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What general counsel should know about alternative dispute resolution

by Natasha Mellersh on 07 Sep 2017

While organising arbitration events, I have always found it very difficult to get in-house counsel to come and speak. Some didn’t want to admit they ever used the arbitration process - which of course many do not - but others were just trying to divert attention from the reality they even had disputes.

That is understandable. No company wants to market itself as an entity laden with conflict.

But it’s also unrealistic to claim that disputes are an alien concept.

The in-house lawyers more willing to speak were very interesting. Rather than focus on the fact that disputes inevitably arise in every company, they focused on the processes.

Speaking about the most effective processes, in terms of accessibility, user friendliness and cost, is no doubt a sign of a pro-active and efficient in-house department.

Of course, speaking about ADR (alternative dispute resolution) publicly is not every company’s policy. In addition, many general counsel have transactional backgrounds and outsource disputes-related work. 

One consistent message highlighted at the Global Pound Conference events over the last 18 months was the importance of choice. Choosing the most appropriate process to resolve a dispute is not always easy or obvious. Every company will work differently.

But when external lawyers are dealing with a dispute clients expect to be offered a range of options.

It’s also important for general counsel to understand the different alternative dispute resolution (ADR) mechanisms, allowing them to take a more active role in deciding which approach to take. The GPC data also indicate significant disparities in the perceptions of parties and external lawyers, highlighting importance of good communication.

What are the alternatives?

While litigation remains an important dispute resolution method, and perhaps the most appropriate for some cases, there are alternatives.

As many parties will reiterate both publicly and privately, no company wants to be involved in litigation. As if cost, time and bad publicity aren’t enough, the high risk of damaged business relationships will make a general counsel question the effectiveness of the entire process.

ADR methods, including mediation, conciliation and negotiation are newer and less well known than arbitration. These, more obviously consensual, dispute resolution processes allow parties to attempt to reach an agreement on their own terms, rather than waiting on a ruling by a judge or arbitrator. Events like the Consensual Dispute Resolution Competition, which takes place in Vienna each year has brought these processes into the limelight among young lawyers who see huge potential in using these tools in their future careers.

In turn, criticism of arbitration has increased in recent years, with critics attacking it on the grounds of cost, time, delays, and lack of transparency. However, for a final, binding decision in a cross-border context, arbitration remains the default choice. Where arbitration might additionally be criticised is in its lack of interplay with other ADR techniques. The US and UK courts support and compliment the use of ADR; arbitration remains siloed by comparison. 

More training needed

There are signs of a shift in the approach to dispute resolution on a global level, although changing a culture focused primarily on litigation will take time. Countries like that United States have proven commercial mediation as an effective dispute resolution tool, but other jurisdictions have arguably been slow to follow.

It’s also worth noting a changing dialogue among the legal community. Something that was exemplified by the 29 GPC events which took place across all continents, and a willingness of all stakeholders to communicate with one another - that in itself being a symbol of ADR.

But ADR skills do not spring out of thin air. While being aware of the different mechanisms available can be helpful to a general counsel in managing a dispute, training and a deeper understanding of the process is invaluable regardless of the level of support of external counsel.

In his recent book, ADR pioneer Michael Leathes speaks about the lack of training in negotiation skills in many in-house departments. Despite an obvious market of eager young lawyers and law students, negotiation is barely taught in law schools, a skill which offers value in any legal and business process.

This also goes for mediation, which may be more present in law schools, especially in the US, but is still largely underrepresented in the education system as a whole. With no shortage of enthusiasm, law schools should jump at the chance to teach future generations the skills they need for their future career - not only looking at using the law to fight an opponent, but rather to solve a problem using the best tools available.

General counsel could also add value by providing training in their departments, allowing in house lawyers to be more aware of the mechanisms available and making more informed decisions as to which route to take.

Litigation in review

Topics: ADR, Mediation, Arbitration

Natasha Mellersh

Written by Natasha Mellersh