losing in court or at arbitration.

A sign of the importance of mediation isthat the Courts in England, the US and HKall encourage parties to litigation to use ADR (usually mediation) to try and resolvetheir disputes. See paragraph 19 of the notesI have first hand knowledge of this in theCommercial Court in London. My client

wanted to mediate and our opponent didnot. We told the judge and the judgeasked the opponent why they did notwant to try. In the end the Judge told theparties to at least try. The case waseventually settled at the mediation.

Over the last 15 or so years, the Courtshave persuaded many litigants to trymediation. I like the process but I remember many older lawyers not beingEnthusiastic at the start.

Nowadays most lawyers are enthusiasticbecause it is what their clients want!

These different types of ADR work indifferent ways.

Arbitration is an alternative to litigation -You cannot arbitrate and litigate the samedispute at the same time.

However, the parties can (and often do)agree to mediate or conciliate a disputethat is before the courts or arbitration.

However, all share one important feature.

All forms of ADR are consensual and so they only can apply if all parties agree to participate. This is, of course, different from litigation in the courts where a party has no choice about participating in a lawsuit as a defendant provided that the court

has jurisdiction to hear the dispute. One party cannot compel another to arbitrate or mediate.

There are two ways that parties mayagree to use ADR

•In a contract in a dispute resolution clausebefore there is a dispute (this is my favoured option) or•Agree after a dispute has arisen.

There are many types of clauses - a lawyermust give the client the advantages and disadvantages of each option so the client can make an informed choice.

It is possible for the parties to agree totry mediation/conciliation beforestarting arbitration of litigation.

Let’s look at some of the clauses in para 12of the note.