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©MNoonan2011
This presentation and Copyright therein is the property of Maureen Noonan and is prepared for the benefit of students enrolled in the Commercial Transactions course conducted by the Law Extension Committee and is available for their individual study. Any other use or reproduction, including reproduction by those students for sale without consent is prohibited.
©MNoonan2011
Is this topic examinable?
Yes,Either --by a short direct question on this topic in Q6 of
the exam. The appropriate answer would be descriptive.
Or--as one part of a problem question..e.g. would
ADR have been useful in this situation?Or--as the whole subject of a problem question if
Semester Focus-Mediation for Summer 2010-11
©MNoonan2011
Disputes
Valuable things at risk, such as:• Time • Money for expenses incurred trying to resolve
dispute, lost earnings• Business relationship and future earnings• Loss of market to competition• Loss of reputation• Freedom if a criminal offence and dispute is with
authorities/society.• Political issues between states and countries
©MNoonan2009
©MNoonan2011
Dispute Resolution News
• Note Cth Civil Dispute Resolution Bill. Passed by HofR in October. Before Senate.
• Purpose is to seek to resolve disputes at the most appropriate level-earliest opportunity and where possible, outside the courts and the stressful, expensive and adversarial culture of litigation.
• An applicant, when filing a Federal Court (& Fed Magistrate) matter will also have to file a statement outlining the “genuine steps” they have taken to attempt to resolve the dispute.
• See Second Reading Speech of Robert McClelland 16 June 2010, House of Representatives Federal Parliament and Bill itself.
©MNoonan2011
Civil Dispute Resolution Bill
Section 3.
The object of this Act is to ensure that, as far as possible, people take genuine steps to resolve disputes before certain civil proceedings are instituted.
©MNoonan2011
Civil Dispute Resolution BillWhat are “genuine steps”? Examples s.4a) Notifying the other person of the issues…offering to
discuss them, with a view to resolving the dispute.b) Responding appropriately to any such notification.c) Providing relevant information and documents to enable
the other person to understand the issues involved and how the dispute might be resolved.
d) Considering whether process facilitated by another person could help, including ADR.
e) If such process agreed, agreeing on person and attending
f) If process conducted but unsuccessful, considering another.
g) Attempting to negotiate.
©MNoonan2011
Methods of dispute resolution
Prevent the dispute by risk managementAvoid some disputes by drafting contracts wellNegotiationCapitulationMediation and conciliationExpert determinationArbitrationLitigationOther: e.g. Toss a coin, force etc
©MNoonan2011
Role of the lawyer
Policy and community attitudes to cost etc of traditional dispute resolution
Courts overworked and congested
Repositioning of a narrow profession
Opportunities to use diverse skills instead of purely “legal” skills
Important to choose most appropriate method for particular issue/dispute
©MNoonan2011
Role of the lawyer
• Establish dispute resolution function for an organisation.
• Risk management especially in larger companies.
• As a professional mediator, arbitrator.• Management of international arbitrations for
exporters/importers/multinationals.• Role in international organisations.• Becoming a compulsory first step to litigation• Advising clients of alternatives for resolution
©MNoonan2011
Opportunity Board
Interested in International Arbitration?
Note that LEC has put together a team for the Vis moot in Vienna at Easter.
©MNoonan2011
Risk Management
Identify legal risk
Monitor risk
Identify AppropriateManagement Technique
for each risk and plan
for overall management
Apply Management
Technique
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Legal role in Risk Management
• Objective is to avoid dispute or minimise damage resulting from a dispute
• Must understand business
• Conduct due diligence to ascertain main areas where dispute/legal liability likely to arise
• Appreciate bargaining position and opportunities/limitations
©MNoonan2011
Some Exporter Legal Risks
Customer does not pay-unpaid seller
Unable to recover /enforce rights in foreign country
Product liability-wrong item, quality, quantity, unsafe, late, incomplete
Unable to produce/acquire-breach contract
Loss in transit-who bears loss?
Competition cheaper-buyer defaults so they can take advantage of cheaper opportunity
©MNoonan2011
Some importer legal risks
Goods or services inappropriate, not what was ordered-claim for compensation available?
Supply does not meet local standards/lawsCrime –bribing foreign officialsTax, customs issuesUnfamiliar with particular free trade treaty
provisionsUnable to enforce rights /recover money in a
foreign countryUnable to sell items purchasedVulnerability to local customers for problems
©MNoonan2011
Some manufacturing risks
Raw material problemsMachineryFinanceDeliveryQuality/quantity issuesDamage to othersFailure to sell productsTitle issues
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Alternative dispute Resolution (ADR)
Defined by ADRA (Australian Dispute Resolution Association Inc.) as:
Dispute resolution by processes which encourage disputants to reach their own solution and in which the primary role of the third party neutral is to facilitate the disputants to do so.
Generally includes negotiation, independent expert appraisal and mediation, but not arbitration; which is an adjudicative process where the parties agree that the decision of the third party is binding.
©MNoonan2011
ADRA
www.adra.net.auFormed 1987 with objectives:• To promote and encourage ADR in Australia• To encourage exchange of ideas and information re ADR• Providing and supporting education, research• Printing, publishing and circulating ADR info• Enhancing professional skills of ADR practitioners• Represent ADRA members• Cooperate with others to achieve objectives
©MNoonan2011
Early dispute Resolution (EDR)
Reference: Law Society Task Force Report on Early Dispute Resolution and Law Society Dispute Resolution Committee.
EDR is concept and process of intervention in the formal dispute process to resolve that dispute early, effectively and legitimately
To enable EDR, need for changes in attitude by profession, clients, the litigation process and an increase in ADR initiatives
Complexity and inefficiency of legal system in part due to Commonwealth/State division
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Institutionalised EDR / ADR
The Administrative Decisions Tribunal NSW (ADT)See Judge Kevin O’Connor AM, President ADT, address to ADRA Conference 2007 on ADRA website: Institutionalised Dispute ResolutionADT deals with state tax appeals, FOI merit reviews, professional discipline of legal profession and others, retail leases.
Chapter 6 of Administrative Decisions Tribunal Act 1997 empowers Tribunal to engage in 2 forms of ADR-mediation and neutral evaluation and Tribunal can determine its own procedures. It can engage assessors, conduct preliminary conferences and can dispense with hearing and determine matter on the papers.Mediation means a structured negotiation process in which mediator as neutral and independent party assists parties to achieve their own resolution. It is voluntary and mediators are encouraged to adopt uniform practice.Neutral evaluation means a process in which neutral evaluator seeks to identify and reduce the issues of fact and law in dispute. The role includes assessing relative strengths and weaknesses of each party’s case and offering an opinion as to the likely outcome of proceedings.Assessors can be very helpful where special knowledge or experience is required e.g. veterinary surgical techniquesNot always appropriate? e.g. occupational licensing, professional discipline and tax appeals. Once a public decision has been made e.g. to suspend a licence Judge O’Connor is of the view the process should remain public and open.
©MNoonan2011
Industry based dispute resolution
Banking and Financial Services Ombudsman
We have a look at this in a later module
Insurance Ombudsman
©MNoonan2011
Negotiation
Win/win mentality means both parties must come out of the negotiation with an improvement in their situation. Skill lies in formulating such an outcome.
Win/loss means that one side is better off and one worse off. May resolve immediate dispute, but might lead to loss of relationship, or retaliation later.
©MNoonan2011
Win/win examples
Deliver later at higher price…buyer gets timing required and vendor is compensated for storage/delay of receipt
Pay earlier at cheaper price
Long term contract in return for fixed price
Return unsold items in return for prime display position
©MNoonan2011
The Negotiation process
• Prepare-Formulate desired outcome, research possible solutions
• Choose diplomatic/respectful language• Refrain from adversarial, bullying language.• Consider position of the other side and any
cultural issues relevant such as importance of saving face
• Avoid insults, name calling, emotional abuse• Meet personally on “without prejudice” basis-at
lower level first / higher level first, neutral ground• Exchange of emails, telephone, correspondence
©MNoonan2011
Capitulation
Sometimes there is no better alternative
e.g. in the wrong
No gain/point in spending time/money
No chance of success
Better use for resources
Best to preserve relationship for now and do something about it later.
©MNoonan2011
Mediation
• Parties appoint a person who assists them to reach a negotiated resolution.
• Often a person with skills to work out win/win solution to particular issue
• Puts someone in between warring parties and can dilute poisonous atmosphere to enable productive consideration of issues
• Not binding on parties unless reflected in a formal settlement agreement
©MNoonan2011
Mediation process
• Usually mediator conducts separate sessions with each party to ascertain points at issue and respective positions
• Mediator reflects on those sessions and formulates possible solutions
• Mediator explains likely outcomes if dispute continues (if adequate skills to do latter) to both parties separately
• Mediator presents possible solutions at joint session. (Sometimes further separate sessions beforehand).
• If settlement reached, mediator formulates basic agreement terms for lawyer to translate into agreement or, if a lawyer, drafts settlement agreement.
©MNoonan2011
Compulsory mediation
See NSW Civil Procedure Act 2005 Part 4 and Uniform Civil Procedure Rules 2005
Parties must participate in “good faith” s. 27
Court can refer without consent. S.26
Court annexed mediation-no charge for mediator or room. Private-have to find and pay for both.
©MNoonan2011
Mediation Schemes
Great variety, many courts, tribunals.Law Society Mediation Program. See
Mediation and Evaluation Information Kit (2007) on website….mediators are qualified solicitors who meet stringent selection criteria and undergo advanced mediation training.
Australian Mediation Association…www.ama.asn.au
©MNoonan2011
Domestic ADR
The Australian Commercial Dispute Centre Ltd formed in 1986 by AG and Sir Laurence Street. Established to introduce and encourage non adversarial dispute resolution into Australia. Works with ACICA and 2003 Memorandum of Understanding means ACICA focuses on international disputes and ACDC on domestic disputes and mediation.
Compulsory mediation has been introduced into many disputes in the regular court system.
©MNoonan2011
Expert Determination
• Sometimes resolution of a single issue at base of dispute can resolve dispute
• E.g. specification/qualities/existence of a substance or state of affairs, a legal/accounting/scientific opinion on a particular matter
• Parties nominate an expert or panel to give opinion on that single matter
• Can agree on “papers only” or independent tests, as appropriate.
©MNoonan2011
Expert determination in court system
Judges may refer questions to assessors or special referees.
For example, in a building dispute, questions for the architect or engineer.
Family court-family report after interviews of family members
©MNoonan2011
ARBITRATION
• Parties agree to resolve disputes by arbitration in accordance with nominated Rules.
• Parties appoint Arbitrator or panel
• Arbitration conducted
• Decision made by Arbitrator
• Binding on the parties
• Enforceable in approx 142 countries
©MNoonan2011
Arbitration process
• Can be similar to a court process• Can be informal• Can be remote• Can be on “papers” only, i.e. written materials and no
oral hearing• Parties can choose an arbitrator with expertise in their
business• Usual to choose 1 or 3 arbitrators so no deadlock
possible• Usually confidential, so limited precedent bank to consult
/ research.• Important elements are a process, rules defining how
that works, and a timetable to keep it moving along.
©MNoonan2011
Framework for Domestic Arbitration
States have Commercial Arbitration Acts-largely uniform and regulate domestic arbitrations
Supreme Court has power of overall supervision.Public policy prevents parties from agreeing to
oust jurisdiction courts. Scott v Avery clauses seek to get around that by making arbitration a condition precedent to legal proceedings. So, not ousting, just delaying or not primary method. However, Commercial Arbitration legislation prohibits any clause trying to make it a condition precedent.
©MNoonan2011
Powers of the Court
Under s. 53 Commercial Arbitration Act 1984 (NSW) and Supreme Court Rules court has power to refer a matter to arbitration on application of a party or its own motion.
©MNoonan2011
Qantas Airways Ltd v. Dillingham Corporation (1985) 4 NSWLR113,122
Construction of Qantas Centre. Q brought legal proceedings against D claiming that because D found the building contract onerous, it was attempting to force Q to renegotiate by wrongful means such as delay, inducing labour unrest, conspiracy to hinder work and fraudulently misrepresenting that design problems made work impracticable. D applied for a court order to send it for arbitration by an architect and a builder or by an arbitrator mutually appointed as set out in the Scott v. Avery clause in the contract.
The court agreed with D and stayed proceedings effectively giving effect to arbitration clause and noted that “It is now more fully appreciated that used to be the case that arbitration is an important and useful tool in dispute resolution. The former judicial hostility to arbitration needs to be discarded and a hospitable climate for arbitral resolution of disputes created”
©MNoonan2011
International Disputes
Advantages of arbitration
• Neutrality
• Flexibility
• Efficiency
• Confidentiality
• Enforceability
©MNoonan2011
Global Survey –International Arbitration- large corporates- PWC 2007 – See: www.pwc.com
• 73% corporations prefer it to transnational litigation• Advantages outweigh disadvantages• Clear dispute resolution policy an important strategic asset. 65 % of
respondents had one. Minimised escalation and costs.• Arbitration clause in contract can give a tactical advantage• More than 75% arbitrations conducted under the auspices of an
arbitration institution such as ICC and London Court of International Arbitration; with regional centres growing
• Legal consequences most important for choice of venue• 91% liked finality and rejected idea of appeals• Concern that experienced arbitrators scarce. 90% wanted arbitrator
with established reputation in their field and region.• Corporations retain specialist arbitration counsel rather than usual
litigation lawyers to assist• 91% in house counsel well informed about international arbitration
©MNoonan2011
International Arbitral Institutions• International Court of Arbitration and ICC in Paris• London Court of International Arbitration• Swiss Chambers of Commerce and Industry• Arbitration and Institute of Stockholm Chamber of Commerce• American Arbitration Association• HK International Arbitration Centre• Singapore International Arbitration Centre• China International Economic and Trade Arbitration Commission• Kuala Lumpur Regional Centre for Arbitration• The Australian Centre for International Commercial Arbitration• International Centre for the Setttlement of Investment Disputes
Asia Pacific Regional Arbitration Group (APRAG) is association of 17 regional arbitral institutions in our area. See www.aprag.org
©MNoonan2011
Framework for International Arbitration
UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (The New York Convention)
When local court faced with dispute covered by an arbitration agreement, it must stay proceedings and recognise and enforce arbitral awards.
Incorporated into Australian law via International Arbitration Act 1974(Cth). Note best practice amendments passed in June 2010 to improve its appeal for International Arbitration.
Australian Centre for International Commercial Arbitration. See www.acica.org.au
©MNoonan2011
ACICA
The Australian Centre for International Commercial Arbitration is a non profit organisation formed in 1985 to provide a framework for international commercial arbitration and to foster Sydney as a centre for such arbitrations
See www.acica.org.au
©MNoonan2011
Why Sydney?
• Supportive legal environment-International Arbitration Act provides for various opt in/out alternatives, foreign lawyers can appear, signatory to NY Convention on Recognition and Enforcement of abitral awards, supportive courts and political stability.
• Sophisticated legal profession and some internationally respected arbitrators such as Sir Laurence Street QC. Good support services, languages, resources.
• Cost savings when compared with London, NY, Paris, Geneva, HK…cost hotel rooms, rates etc.
©MNoonan2011
Arbitration Clause
ACICA recommends:“Any dispute, controversy or claim arising out of, relating to or in connection with this contract, including any question regarding its existence, validity or termination, shall be resolved by arbitration in accordance with the ACICA arbitration rules. The seat of arbitration shall be (location). The language of the arbitration shall be (language). The number of arbitrators shall be (1,3 or Article 8 of rules).”Note also need for choice of law clause.
©MNoonan2011
Arbitration Rules
Arbitrations are conducted in accordance with rules chosen.
See for example ACICA Arbitration rules at www.acica.org.au. Selections follow.
Procedural as with civil/criminal procedure court system rules.
For other rules, see appropriate organisation
©MNoonan2011
ACICA Rules
4. Party initiating gives ACICA a Notice of Arbitration which covers a demand for arbitration, contact details, copy of A clause, general nature of claim and remedy sought and proposal re number of arbitrators.
Notice can include detailed Statement of Claim or that can come later
©MNoonan2011
ACICA Rules
5. Within 30 days of receipt of Notice, Respondents submit Answer which includes contact details, any plea disputing jurisdiction, comments on particulars in notice and answer to relief/remedy sought.
It may also include Defence to Statement of claim, but this may come later.
©MNoonan2011
ACICA Rules
6. Parties may be represented8-16 Appointment of arbitrators17-31 Arbitral proceedings. Tribunal may
conduct arbitration as it sees appropriate provided that it treats parties equally and each is given opportunity to present their case.
Usually held in private21 Contents of statement of claim
©MNoonan2011
What does it all cost?
Appendix A to ACICA rules
Notice of Arbitration Registration fee $2,500
Admin fee
$1-$500,000 1% of amount in dispute
And upwards
Over $100m $39,000 plus 0.02% of amount in dispute above $100m up to maximum $60,000.
PLUS costs of representation, presenting case.
©MNoonan2011
Attitude of our courts
Mainly support
Care must be taken when drafting to avoid multi-party, multi-contract and multi-venue disputes.
If arbitration clause too narrow, it may limit range of disputes that can be settled by arbitration
©MNoonan2011
Example
Australian company entering JV with Malaysian company to build infrastructure in Phillipines. You negotiate a clause submitting disputes to Australian courts.
However, judgement may not be enforceable (no reciprocal enforcement treaty with Malaysia), dispute very public, and judge may have no expertise.
Arbitral award would be enforceable (Malaysia and Australia both signatories to NY Convention), and can choose arbitrator(s) with expertise
©MNoonan2011
Another example
Importer of ginger from China. No choice of law clause. No arbitration clause. Ginger rotten.
Bring proceedings in China? Or Australia?
Vienna convention applies to sale?
Chinese law has closest connection?
Chinese law very different to ours. E.g. limitation periods, no precedent value
©MNoonan2011
International Treaty obligations
Specialist Dispute Resolution bodies and rules
WTO
WIPO-Domain name disputes-cybersquatting
UNCITRAL Model Arbitration law
©MNoonan2011
WTO dispute settlement understanding (DSU)
Came out of Uruguay Round
Clearly defined rules and timetables
Parties/countries first discuss.
First WTO stage is good offices, conciliation.
Then a panel and endorsed (or rejected) by WTO membership.
Appeals on points of law are possible.
©MNoonan2011
DSU timetables
60 daysConsultation, mediation
45 daysPanel set up, appointments
6 mths Panel hears dispute and reports
3 wks Panel reports to WTO members
60 daysDispute Settlement Body adopts report (if no appeal) TOTAL 1 year
60-90 days Appeals report
30 daysDispute Settlement Body adopts appeals report. TOTAL 1.25 years
©MNoonan2011
How the panels work
• Each side presents case in writing to panel• First hearing-complaining country and
responding country present case• Rebuttals-written and oral• Experts, if appropriate• Draft panel report given to both sides• Interim report to both sides• Review for two weeks• Final report given to both sides and 3 weeks
later to all WTO members
©MNoonan2011
Remedies?
• Obligation on parties to respect ruling• Trade sanctions possible• Limited discussion in this course• Reading some cases is useful
e.g. See www.wto.org and go to Case Studies Thailand: Conciliating a Dispute on Tuna Exports to the EC
Dispute Settlement between Developing Countries-Argentina and Chilean Price Bands
Pakistan’s Dispute Settlement with the US on Combed Cotton Yarn exports.
©MNoonan2011
Trade with China
• Australian exports include mainly rural products, minerals and energy-wool, cotton, beef, dairy products, wine, iron ore, liquified natural gas-and a few services in education, tourism, architecture, banking and legal.
• Also considerable outsourced manufacturing done in China with products/components then imported.
©MNoonan2011
Trade Disputes involving China
Resolution mechanisms include:
• Consultation
• Negotiation
• Conciliation or mediation
• Arbitration
• Litigation
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Trade Disputes involving China
• Less formal methods are preferred• Desirable to maintain a harmonious and
consensual working relationship, so confrontational/adversarial methods often not helpful.
• Conciliation and arbitration therefore common• Arbitration clauses common in JV contracts –
avoid unfamiliar Chinese court system, reduce costs, preserve business relationships, enforceability.
©MNoonan2011
Trade Disputes involving China
• CIETAC (China’s International Economic and Trade Arbitration Commission) is the mechanism China has set in place to resolve problems in trade
• Legislative encouragement for negotiation and conciliation first and arbitration or litigation if that fails.
• JV contracts MUST contain provisions re settling of disputes.
©MNoonan2011
Case Study Focus
Summer Semester 2010-2011
MEDIATION
Useful reference: Hardy and Rundle, Mediation for Lawyers, CCH 2010
(Checklists used in these notes), Law Society NSW mediation kit.
©MNoonan2011
Mediation
A third party facilitates resolution of a dispute by the parties.
Third party does not decide. Parties do.
©MNoonan2011
Mediation-is it appropriate?1. Does client want to resolve the matter?2. Intellectual mental or emotional capacity to pursue an agreement?3. Does client want to create a legal precedent?4. Does client have capacity and willingness to pay legal costs of litigation?5. Does client suspect other party is hiding information, lying or otherwise acting in bad
faith?6. Does client trust that other party would comply with settlement?7. Is there a fear of violence or intimidation?8. Is there any scope for compromise? Is client prepared to make concessions?9. Is there information that one party could provide to improve understanding?10. Could some aspects be resolved now?11. Do parties share interests?12. Is mediator likely to enhance negotiations? Have the parties tried themselves?13. Does the client want to participate directly?14. Has communication been a source of conflict?15. Any non-legal interests of client?16. Is a quick resolution in client’s interests? Does either party have an interest in delay?17. Is continuation of dispute affecting commercial or reputational interests?18. Would an apology help?19. Is privacy / confidentiality important?
©MNoonan2011
Mediation Agreement
• Confidentiality
• Payment of the mediator
• Exclusion of liability and indemnity
©MNoonan2011
Mediator Selection
What style of mediation?Sole mediator? More than one?Court connected mediator or private?Level of influence of mediator? Settlement,
Facilitative or Transformative model?Expert advisory panel?Wise counsel model?Tradition based model?With or without caucuses?
©MNoonan2011
Qualities in a MediatorOpen minded
Persistent
Good listening skills
Sense of humour
Honesty, integrity
Patience
Flexible
Creative
Able to work with highly charged emotions
Qualified….-in what?
Respected
Perceptive
Attentive to detail
Respectful
Friendly
Intelligent
Even tempered
Organised
Articulate
Gender and race
©MNoonan2011
Most suitable type of mediator
Private (legal or other training?)
Solicitor, barrister
Former judge
Specialist-family/relationships, psychologist, engineer, building/construction, franchise, accounting, IP, Biotech, Mining, trade, banking.
©MNoonan2011
Stages of MediationOpening statements-problem, facts and issues 30
minutes.
Identification of issues and setting agenda
Exploration and discussion of issues
Private sessions (and discussion with lawyer?)
Generation of options or offers
Evalutation of options or offers
Negotiations
Finalising agreement(assisted by lawyer?)
©MNoonan2011
Role of Lawyer in Mediation
• Research problem and issues, obtain information, assemble and prepare.
• May or may not be present.• May speak for client or coach client as to opening
statement, participation, process.• May ask questions on behalf of client• May generate options.• May advise in relation to offers• May negotiate on behalf of client• May assist with documentation of settlement• Extent may depend on whether client can afford it
©MNoonan2011
Mediation and ConfidentialityIs there an Agreement covering
confidentiality?Who is bound? Parties, mediator, lawyers,
others.What Information is covered?-admissions,
offers, facts, documents, notes, agreements
Limits of confidentiality, enforcing confidentiality-Use of information for other purposes including legal proceedings.