CPR Philadelphia Regional Meeting at Stradley Ronon on Effective Mediation Strategies for Client and Counsel

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By Anna M. Hershenberg, Esq., Vice President, Programs and Public Policy, CPR

On April 10, 2018, the International Institute for Conflict Prevention and Resolution (“CPR”) held its first Philadelphia regional meeting at the offices of Stradley Ronon Stevens & Young, LLP, a long-standing CPR member and first recipient, more than a decade ago, of CPR’s “Law Firm Award for Excellence in Alternative Dispute Resolution” for the firm’s commitment to principled and creative conflict management and resolution.

The meeting drew more than 130 people, with the attendees split evenly between in-house counsel from Fortune 500 companies, trial attorneys from the nation’s top law firms, and highly sought-after neutrals. The prominent attendees included 15 former judges and general counsels and chief legal officers from Aetna Inc., Comcast Corp., Deloitte, General Motors Corp., GlaxoSmithKline, Hewlett-Packard Co., Independence Blue Cross, Johnson & Johnson, KPMG LLP, Merck & Co., Monsanto Co., Pfizer Inc., TE Connectivity Ltd., Triumph Group. Inc., and Verizon Communications Inc., among others.

The program, “Effective Mediation Strategies for Client and Counsel,” was divided into three parts.  Bennett G. Picker, Senior Counsel at Stradley Ronon, CPR neutral and member of CPR’s Council, and Noah Hanft, President and CEO of CPR, kicked off the meeting with welcoming remarks.

Wharton School lecturer and mediation trainer Eric Max then led the first part of the program, “Negotiating Strategies for Clients and Counsel,” by facilitating an interactive discussion among the in-house counsel, outside counsel and mediator audience members.  Professor Max outlined the multiple layers of negotiation occurring at any given time during a mediation.  He challenged the audience with provocative questions, such as pressing each stakeholder to reveal if they lie to each other during the course of a mediation and exploring the reasons for their conduct.

After a networking coffee break, the program resumed with Sophia Lee, Partner at Blank Rome and former Chief Litigation Counsel at Sunoco Inc., skillfully moderating a panel discussion on the keys to effective preparation and advocacy with panelists Francine Friedman Griesing, Managing Member of Griesing Law; Scott S. Partridge, Vice President of Global Strategy at Monsanto and a member of CPR’s Board of Directors; and John Wright, Senior Vice President and General Counsel of Triumph Group.  Of particular interest to the attendees was Mr. Partridge’s explanation of how he created a relationship-based conflict identification and resolution process to shrink Monsanto’s – and then the entire industry’s – litigation portfolio.

The highlight of evening came when the Honorable Timothy K. Lewis (Ret.), Counsel at Schnader Harrison Segal & Lewis LLP, former federal circuit and district court judge and Chair of CPR’s Diversity Task Force, and Mr. Picker led the third part of the program, “Promoting Diversity in Mediation.”  Mr. Picker – who has been championing diversity and leading by example for decades – provided concrete steps that in-house counsel, outside counsel and mediators can take to drive diversity and inclusion in the dispute resolution field.  Judge Lewis then delivered deeply moving and personal remarks on his experiences as a black attorney and federal court judge in a predominately white legal world.  He challenged the audience to mentor colleagues from historically disadvantaged backgrounds, reminding them that everyone got to where they are by standing on someone else’s shoulders, and “that talent is distributed equally across all races and ethnicities and genders and identities. Opportunity is not.”

He set out his vision for what true workplace inclusion should look like and how to achieve it: “The goal here is not to be included simply because of race or gender; the goal is not to be excluded simply because of these qualities. But in order for us to get there, we have to make a concerted effort, and we must challenge ourselves, our assumptions, and sometimes each other.”  Judge Lewis’s remarks, which received a standing ovation, will appear in Alternatives to the High Cost of Litigation, CPR’s monthly international newsletter (see altnewsletter.com).

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Pictured: Bennett G. Picker and Honorable Timothy K. Lewis (Ret.) 

The evening concluded with closing remarks by Thomas J. Sabatino, Jr., CPR Board Vice Chair and Senior Vice President, General Counsel, Law & Regulatory Affairs at Aetna and a networking cocktail reception.

In short, the CPR Philadelphia Regional Meeting introduced attendees to what CPR does best: create opportunities for high-level conversations between inside and outside counsel and provide businesses with the tools to cultivate a corporate culture that embraces diversity of perspective, and early and creative ways to prevent and resolve business disputes.

 

About CPR

CPR is an independent nonprofit organization that, for more than 40 years, has helped global businesses prevent and resolve commercial disputes effectively and efficiently. CPR’s membership consists of top corporations and law firms, academic and government institutions, and leading mediators and arbitrators around the world. CPR is unique as: (1) a thought leader, driving a global dispute resolution culture; (2) a developer of cutting-edge tools and resources, powered by the collective innovation of its membership; and (3) an ADR provider offering innovative, practical arbitration rules, mediation and other dispute resolution procedures, and neutrals worldwide. For more information, please visit www.cpradr.org.

 

About Stradley Ronon

Stradley Ronon attorneys have served with distinction as neutrals, both independently and under the auspices of ADR provider organizations such as the American Arbitration Association, the International Centre for Dispute Resolution, and the International Institute for Conflict Prevention & Resolution (CPR). Stradley Ronon attorneys have built a reputation for fairness and creative problem solving and are highly regarded for their ability to understand complex commercial transactions and cutting-edge technologies. In recognition of its commitment to principled and creative conflict-management and resolution, Stradley Ronon’s ADR practice group received CPR’s inaugural Law Firm Award for Excellence in Alternative Dispute Resolution. For more information, please visit https://www.stradley.com/

CPR Releases New Mediation Best Practices Guide for In-House Counsel

By Erin Gleason Alvarez and Rick Richardson

As co-chairs of the Mediation Committee, we are pleased to announce the release of the Mediation Best Practices Guide for In-house Counsel: Make Mediation Work for You.  The Guide will be launched as part of the CPR Institute Annual Meeting in Atlanta from March 8 through 10, 2018.

Make Mediation Work for You was inspired by conversations among in-house counsel that have arisen in the Committee.  What is the best way to convince counterparties that mediating early is a good thing?  How do you best prepare for mediation?  Should you always accept a counterparties’ suggestion on the mediator?  What is the best way to keep negotiations going if the mediation concludes without settlement?

The Guide answers all of these questions and includes insider tips from in-house counsel throughout.  Make Mediation Work for You begins with a discussion on when to contemplate mediation and then takes the in-house reader though every step in the process: from convening the process and making negotiations plans before the in-person session to creative solutions for overcoming impasse and structuring a settlement agreement.

Make Mediation Work for You will undoubtedly be a valuable resource for CPR members.  We are grateful to the Mediation Committee members for their efforts in creating this important guide, most notably John Bickerman, David Brodsky, David Burt, Steve Comen, Steve Gilbert, Duncan MacKay, Chris Mason, Judy Meyer, Meef Moh, and Mike Timmons.

We look forward to seeing many of you at the Annual Meeting next week!

 

Erin Gleason Alvarez and Rick Richardson co-chair the CPR Mediation Committee.  Rick serves as Vice President and Associate General Counsel, Dispute Resolution and Prevention for GSK.  Erin is the former Global Head of ADR Program for AIG; she now has her own mediation and arbitration practice and is a member of the CPR Panel of Distinguished Neutrals

Ethics Issues in Mediation: Confronting the Maze of Confidentiality and Privilege

By Ginsey Varghese

With a rise in litigation about mediation, likely linked to its  increasingly common use, it is important to take a closer look at the ethical issues facing both the mediator and advocate in a mediation.

What are the ethical obligations of mediators to parties when engaged in “shuttle diplomacy” in private caucusing? How does blanket confidentiality in mediation agreements intersect with attorney-client and work product privilege? In disputes following mediation, will courts pierce the confidentiality of mediation? Can mediators be subpoenaed to testify?

These hairy contours of the law and mediation were addressed in an interactive panel hosted jointly by CPR, Practical Law, and Jenner & Block, LLP on January 8, 2018.  The panel was moderated by Steven Skulnik (Editor) of Practical Law, and featured Noah Hanft (President and CEO) of CPR, Bernadette Miragliotta (Managing Counsel) at American Express Company and Richard Ziegler (Partner) at Jenner & Block, LLP (pictured in the order, from left to right below).

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Almost 400 people attended the session via webinar, and another several dozen in person at Jenner & Block’s New York offices. The discussion was extremely engaging as the moderator, Mr. Skulnik, steered panelists’ conversations around realistic hypotheticals with live polling and immediate feedback from the audience.

The session began discussing a mediator’s duty of confidentiality in private caucus. Mr. Ziegler stated, “An effective mediator must review with the parties exactly what the mediator can say in caucusing with the other side.” All the panelists agreed, adding that mediators must be tactful in their language conveying information to guard the confidentiality of each side.

In a discussion about whether mediators should suggest specific dollar amounts for offers or demands, Ms. Miragliotta stressed that this should be avoided as it is essential that parties feel like it is their mediation…that they own the process and the settlement. It is not beneficial for parties to feel rushed into an outcome over which they do not feel ownership, she added.

Another important consideration  discussed is that there is no single uniform body of law on mediation across the 50 states jurisdictions and federal jurisdiction, and only 12 jurisdictions have adopted the Uniform Mediation Act.

As Mr. Hanft explained, knowledge on the applicable law or the necessary “magic words” in a particular jurisdiction when enforcing a settlement or protecting confidentiality in a post-mediation dispute is paramount. He also offered practical guidelines to ensure a settlement is more likely to be enforced.

The panelists deliberated a range of other topics: the complexities of Attorney-Client Privilege and Work Product Doctrine in a mediation; post-mediation disputes that commonly arise including settlement enforcement; mediation confidentiality issues in malpractice or non-party disputes; and best practices for mediator and advocates, among others.

As Jenner & Block’s Ziegler summarized, “Confidentiality in mediation is not ironclad.”

The final takeaway? When in mediation, be mindful of not crossing ethical lines and not inadvertently waiving attorney client privilege or work product protection.

An audio stream of the panel discussion is available In CPR’s member’s only Resources Library HERE (you must be logged in to view).

Celebrate with CPR – Mediation Week: Oct. 15-21, 2017

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Celebrate Mediation Week 2017!

Of course, it’s always a good time for mediation, but CPR will be joining numerous other organizations next month to formally celebrate this effective means of preventing and resolving disputes, at Mediation Week 2017: “Mediation, Civility and the Power of Understanding, organized by the American Bar Association Section of Dispute Resolution. Please join us, won’t you?

Tuesday, October 17 – Open Forum on (In)Civility in Mediation

The CPR Institute’s Mediation Committee invites all who are interested to participate in a convenient and open-to-the-public Lunchtime Teleconference on Tuesday, October 17th, 2017 from 12:30-1:30 pm ET. Distinguished mediator and CPR panelist, Jack P. Levin, will recount some of the lessons and inevitable trials encountered in his years striving for greater civility in mediation. This dialogue will be followed by an opportunity for caller participation.

While there has been research on the cost of incivility to corporations, we will explore the effects of this behavior in the mediation process, along with strategies for promoting civility in negotiations. We hope you will join us, prepared to share any anecdotes or observations on the effects of civility (and lack thereof!) in dispute settlement. To register, contact zchanin@cpradr.org. You will be provided dial-in information and links to supplementary material upon registration.

The Mediation Committee is a consortium of CPR members throughout the world.  We are currently exploring ways to enhance the quality and effectiveness of corporate mediation practice, both domestically and internationally.  The Co-Chairs of the Committee are Erin Gleason, of Gleason Alvarez ADR, and Rick Richardson, of GlaxoSmithKline. 

Wednesday, October 18 – Mediation Settlement Day

CPR has been invited to speak on a panel as part of the Mediation Settlement Day Kick-Off Event on October 18, 2017 from 4:30 pm – 7:30 pm at New York Law School, 185 West Broadway in New York City.

The focus of this event will be “Diversity and Inclusion in Dispute Resolution, 2.0.” Following an open house and a remembrance of Margaret Shaw, panelists Maurice Robinson, Esq. (Moderator), CPR’s Niki Borofsky, Esq., John D. Feerick, Esq., Rekha Rangachari, Esq. and Maria Volpe, Ph.D. will discuss:

  • What is Diversity and Inclusion in Dispute Resolution?
  • How are bar associations, professional organizations, court-connected dispute resolution programs and community dispute resolution centers addressing diversity and inclusion in the field?
  • A New CLE Category: Diversity, Inclusion and the Elimination of Bias
  • Current opportunities for diverse mediators

The evening will conclude with the Frontline Champion Award Presentation and a Keynote address by John Kiernan, Esq. of Debevoise & Plimpton on Diversity and Inclusion. For more information and to register click HERE.

Tuesday, October 24 – CPR Webinar on Including Effective ADR Clauses in Contracts

Admittedly, this date is slightly outside of the formal “Mediation Week,” but we’re going to squeeze it in and keep on celebrating with this CPR members-only event, being hosted by the Fundamentals Task Force of the CPR Transactional Dispute Prevention and Solutions Committee on October 24, 2017, from 12:30 pm – 2:00 pm ET.

All transactional lawyers would benefit from an understanding of how various forms of dispute resolution can be included in contracts and other agreements. We help to accomplish this through our easily used online CPR Clause Selection Tool. Michael B. Keating of Foley Hoag LLP will demonstrate a method to train transactional lawyers to craft an appropriate ADR contract clause using this tool. Following this session, attendees will be able to do the same for their colleagues. The program will qualify for one hour of New York CLE credit–details to follow. 

For more information and to register for the CPR members-only event, click HERE or email Zoe Chanin at zchanin@cpradr.org.

And for more information about Mediation Week 2017, please visit the ABA event website HERE.

CPR Launches New Cyber Panel Focused on Security Disputes and Related Insurance Claims

A cyber security breach occurs, possibly exposing consumer or other sensitive information. What happens next, at the corporate level?

Certainly underlying any serious cyber event are the questions of who is responsible, who is going to do what to remedy it and who is going to pay for it, including related insurance issues that will arise.

“With attacks occurring with both greater frequency and sophistication, smart companies and their counsel are adopting proactive strategies to prevent and/or resolve cyber-related disputes in a manner that best protects operations, customers and reputation,” said CPR President & CEO, Noah J. Hanft.

With CPR’s announcement, today, of a new CPR Cyber Panel, now those strategies can even more squarely include CPR, as well as thoughtful options outside of traditional litigation. The CPR Cyber Panel contains neutrals who are expert in data breaches and other cybersecurity issues, as well as those experienced in handling related insurance coverage disputes.

“Mediation of cyber security disputes and insurance claims if done by the right individuals can drive substantial value to all parties,” said Daniel Garrie, a longtime CPR Distinguished Neutral, Editor-in-Chief of Law & Cyber Warfare and CPR Cyber Panel member. “Of course, it is critical that your mediator have the mediation experience and real-world technical cyber expertise to ensure the right outcome. If done by the right individual supported by a quality ADR organization with strong rules and protocols, an entity will be able to realize the benefits a cyber security neutral.”

In the Law360 article, “Growing Demand for Mediation of Data Breach Disputes,” Barton LLP Partner and CPR Cyber Panel member Kenneth N. Rashbaum stated, “For reasons of financial savings, efficiency and plain peace of mind, those who prepare agreements in technology areas have increasingly turned to mediation and other dispute resolution clauses and this, in turn, has created a demand for mediators with backgrounds that comprise multiple practice areas, including cybersecurity, privacy, technology transactions and litigation. And they should open to dispute-mitigation alternatives. For example, arbitration clauses have been around for a very long time but newer and possibly less expensive modalities include ‘cooling-off and mediation’ provisions that require the aggrieved party to notify her counterpart of the disputed matter and then, only after a certain period of time, the parties will proceed to mediation and can only go further, to arbitration or litigation, if mediation fails.”

“One of the things CPR has particularly prided itself on, over its 40 year history, is being both tuned in and highly responsive to the needs of our members and the ADR community as a whole,” said CPR’s Helena Tavares Erickson, Senior Vice President,
Dispute Resolution Services and Corporate Secretary. “CPR’s new Cyber Panel is a perfect example of that dynamic in action: We were told about increasing cyber-related dispute resolution needs, and we acted. We encourage the community to let us know its needs as we are ready to act.”

CPR’s Panels of Distinguished Neutrals comprise those among the most respected and elite mediators and arbitrators in the world. They include prominent attorneys, retired state and federal judges, academics, as well as highly-skilled business executives, legal experts and dispute resolution professionals who are particularly qualified to resolve all business disputes including those involving multi-national corporations or issues of public sensitivity.

Focusing in more than 20 practice areas, CPR’s esteemed arbitrators and mediators have provided resolutions in thousands of cases, with billions of dollars at issue worldwide. Admission to one of CPR Panels occurs only after an individual is reviewed and approved by CPR and/or a select panel of high-end users, peers and/or academics. Candidates are screened for their ADR expertise and training, and candidate references are asked to comment specifically on the applicant’s qualifications to serve on complex commercial disputes. Qualification to the CPR roster is demanding and available openings are limited.

“Once again, Noah Hanft and CPR are leading the way in dispute resolution,” concluded Steven J. Antunes, Senior Litigation Counsel at AEGIS Insurance Services, Inc. “As the law regarding cyber security evolves and the claims become more sophisticated , the most cost effective manner in which to resolve cyber-related disputes may very well be through mediation.”

Shall We Have an Adult Conversation About Legitimacy?

[A summary of the keynote address of Jan Paulsson on 2 March 2017 at the Annual Meeting of the CPR Institute at the Biltmore Hotel, Coral Gables, which has also been archived on CPR’s Facebook page.]

By Jan Paulsson

It is difficult to know when history is being made. Important developments tend to be incremental, and perceived only in hindsight. Yet I am willing to wager that we are in the middle of a decade this decade in which the international arbitral process seriously comes to grips with the existential need to secure acknowledgment of its legitimacy. This is not being done, and cannot be done, by individual arbitrators. The exemplary work of 50 is done in silence; the misconduct of one may become a first-page scandal. The heavy lifting must be done by arbitral institutions.

The three evils they must combat are: transparency deficits, entrenchment, and capture. Not all of the hundreds of arbitral institutions who purport to handle international disputes will do their part, because some of them were created and remain dominated by special interests, and like things the way they have them. They have other priorities than ensuring a fair and neutral process. These are not the successful institutions, but it is vital – lest all be tarred with the same brush – that they are recognized by tangible criteria for what they are. The test is not what institutions proclaim, but what they do; does their conduct prove a commitment to fairness and neutrality?

Thirty years ago Professor Hans Smit proposed in the Columbia Journal of Transnational Law (Vol. 25, p 30) that there should be a single global arbitral institution charged with the supervision of the arbitral process. If this could not be achieved by a voluntary process of federation, he suggested that the same goal could be reached by the establishment by the International Chamber of Commerce of a network of conveniently located branches around the world.  Existing institutions would be invited to “merge” into those branches, failing which the ICC would proceed alone. This may not have been a good idea at any time, given the dangers of bureaucratization and monopolistic complacency, not to mention prohibitive cost. And today it is surely an impossibility, given the emergence of a number of deservedly successful and robust institutions in a number of regions of the world. Still, Smit’s idea was founded on the crucial insight that international arbitration will suffer from the misconduct of what one might call its weakest links, and that it is necessary to be very clear about what the criteria of legitimacy are so that waywardness can be exposed by objective measurement.

This is not rocket science. The premise of international arbitration is that all commercial disputes, even those with stakes of billions of dollars, will be decided by three arbitrators, or even a sole arbitrator, and that the outcome is final. Let’s be frank; this is asking for a lot. Losing parties are often extremely unhappy, and quick to think that something has gone seriously wrong. When the institution has not been properly “designed for legitimacy”, the ultimate sad irony may be that each side thinks that its opponent has some occult advantage, and that each side therefore seeks achieve some compensatory secret trump card – even though their reciprocal suspicions had no foundation. This can be something like a death spiral.

Today I have the good fortune of having been asked to address the annual meeting of an organization which is known for having been created not by the service providers, but by consumers of dispute resolution services. How fitting it is therefore that in 2002 CPR took the unique initiative of developing a template for universal best practices suggested as suitable if not essential for any institution anywhere. This was called the CPR/Georgetown Commission’s 2002 Principles for ADR Provider Organizations. Much ground has been covered since then at the individual reforming initiatives of the leading institutions, but it was certainly a step in the right direction.

It seems that I have achieved modest notoriety for expressing doubts about the wisdom of the widespread practice of unilateral appointments of arbitrators. Given how insistently those who disagree with my ideas on this subject distort what I say, I could perhaps be forgiven if I concluded that the propositions I articulate must be very powerful. From where I’m standing today, I cannot tell if this audience is dominated by experienced lawyers or younger ones. Younger audiences are of course idealistic and invariably agree with me.  Older audiences are cynical and set in their ways, and always protest. So obviously I prefer the latter. It’s much more fun.

My opponents say that I want to do away with the fundamental right of parties to name their arbitrators. This is unfair; I do not that at all. In the first place, I believe in the freedom of consenting and informed adults. If arbitrants agree that each of them can name its best friend or favorite lawyer as arbitrator, that’s fine with me as long as everything is out in the open. I’m not sure the result deserves the name “arbitration”, but hey – what’s in a name? Second and more importantly, my animadversions against unilateral appointments have not led me to want to tear down the temple or destroy icons, but just to a modest proposal. Here it is: the default rule should be that if the parties have agreed to a three-member tribunal all three members should be agreed by both sides, or else by an appointing institution. It’s only a default rule, but I suggest it should not be varied by agreement until the dispute has arisen. That day the claimant can measure whether the dispute is going to be civilized or brutal. If the former – and perhaps that will be the case most of the time – it takes only a phone call to agree that each side can name one of the arbitrators in the usual way. If the latter, the claimant may well have reason to rejoice, faced with a bitter clash with a party who wants to break off relations forever and is likely to deploy scorched earth tactics, that the default rule is the one I suggest.

I have written at length about the disadvantages of the practice of unilateral appointments and will not go through them here. (See The Idea of Arbitration, Oxford University Press, Sections 5.4 and 9.4.) All experienced practitioners in the international field know what it is like when unilateral nominees misbehave, or when losing parties suspect undue influence. It’s an on-going concern, and I am not mollified by the “if it ain’t broke thesis.” Things may be tolerable most of the time, but most of the time is not good enough.

This was brought home to me when I read the heart-felt account published a couple of weeks ago of the experience of a lawyer participating in his first ICSID arbitration. I do not know him, but I am certainly aware that he is a prominent fixture of several decades’ standing in the Miami legal community. Indeed his office is only a mile away from the beautiful hotel where we are meeting now.  I will call him Mr X.  His account is interesting precisely because this is a sophisticated and articulate lawyer who discovers a process with which he is not familiar and feels compelled to express serious concerns. We do well to take the concerns of such thoughtful individuals to heart. I do know the two other arbitrators involved in the case, with whom I have participated in more arbitrations I can count. From what one can read in the award and the dissenting opinion, my only sources of information about this case, all three arbitrators behaved perfectly honorably and none should be embarrassed if I named them, but I will not do so since but I would find it a distraction to personalize a matter which I am using only as an illustration of what I believe to be a frequently recurrent and seriously troubling unease, maybe even a malaise.

Here’s the story in a nutshell. The case involved Costa Rica, which is all I have to say to enable anyone here with a laptop to learn as much as I know about the case.  From the parties’ point of view, the case was over in March 2014, when the parties filed post-hearing briefs.  After that date, the process seems (to the uninitiated reader) to have entered a black box, as the next recorded event is a challenge by the claimant, like a bolt out of the blue, to all three members of the arbitral tribunal. This dramatic event occurred in June 2015. You heard me: a year and three months later which the parties were presumably waiting passively, if with mounting impatience, for the award to come out. Something was obviously not right. We do know that the claimant’s complaint was based on the fact that the Tribunal’s legal secretary, a lawyer on the ICSID staff who as part of their function are present during deliberations and typically assist in such useful ways as retrieving documents from a voluminous file which the arbitrators are unlikely to transport in its entirety to the place of arbitration from their various home offices, had left ICSID’s employ to join the law firm representing the respondent. In other words, the claimant was complaining about a form (I might perhaps venture to say a mild form) of capture.

The challenge was dismissed nine months later in accordance with the relevant rules and practice. I say nothing about that.  The arbitrators, thus confirmed in their function, went about their duty to render a final award, which they did a few weeks ago, in January.  It turned out to be one of those cases where a number of issues  were decided 2-to-1, with each of the co-arbitrators finding himself either part of the majority or in dissent, and the presiding arbitrator always part of the majority. Mr X wrote the dissent which captured my attention. The first thing to say about it is that it is entirely respectful of the other arbitrators, with whom Mr X writes that he was “honored” to serve. He explained in lucid terms some significant differences of substance with respect to which he was disappointed to find himself in disagreement. Such things happen; reasonable people differ. But then we get to the troubling passages.

Mr X notes that “the period that followed the hearing was delayed by the embarrassing and unnecessary issues caused by the change in employment of the Panel secretary and other issues related to the impartiality of the panel.” What these “other issues” involved is not specified, and the challenge decision itself has not been published as far as I know. I have seen press articles referring to information to the effect that these issues had to do with the prior relations between the presiding arbitrator and the other co-arbitrator; such complaints are frequently raised by losing parties, sometimes on quite flimsy grounds, but let’s not pay heed to gossip or speculation or anonymous sources. Mr X then goes on to write that “I choose not to add any further comment on the issue of the secretary’s employment, but do wish to address the issue of the constitution of the panel and the issues of conflicts and impartiality.”

What Mr X then has to say is notably that “the arrangement whereby two of the panel members are selected by the parties to the agreement creates an uncomfortable aura of conflict which permeates, in my view, the proceedings” and that, although “I have worked hard to neutralize his factor as I am sure my esteemed [co-arbitrator] colleague has done”, the only panelist who did not have “an inherent conflict” was the chairman. Mr X concluded that the “appointment by a party of a judge to rule on the party’s claim creates an unnecessary barrier to pure objectivity” and recommended that ICSID consider prohibiting the practice of unilateral appointments.

This is not the occasion to discuss the feasibility or even desirability of such a prohibition, particularly in the case of ICSID since its rules are constrained by the text of the international treaty by which it was created. My point is rather to insist that this measured but heart-felt comment is one that all institutes and arbitrants should take to heart, recognize as not being an isolated phenomenon, and take as a compelling reason to consider ways in which this kind of unease can be alleviated.

I think I have heard and examined at length in writing all conceivable arguments against my suggestion that we move away from the practice of unilateral appointments as a default rule, and I challenge any one of you to a debate because I am confident that I will prevail. Prevail, that is, except if you make the one argument which is Kryptonite and will defeat me every time. Here is how you win the argument: you look me in the eye and say “I don’t trust the institution, and so as long as I can name one of the arbitrators I feel that I will reduce the risk of a runaway tribunal doing something crazy – but unappealable.”

That argument is indeed made, like it or not. Decent arbitral institution cannot fail to realize that it is a disappointing and sobering message, indeed something of an indictment. They must absorb this reality, and do try to do two things about it. The Big Thing is to earn such trust that this kind of worry about a runaway tribunal evaporates. The Little Thing is far easier, and may in practical terms be just about as good. It is to focus on the involvement of the parties in the selection of arbitrators, and to attend to the numerous adaptations and refinements that may take the edge off the disadvantages of what one might call unreconstructed unilateralism.

The CPR Institute took a noteworthy step in this direction with the well-known Rule 5.4 of its Rules for Administrated Arbitration of International Disputes, for which it deservedly won a prize as the best innovation of 2016 [from Global Arbitration Review]. It introduces what CPR calls a “screened selection process,” which allows parties to choose among proposed arbitrators but in a manner designed to keep the ultimately appointed panel members from knowing individual parties’ preferences. We need to see how this works in practice, and how similar initiatives function elsewhere. There will always, believe me, be attempts to game the system. If I may put it as a paradox, the only thing that must be constant is the readiness to change as we learn. The poacher never rests; neither can the gamekeeper…

But this is not enough. Institutions should not only be inventive themselves, but encourage parties to be inventive as well. Most often this concerns the parties’ lawyers. Why are we lawyers, so unbelievably inventive in argument, stuck in the mud when it comes to patterns of process? Can’t we all agree that in ideal circumstances an arbitral tribunal should operate as a team, and not as three sole arbitrators cobbling together something of dubious coherence that achieves an unappealable result but does not deserve to be called “consensus?” If we agree want cohesive tribunals capable of producing greater quality than their individual members, aren’t presiding arbitrators the captain of those teams? Why not give them an important role in the constitution of the team – perhaps identifying a number of individuals they find compatible, or complementary, and asking the parties to rank them. (This, by the way, seems to be a more likely route to diversity than to expect it from unilateral appointments by parties whose entire focus in making appointments is to win the case. The presiding arbitrator might say “I’m comfortable with the industrial context, but would like a member of the tribunal to be conversant with public international law; then we’ll be all set so the third member can be someone less experienced whom I believe will make a solid contribution and who merits the experience and exposure.”) Or how about each side giving the presiding arbitrator a list from which to chose each co-arbitrator on the basis of compatibility? Or even, when full confidence reigns, go all the way and allow the presiding arbitrator simply to come up with the two others, constrained by nothing except perhaps observations by the parties as to what kind of qualities or experience the case calls for?

Parties have also been known to achieve quite surprising things – if only they will pick up the phone and try. I have observed an interesting dynamic when two lawyers with a minimum of mutual respect agree (between themselves) to give each a right of veto with respect to the unilateral nominees, maybe once or twice. A cynic might say that the result will be that each will immediately propose wholly unacceptable names and then move on – but I say that such is not the unavoidable result, and no harm trying.  Or how about saying “If I appoint A, whom will you appoint? Are you saying B? Oh, no, then I’d appoint C.  What’s that, you like A? Well then, think of someone other than B”.

The possibilities are limited only by our imagination, and it is urgent that we unleash our capacity for innovation. As we have heard this morning from Noah Hanft as he enters his third year of leadership of the CPR, he and his staff are determined to give fresh impetus to the vigorous improvement of the dispute resolution process in all of its forms, and it behooves all of us to take a sympathetic interest in their efforts, which can only benefit all who believe that legitimacy in the resolution of disputes should not be negotiable.

Jan Paulsson is a founding partner of Three Crowns LLP, a specialist international arbitration firm. He holds the Michael Klein Distinguished Scholar Chair as professor of law at the University of Miami. 

 

 

A Mock Challenge under the CPR Rules for Administered Arbitration of International Disputes – An Overview

By Ksenia Koriukalova

On December 6, 2016 CPR’s Young Attorneys in Dispute Resolution (“Y-ADR”) and New York International Arbitration Center (“NYIAC”) hosted a seminar in New York City. The event featured a panel discussion on hot topics in international dispute resolution in 2016, as well as the mock challenge of an arbitrator under the CPR Rules for Administered Arbitration of International Disputes (“CPR Rules”).

The mock exercise was based on a hypothetical case involving the challenge of an arbitrator after a draft award had been circulated based on his alleged connection to the officer of the winning party, as well as on the views he expressed in his prior publications. The arbitrator in question served on a three-member panel which rendered a unanimous award in favor of one of the parties. The draft award signed by all three arbitrators was circulated to the parties by the chairman of the tribunal, and indicated that it would become effective if no comments were received from either party within 10 days.  The award was not delivered by CPR as required under its Rules. The losing party filed a request to correct the award within 20 days of the date of the Award, as provided for under Rule 15.6 of the CPR Rules. It simultaneously challenged one of the arbitrators. The challenge alleged “evident partiality” based on the fact that the arbitrator had been connected to the winning party’s CFO on LinkedIn for four years, and the two of them served on several committees of the college they had both graduated from. Another ground for the challenge was the alleged issue conflict, based on the arbitrator’s prior publications on the legal questions raised in the arbitration.

The mock challenge was considered by a panel of three CPR Challenge Review Board members, which included James H. Carter of WilmerHale, Lawrence W. Newman of Baker & McKenzie, and Hon. Curtis E. von Kann (Ret.). Anna Tevini of Shearman & Sterling LLP argued the case on behalf of the challenging party, while Ank Santens of White & Case LLP represented the party opposing the challenge.

The challenging party argued that the challenge was admissible, and that the challenge should have been granted, as the circumstances of the case allegedly gave rise to justifiable doubts as to the arbitrator’s impartiality. The challenge was based on Rules 7.5 and 7.6 of the CPR Rules, as well as on the provisions of the CPR Challenge Protocol.

The counsel stated that the challenging party had timely filed the challenge within 15 days of the time it had become aware of the respective circumstances, as provided for in the CPR Rule 7.6. She explained that submitting the challenge at the late stage of the proceedings was due to the arbitrator’s failure to disclose the relevant facts, which he allegedly had a duty to do. She also pointed out that, although the challenge was filed after the 10-day period for commenting on the draft award had lapsed, that did not make the award effective and the challenge – inadmissible, as the latter was submitted within the 20 days granted under CPR Rule 15.6 for seeking corrections of the award.

On the merits of the challenge, the counsel argued that the arbitrator’s connections to the other party’s CFO on LinkedIn and via college committees, his prior publications expressing views favoring the winning party’s position in the arbitration, and his failure to disclose these circumstances gave rise to justifiable doubts as to his impartiality. She referred to the 2004 Code of Ethics for Arbitrators in Commercial Disputes to support the argument that even the “appearance of partiality”, not necessarily actual partiality, satisfied the justifiable doubts standard.

The party opposing the challenge argued that the challenge was inadmissible, because the challenging party had been able to learn about the relevant facts from public sources well before the time of the challenge. The counsel referred to U.S. case law, the practice of England, France and Switzerland, as well as to the provisions of the American Arbitration Association and the CPR Rules applicable to challenges to prove that the right to challenge had been waived.

She further argued that the CPR Rule 7.5 “justifiable doubts” standard for arbitrator disqualification was not satisfied. The counsel referred to the IBA Guidelines on Conflicts of Interest in International Arbitration, which put arbitrators’ social media contacts on a “green list” and as such do not create even an appearance of bias, and thus do not require disclosure by an arbitrator. The same is true about prior expression of opinion on an issue arising in an arbitration, where such opinion does not focus on the case at issue. Finally, counsel argued that the arbitrator had no duty to disclose the facts at issue, and, in any event, non-disclosure was not an independent ground for disqualification.

After the oral arguments, the members of the CPR Challenge Review Board panel deliberated in front of the audience. They concluded that the challenge should be denied, as none of the facts referred to by the challenging party created grounds for disqualification of the arbitrator.

The mock was an interesting exercise which not only focused the attention of the attendees on current legal questions, but also demonstrated how the challenge of an arbitrator under CPR administered arbitration works in practice. Stay tuned for other upcoming Y-ADR events in 2017!

Ksenia Koriukalova is a CPR Fall intern

Y-ADR Mock Procedural Hearing under CPR Rules for Administered Arbitration of International Disputes – An Overview

By Ksenia Koriukalova

On September 8, 2016 CPR’s Young Attorneys in Dispute Resolution (“Y-ADR”) held the Mock Procedural Hearing under the CPR Rules for Administered Arbitration of International Disputes at the offices of Williams & Connolly LLP in Washington, DC.

The mock case involved a multi-million-Euro energy dispute between business parties from both sides of the Atlantic. Vento, a French energy business company, and Vento España, its wholly-owned Spanish subsidiary operating a windmill plant, initiated arbitration against Wind Corporation, a windmill manufacturer based in Chicago, Illinois. The claim arose out of the purchase by Vento España of 25 windmills produced by Wind Corporation, at the price of €1 million per unit, with the right of first refusal with respect to 25 additional units to be produced by the manufacturer following the execution of the contract. Claimants alleged that Respondent breached the right of first refusal provision by selling windmills to a different buyer.

In late June 2016, Claimants filed their notice of arbitration based on the arbitration clause found in Vento España’s contract with Respondent, which called for arbitration under the CPR Rules for Administered Arbitration of International Disputes (CPR Rules). One month later, Respondent submitted its notice of defense and counterclaim objecting to the tribunal’s jurisdiction on the grounds that one of the Claimants, Vento, did not sign the contract containing the relevant arbitration clause.

Meanwhile, three arbitrators were appointed to hear the case on August 1, 2016. Two of the arbitrators were appointed pursuant to CPR’s screened selection process provided in Rule 5.4 of the CPR Rules. Under this selection process, two out of three arbitrators are designated by the parties without them knowing which party designated each of them. It is worth noting that CPR’s unique Screened Selection Process was the winner of the 2016 Global Arbitration Review (GAR) Innovation Award.

Pursuant to Rule 9.3 of the CPR Rules, the arbitrators scheduled the initial pre-hearing conference promptly after their appointment to discuss the procedural issues of the case. The Y-ADR event simulated this pre-hearing procedural hearing before the tribunal composed of Dana MacGrath (Sidley Austin LLP), Patrick Norton (Law Offices of Patrick M. Norton), and Allan B. Moore (Covington & Burling LLP). David L. Earnest of Shearman & Sterling LLP, C.J. Mahoney of Williams & Connolly LLP, Mallory B. Silberman of Arnold & Porter LLP, and Laura J. Stipanowic of Smith, Currie & Hancock LLP played the roles of party representatives and counsel.

The first issue argued before the tribunal was whether the question of the tribunal’s jurisdiction should be considered separately leading to bi- or even trifurcation of the arbitral proceedings. Respondent stated that because one of the Claimants, Vento, was not a signatory of the contract containing the relevant arbitration clause, the tribunal had no jurisdiction over its claims. In support of its argument on separate consideration of the question of jurisdiction over the non-signatory, counsel for Respondent referred to Guideline 2 of the CPR Guidelines on Early Disposition of Issues in Arbitration, which lists jurisdiction and standing as issues for which early disposition may be appropriate. The tribunal ruled against separate consideration of Respondent’s jurisdictional objections, primarily due to the tight time-frame of the arbitration. According to the arbitration clause, the arbitrators had to conduct an oral hearing on the merits within six months and render the award within nine months of its constitution. Another reason for denying the request for bi- or trifurcation were potential overlaps between the facts of the case relevant for deciding both on Respondent’s jurisdictional objections and on the merits of the dispute.

Next, the parties and the tribunal discussed the necessary length of the merits hearing and the dates suitable for all expected participants. This task appeared to be not an easy one because of the parties’ different positions on the optimal hearing length, other commitments of the chair of the tribunal, and the approaching holiday season.

The third issue the arbitrators had to decide was the number, sequence and content of written submissions, as well as the timing and scope of the disclosure. Claimants, European companies, insisted on limited document exchange and referred to the CPR Protocol on Disclosure of Documents and Presentation of Witnesses in Commercial Arbitration to support their position. Respondent, a U.S. corporation, sought broad discovery and depositions, and argued that they were possible under the CPR Protocol if allowed by the tribunal or agreed upon by the parties. Claimants and Respondent also had different views on the number and content of submissions. The arbitrators ordered to have two rounds of simultaneous pre-hearing submissions, with the first round containing full positions of each party supported by evidence, and the second one being the response to the opposing party’s brief. The tribunal also decided that the discovery process with the use of the Redfern schedule should take place before the first round of written submissions. Respondent’s request for depositions was denied.

At the end of the procedural hearing, the chair of the tribunal asked the parties to consider settlement negotiations, and draw their attention to relevant Rules 9.3(e) and 21 of the CPR Rules.  Rule 9.3(2) of the CPR Rules expressly provides the possibility for the parties to engage in settlement negotiations, with or without the assistance of a mediator, as one of the matters to be discussed during the pre-hearing conference. Counsel and their clients discussed the possibility but, ultimately, there was no agreement between the parties to engage in mediation.

The mock pre-hearing conference provided a realistic picture of how various procedural issues are discussed and determined at an early stage of arbitral proceedings. It also demonstrates how CPR Rules and other tools available to the parties in CPR arbitrations are used in practice. Well-prepared party representatives and arbitrators made the proceedings very dynamic and interesting to observe. The recording of the hearing is available to CPR members (who are logged into the website) HERE.

Ksenia Koriukalova is a CPR Fall intern

Screened Selection Offers Best of Both Worlds

We at the CPR Institute are still abuzz over our receipt, earlier this month, of Global Arbitration Review’s (GAR’s) Innovation Award 2016 for our unique Screened Selection Process, which allows parties to select arbitrators without revealing to the neutral which party selected them. We are pleased and proud that our efforts to improve the arbitration process have received the recognition of the ADR community.

What’s so special about the screened selection option, one of many that CPR offers in its Rules? In a recent article published in Law360, CPR’s Olivier Andre and Charles B. Rosenberg of White & Case discuss how the process avoids the “moral hazard” of party-appointed arbitrators who may subtly favor the party that chose them.

How does it work exactly, when this option is selected? CPR carefully vets a list of neutrals based upon the qualifications that the parties require, conflicts, schedules and fees. The parties rank them by preference and include any objections to specific candidates without the neutrals’ knowledge. CPR then uses these rankings and objections to assign each side’s highest ranked neutral and the individual with the highest combined ranking is chosen as Chair. Then the case proceeds using CPR Rules.

Further detail about this Screened Selection Process can be found in the commentary to Rule 5.4:

Rule 5.4 presents a unique “screened” procedure for constituting a three-member Tribunal, two of whom are designated by the parties without knowing which party designated each of them. The procedure is intended to offer the benefits, while avoiding some of the drawbacks, of having party-appointed arbitrators. On the one hand, parties are able to designate arbitrators whom they consider to be well-qualified to sit on the Tribunal. On the other hand, any tendency (subtle or otherwise) of party-appointed arbitrators to favor or advocate the position of the parties who appointed them is avoided because those arbitrators are approached and appointed by CPR rather than the parties and are not told which party designated each of them. The Rules governing ex parte communications (Rule 7.4), challenges (Rule 7.6), and resignations (Rule 7.9) contain specific provisions designed to preserve the “screen” for the party-designated arbitrators under Rule 5.4 throughout the arbitration. The parties may choose the “screened” selection procedure in their pre-dispute arbitration clause (see standard pre-dispute clause), or agree to the screened procedure once a dispute arises.

CPR recognizes that, as a practical matter, some party-designated arbitrators selected pursuant to Rule 5.4 may deduce or learn which parties designated them – i.e., the “screen” may not, in all instances, be perfect. CPR nevertheless believes that the screened procedure is worthy of consideration by parties as a means to enhance the integrity of arbitrations involving party-appointed arbitrators. Any party-designated arbitrator who does, in fact, learn which party appointed him or her should disclose that fact to each of the parties and the other members of the Tribunal in order to ensure a level playing field. In the event an arbitrator discovers who appointed him or her, such knowledge would not be a basis for disqualification or challenge per se, and the arbitration can continue uninterrupted on a non-screened basis.

The Screened Selection Process is just one of the many tools CPR makes available to its users to customize an arbitration process that works best for the parties involved. If you have any questions about the Screened Selection Process or any other aspect of CPR’s rules, please contact Helena Erickson at herickson@cpradr.org.

Interview: Users Respond to CPR’s New International Rules – Most surprising and valued reported features

InternationalRulesSlimJimCPR recently launched a new set of Rules for Administered Arbitration of International Disputes for use in cross-border business transactions. These new Rules reflect best practices, including the arbitration work of UNCITRAL, and address current issues in international arbitration, such as arbitrator impartiality, lengthy time frames to reach resolution, burdensome and unpredictable administrative costs and requirements. To celebrate their release, and introduce them across the globe, CPR held a series of well-attended launch events in London, Paris, Miami, Geneva, Madrid, Brazil and Washington, DC.

CPR’s newest event takes a deeper dive into one of the Rules’ most buzzed-about aspects, the Screened Selection Process for Party-Appointed Arbitrators ™. Responding to the need to both preserve the right of the parties to appoint their arbitrators and guarantee the fairness and impartiality of arbitration, the Screened Selection Process ™ is available under the new CPR Arbitration Rules, and will be discussed from the perspectives of the users, outside counsel and arbitrators on July 30, 2015 at Jenner & Block in Chicago and via live webcast.

Olivier P. AndreToday, we sat down with CPR’s Olivier André, Vice President, International and Dispute Resolution Services, for a recap of the launch events and a preview into our upcoming event.

To begin, could you provide a quick recap of CPR’s recent launch events celebrating the new rules? 

Over the past few months, we have organized eight events to celebrate the launch of the new CPR Rules for Administered Arbitration of International Disputes.  At each of these events, panelists discussed the key benefits and innovations of the rules from different perspectives – the corporate counsel, arbitration practitioner, arbitrator, and institutional perspectives.   The events were well attended and, whether they were held in the US, Europe or Brazil, they triggered a lot of interest.

What were some of the most memorable responses you received about the rules, either at the launch events or otherwise. What are people most surprised about, thrilled about, etc.?  

The new rules triggered a lot of interest because attendees felt that they really address many of the criticisms we currently hear about arbitration, such as high costs, lengthy timeframes, and bureaucratic administration of the proceedings.   With the new rules, CPR provides only the services that are necessary from an administering institution, and no more.  Thus, CPR gets involved at the very beginning – at the commencement and arbitrator appointment stages – and at the end – to provide a “light” review of the awards and to issue them.

In between, CPR handles all billing aspects, but lets the tribunal interface directly with the parties on all other matters.  All pleadings and filings to CPR are in electronic format only.  As a result of this “lean administration,” CPR is able to offer a very competitive schedule of administrative costs.  Administrative costs are capped at US$34,000 for disputes over US$500 million.   At a time when all companies are trying to contain the costs of dispute resolution – and where smaller companies simply cannot afford an expensive dispute resolution process – that was particularly appealing.

Another feature which triggered a lot interest is the provision under the rules for the issuing of the award within 12 months of the constitution of the tribunal.  Very often, users of arbitration have had terrible experiences of proceedings that lasted longer than court proceedings, when arbitration is supposed to offer a fast dispute resolution process.  The CPR rules require all actors of an arbitration to use their best efforts to comply with this time requirement.  Any scheduling order or extension from the tribunal that would result in extending this timeline must be approved by CPR.  Such extension requests are not new, but what was interesting to the attendees of these events was the fact that these approvals are not automatic.  Whenever such an approval is requested, CPR can convene all involved in the arbitration to discuss the factors that have led to the extension request.  This mechanism increases the accountability of all actors of the arbitral process while asking them to comply with a reasonable timeframe.   I say reasonable because historically the average length of CPR cases is a little over 11 months.

Finally, there was a lot of interest – particularly from the corporate counsel – for the provision in the rules which encourages the arbitral tribunal to propose settlement and assist the parties in initiating mediation at any stage of the arbitration proceedings.

CPR’s event in Chicago delves deeper into one of the most unique and valued features of the rules—the screened selection process. What were the challenges that necessitated this specific Rules feature? How did we address those challenges? What have responses from users of the new rules been like on this point in particular?  

Arbitrator selection is a key phase of any arbitration and getting qualified arbitrators appointed for a particular dispute is critical to ensure smooth proceedings.  The ability for the parties to choose their decision makers is also one of the main advantages of arbitration.  The CPR rules offer many options that arbitration users can choose from in their arbitration clause depending on the specific nature of the disputes they anticipate.  The bottom line is that they have the ability – and are encouraged – to really control the arbitrator selection process.

One of the options provided is called the CPR Screened Selection Process ™ for party-appointed arbitrators.  That process – which is unique to CPR arbitration rules – enables each party to choose their “party-appointed” arbitrators without them knowing which party has designated them.  CPR acts as a screen between the parties and their candidates.  This is an interesting process because, even though all arbitrators under CPR Rules must be impartial and independent, there can be some degree of ambiguity around the role that a party-appointed arbitrator is supposed to play.  This selection offers the parties the ability to choose their arbitrators while, at the same time, removing that ambiguity and changing the working dynamics among the members of a tribunal.

Olivier André is CPR’s Vice President, International and Dispute Resolution Services. In this capacity, Mr. André is responsible for CPR’s international activities, as well as international arbitration and mediation matters which are brought before CPR pursuant to its rules. He can be reached at oandre@cpradr.org. For Mr. André’s full bio, click here.