CPR Rules

Video Simulation Highlights the Need for a New Deal Point: The Prevention Neutral

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By Amy Foust

A March 4 New York Law School Alternative Dispute Resolution Program presentation focused on the work of CPR’s Dispute Prevention Committee, centering on recognizing the inevitability of disagreements in complex business relationships, and the value of working to prevent problems from festering into conflict and formal disputes.

The program, “No Need to Resolve if You Can Prevent,” opened with moderator Noah Hanft, of New York consulting firm AcumenADR, noting that mediation was rare just a few decades ago, but is now common or even required in many jurisdictions.  He expressed confidence that dispute prevention, although unusual today, will be a part of ADR’s future.

Hanft, who was CPR’s president and CEO from 2014-2019, co-chairs the CPR Dispute Prevention Committee with Gregory S. Gallopoulos of General Dynamics Corp., in Falls Church, Va. The committee has worked with CPR to develop a dispute prevention panel of professionals to assist companies in developing techniques and processes to head off conflicts, and Model Dispute Prevention and Resolution Provisions. 

The model provisions assist with the appointment of a standing neutral for significant transactions, such as joint ventures where the parties envision a long-term relationship; a standby neutral, who is ready to step in but is not necessarily involved in regular meetings; or an agreement, without the appointment of a neutral, to work to recognize and resolve friction before it evolves into conflict.

CPR also offers a new Dispute Prevention Pledge for Business Relationships (it can be viewed and signed here) to recognize the importance of addressing conflict. The Pledge allows for contracting parties to incorporate dispute prevention mechanisms into business arrangements, such as the prompt identification of escalating conflicts or the appointment of a third-party neutral who will be engaged before disputes emerge.

Noting that the failure rate for joint ventures might be as high as 60%, the panel used portions of  a video from a January dispute prevention simulation at the CPR Annual Meeting to discuss how dispute prevention might work in a complex business scenario, with several of the #CPRAM21 presenters returning for analysis at the NYLS program. 

The video follows a hypothetical joint venture of two auto companies seeking to build a network of electric car charging stations. The scenario envisions perfunctory quarterly meetings, with increasing departures from projected results.  In one version of the scenario, there is no early intervention.  The failures lead to finger pointing and blaming.  Mediation fails, and the case goes to arbitration.

In a second scenario, a neutral attends meetings, and calls attention to the pattern of falling revenues before the parties have expressly addressed them.  Recognizing this as a likely source of future conflict, the neutral facilitates a conversation about the significance and causes of the departure from plan—a “constructive framework” for review. The parties work on a joint plan to revise the course of the deal or terminate the joint venture before a dispute emerges. 

The video segments also addressed overcoming objections to adding a dispute prevention clause to an agreement, distinguishing dispute prevention from a routine dispute resolution clause.  One mock negotiator dismissively described the appointment of a standing neutral as “like marriage counseling.” 

But panelist Deborah Hylton, a neutral who heads her own Durham, N.C., firm and who also played the role of the standing neutral in the CPR video, described the neutral’s role as more “guiding and facilitative,” akin to “an honest broker.”  She said the neutral can call out “the 500-pound. gorilla” neither side felt that it could address “for fear of signaling a weakness.” She described the value of the neutral’s ability to raise difficult issues.

Panelist Kimberly Maney, assistant general counsel at pharmaceutical manufacturer GlaxoSmithKline, based in Durham, N.C., spoke to the familiarity of the hypothetical scenario.  These relationships start in a great place, she said, but then “something goes not quite right,” and the relationship “moves to a scorched-earth posture.” 

Her business partners, Maney offered, would be happy to have a better option for managing conflict than burning the relationship to the ground.  Dispute prevention is helpful in allowing the parties to have a disagreement but still maintain a relationship, she noted.

Panelist Steven Bierman, a New York-based partner in Sidley Austin, noted that outside counsel and litigators are ultimately problem-solvers.  One way to help clients, he said, is to litigate or arbitrate a case, but another is to help clients anticipate problems and avoid litigation.  There will always be disputes to be litigated, Bierman said–if not this one, the next one.

In responding to audience questions, the panel encouraged counsel to engage the business executives involved in a large transaction in crafting a dispute resolution clause appropriate to the relationship the parties seek to establish. 

This is too important, Moderator Noah Hanft said, to be left to the lawyers.  Using ADR provisions as boilerplate copied from one agreement to the next is likely inadequate.  ADR clauses typically address how to resolve disputes, not how to manage the relationship to prevent disputes.

Furthermore, because the dispute prevention and resolution clauses govern the relationship, what worked in a prior relationship might not be in the best interests of a new relationship.  The best time to address these issues is at the outset, when everyone is on good terms. 

The program, hosted by NYLS ADR Skills Program Director F. Peter Phillips, is available at the program’s link above.  The CPR Institute has a web page devoted to the program, too, and it includes the video, here. Panelist Deborah Hylton also posted an article that expands on the Annual Meeting and NYLS programs that can be found here.

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Author Amy Foust is an LLM candidate studying dispute resolution at the Straus Institute, Caruso School of Law at Malibu, Calif.’s Pepperdine University, and an intern with the CPR Institute through Spring 2021.

[END]

#CPRAM21: Committing to More Diversity in ADR

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If you missed the 2021 CPR Annual Meeting in January—the first free public meeting held online in the organization’s 40-year history—the videos are being posted on CPR’s YouTube Channel. While additional videos will be posted for CPR members only, the first, linked here on CPR Speaks, is open access and features the keynoters, CNN Anchor and Chief Political Correspondent Dana Bash and General James Mattis, who is former U.S. Defense Secretary. Click the Subscribe button at YouTube for alerts and for more CPR content. For information on full access and joining CPR, please visit CPR’s Membership webpage here.

By Amy Foust

The CPR 2021 Annual Meeting’s final panel presentation encouraged participants to take action for a more equitable alternative dispute resolution community, and focused on CPR’s Diversity Commitment. 

The Jan. 29 third-day panel was hosted and moderated by CPR’s Anna M. Hershenberg, who is Vice President of Programs and Public Policy, as well as CPR’s Corporate Counsel.

The discussion, “Time To Move The Needle! CPR’s Diversity Commitment and Model Clause–and How to Track for Accountability,” included panelists

  • Hannah Sholl, Senior Counsel, Global Litigation & Competition at Visa Inc.;
  • Brenda Carr, Chief Diversity & Inclusion Officer at Arnold & Porter Kaye Scholer in Washington, D.C.;
  • Tim Hopkins, a senior consultant at McKinley Advisors, also in Washington; and
  • Linda Klein, a partner in the Atlanta office of Baker, Donelson, Bearman, Caldwell & Berkowitz.

The panel offered insights, simple practice changes, neutral selection templates, and diversity tracking tools for promoting diverse ADR panels.

Moderator Hershenberg kicked off the presentation with a poll of attendees, which asked, “What is the number one reason holding you back from selecting a diverse arbitrator or mediator for your matters?” The most popular answer, with 26% of the audience, was “I’m too nervous to select a neutral I don’t know or who my colleagues haven’t recommended.”

Hershenberg also reviewed the requirements under the CPR Diversity Commitment, including recruiting and hiring diverse neutrals.  She noted early Commitment adopters, including  Baker Donelson, ConocoPhillips Co., KPMG LLP, Shell Group, and Visa, among many others.  (Companies and law firms may sign the commitment on CPR’s website at www.cpradr.org/about/diversity-commitment.) Hannah Sholl discussed Visa’s process of managing diversity in light of adopting and signing the commitment.

These efforts, of course, raise the question of why practitioners don’t know more diverse neutrals.  Linda Klein, acknowledging research into affinity bias, said that in ADR, “the parties choose their judges, the arbitrators, and most people are comfortable with people who come from similar backgrounds.” 

Klein recommended applying the Mansfield Rule, which suggests ensuring that any slate of candidates includes at least 30% candidates who self-identify as diverse in some way. See, e.g., Homer C. La Rue, “A Call—and a Blueprint—for Change,” Dispute Resolution Magazine (Feb. 17 (available at http://bit.ly/2ZZ3zvJ).

The panel agreed that an easy way to identify diverse candidates is to request a slate from an institution like CPR, which strives to include diverse candidates.  Klein suggested that it is appropriate to complain if an institution provides a slate that is not diverse, and to request a substitute slate that includes a significant number of diverse candidates. 

The panel agreed that it might be helpful to reach beyond customary contacts to seek input on a neutral, but noted that inclusion on a provider institution panel alone is an indication that the proposed neutral has been vetted.

The audience and the panel repeatedly noted a variety of resources available to identify and research diverse candidates in addition to CPR Dispute Resolution, including the National Bar Association, the Metropolitan Black Bar Association, the African Arbitration Association, the American Bar Association, JAMS, Arbitral Women, the American Arbitration Association, and REAL-Racial Equality for Arbitration Lawyers.  The panel also provided extensive advice for potential neutrals on entering the field and for current neutrals on increasing their exposure and, ultimately, appointments.

Tim Hopkins and others noted that it can be helpful to sign the CPR Diversity Commitment or a comparable business pledge, and then checking to see if other parties to the dispute have signed similar diversity or corporate pledges.  It might be easier to convince other stakeholders to enlist an unfamiliar neutral if they have made a commitment to advance diversity–especially a specific commitment to advance diversity in ADR.

A simple, practical tip the panel provided was adding diverse neutrals clauses to organizations’ standard contract templates, so that there is a default to require specifically a diverse slate. There also was consensus that those clauses rarely generate mark-ups or controversy, and putting them in a template makes it that much more likely they will be added to a draft agreement. CPR provides a model clause that calls for at least one member of a tripartite panel to be diverse. (See link above.)

Other easy, low-cost tips, according to the panel, included praising diverse neutrals, so that their skills are recognized; confronting bias when it arises (e.g., statements like “Are you sure she can handle a $100 million case?”); including diverse neutrals in recommendations to rating services and providers; and, especially with travel restrictions in view of Covid-19 reducing the cost of attendance at virtual hearings, providing exposure by including diverse attorneys in ADR activities so that they are developing the required skills.

Attendee comments presaged the importance of measuring progress, and the panel agreed with the audience comments. Linda Klein proposed setting up a table of neutral qualifications before preparing a candidates’ list to facilitate an impartial selection process.

Brenda Carr presented a spreadsheet for tracking not only the panelists’ individual talents, but also the composition of the slates for those panels, and which candidates were selected.  Carr explained that tracking progress also helps to identify roadblocks—it allows advocates and parties to “have the conversations if you’re presenting a particular arbitrator as a possibility and you notice that the client is constantly turning them down. Maybe you want to follow up and have a conversation about why this person isn’t someone that you are ultimately selecting.” 

Looking at the tracking programs presented by the law firm representatives, Visa in-house counsel Hannah Sholl said that seeing this kind of work, presented in this way, “speaks a lot, and perhaps even more sometimes than … filling in the boxes and the ABA Diversity Commitment  [see https://bit.ly/3sGQ3tc]. You know . . . the firm [that] is tracking this cares about it, . . . is going through a process . . . and they have had a commitment.”

Overall, the panel agreed that the important thing was to start: Whether by signing a diversity commitment or tracking ADR diversity in just one department or working group, that first step is important.

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The author is an LLM candidate studying dispute resolution at the Straus Institute, Caruso School of Law at Malibu, Calif.’s Pepperdine University, and an intern with the CPR Institute through Spring 2021.

[END]

#CPRAM21: Managing Workplace Conflicts, On-site and Remote

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If you missed the 2021 CPR Annual Meeting in January—the first free public meeting held online in the organization’s 40-year history—the videos are being posted on CPR’s YouTube Channel. While additional videos will be posted for CPR members only, the first, linked here on CPR Speaks, is open access and features the keynoters, CNN Anchor and Chief Political Correspondent Dana Bash and General James Mattis, who is former U.S. Defense Secretary. Click the Subscribe button at YouTube for alerts and for more CPR content. For information on full access and joining CPR, please visit CPR’s Membership webpage here.

By Antranik Chekemian

Kimberley Lunetta, who represents management in employment matters as of counsel at Morgan Lewis & Bockius, moderated a third-day CPR Annual Meeting panel on state-of-the-art best practices for addressing and resolving workplace disputes. The panel mainly concentrated on managing employees and disputes in the current remote environment, and how to set up an ADR program in order to prevent and resolve conflicts.

The Jan. 29 session included four panelists:

  • Alfred G. Feliu, who heads his own New York firm, is a longtime panelist for CPR Dispute Resolution and the American Arbitration Association’s commercial and employment arbitration and mediation panels. He is past chair of the New York State Bar Association’s Labor and Employment Law Section and a fellow of the College of Commercial Arbitrators and the College of Labor and Employment Lawyers.
  • Wayne Outten is chair and founder of New York’s Outten & Golden LLP, which focuses on representing employees. He has represented employees for more than 40 years as a litigator. He has long advocated for using mediation in employment disputes. His practice focuses on problem solving, negotiating, and counseling on behalf of employees.
  • Cheryl M. Manley is a veteran labor employment attorney with more than 25 years of  experience, and since 2005 has been at Charter Communications, where she is senior vice president and associate general counsel of employment law, leading the broadband/cable operator’s Employment Law Group.
  • Andrew J. Weissler is a partner in the labor and employment group of Husch Blackwell. He is a member of the firm’s virtual office, the Link, based in Bloomington, Ill. Weissler advises and represents public and private clients on workplace issues involving difficult personnel decisions.

Feliu and Outten are on a subcommittee of CPR’s Employment Disputes Committee that is working on a model workplace disputes program, along with a new version of CPR’s Employment Dispute Arbitration Procedure to be issued soon.

A poll conducted at the beginning of the panel showed that remote working was new for most of the participants.

Lunetta launched the discussion by asking Feliu about the threshold questions employers should ask themselves when considering an ADR program.

If the principal goal is avoiding litigation, responded Feliu, then employers “are really focusing on processing existing or incipient claims.” As a result, he said, employers “are going to focus more on arbitration–on ending up with a process that brings an ultimate result.”

But if the employer’s goal is more on problem solving and identifying tensions before they become disputes and the employer views conflict resolution as a strategic imperative, then the alternative approach of problem-solving should be embraced, he said. Here, the focus is different than pure litigation avoidance. Said Feliu, “Litigation avoidance or reduction of legal costs will be part–will be an effect, hopefully–of the problem-solving process but wouldn’t necessarily be the goal.”

This approach would also help the organization become more competitive, he said–to work more constructively and efficiently while, as an after-effect, avoiding litigation.

Feliu explained, “How do you do this? You do this is by opening up lines of communication, by necessarily undercutting to a certain extent the chain of command. You’re empowering employees to come forward with their disputes at whatever level and whatever the nature. And by doing that, you are creating a different kind of an organization that is less hierarchical, less structured, and more fluid.”

Wayne Outten added that ADR is ideal for workplace disputes. Because there already is an important relationship between both sides and the relationship is typically continuing, said Outten, it “is a perfect place for identifying problems and solving them early on.” He then presented two approaches that companies can embrace for dispute resolution procedures, the legal mentality and the human resources mentality.

The legal mentality, said Outten, is, “Let’s find a way to avoid lawsuits and to maximize the chances that we will win them with the least possible costs.” He said the HR approach is better, with goals of making employees happy and providing an environment where workers can be productive and focus on their jobs in an effective and efficient manner.

With the HR approach, Outten said, a program should start identifying problems at the earliest possible stage. “If a problem ripens into a dispute,” he said, the goal is “resolving the dispute in the simplest, quickest way possible and escalating only as and when you need to.” The HR approach also serves the lawyers’ perspective as it “tends to avoid disputes ripening into the possibility of litigation.”

Lunetta then asked the panelists whether having employees working from home in a number of states, possibly new states to the company, would affect the design of an ADR program.

Al Feliu responded that working from home would not alter or change the program itself, but it increases and amplifies “the need for it to be enforceable across 50 states and 50 jurisdictions.”

Wayne Outten discussed some of the positive and negative changes regarding the nature of workplace disputes that come with remote working. On one hand, the kind of disputes that arise from being in the same place, and having interpersonal reactions, presumably will be reduced with the increase in virtual offices, such as sexual harassment claims and bullying.

“On the other hand,” he said, “the opportunities for disputes are exacerbated because you don’t have as much free-flowing communication, and the ability to address things face to face.” Outten added, “Disputes may fester.”

From the management-side perspective, Husch Blackwell’s A.J. Weissler noted that the HR model Outten mentioned “has changed quite a bit in this remote work environment.” If the employees are typically working remotely, then having difficult conversations over the Internet should be acceptable, he said.  

But if a human resources or corporate employee is working from home while the business has essential workers who have been going to the employer’s worksite, then, says Weissler, “there’s a real disconnect there” that can make the on-site workers feel and sense that the employer is not in touch with the employee.

Moderator Kimberley Lunetta then asked panelists whether CPR has resources that can help employers think through these issues if they are considering any of the dispute resolution options that were discussed.

Outten said that this was the reason for CPR to be founded decades ago, with the goal of helping companies figure out how to avoid and resolve disputes.

Outten announced that CPR and its Employment Disputes Committee will be publishing a new set of rules for administered employment dispute resolution.  Accompanying the rules will include “draft programs that companies can adopt and adapt for their own use, which have within them the various different stages that employers can consider […] including things . . . [like] informal dispute resolution and problem solving, . . . open-door policies that invite people to take their problems up the chain of command,” ombudspersons, peer review processes and “all the way up to mediation which . . . is perfectly suited for employment disputes of all kinds.”

The conversation then revolved around the pluses and minuses for an employer of establishing a mandatory arbitration program.

“In reaching the decision that our arbitration program was going to be mandatory,” responded Charter Communications’ Cheryl Manley, “one of the factors that went into play was either reducing the litigation costs, or perhaps not having to deal with court litigation.” She mentioned that her company’s program was built to resolve issues in a timely manner and on an individualized basis.

She further added that her organization has many steps before getting to the arbitration phase to resolve the employment issue. And “when it finally does get to arbitration, we believe that there’s some certainty,” said Manley, “We believe that both parties have some skin in the game, in terms of selecting the arbitrator and primarily, it’s cost effective and efficient.”

Outten then answered a question about CPR’s employment ADR program and how it can help employers not only set up, but also ensure long-term success.

Outten reiterated the program’s strength in early-stage problem solving and early dispute resolution, and added that the program offers room for flexibility and adaptability in different workplaces.

Mediation with a third-party facilitator, he said, “can be extremely valuable and beneficial. It gives the parties an opportunity to air their grievances.” When it comes to arbitration, he said, every successful workplace ADR program really needs to comply “at a minimum,” with due process protocols.”

He then presented several key features of the due process protections (which CPR has adopted here), which include:

  • “The employee isn’t required to pay more than they would pay if they were going to file in court.”
  • “The arbitrator has the authority and power to provide any remedy that a court can provide so that there’s no takeaway of remedies for the affected employee.”
  • “The employee has a fair opportunity to pick the decision maker–the arbitrator–especially given the binding power of the decision of this person to resolve the dispute.”
  • “The employee has to have a full and fair opportunity to gather information in order to present the case and . . . [any] defenses.”
  • “The employee needs to have an opportunity to have counsel of his or her choosing.”
  • “The hearing itself should be reasonably convenient . . .  so the employee doesn’t have to go a long distance to have his or her day in court.”
  • Finally, “the arbitration should end with a reasoned decision, so the parties know what the arbitrator took into account, what the findings were on the evidence, and what the legal conclusions were in determining” the decision.

A.J. Weissler added that “there are great legal reasons” not to “cram down” arbitration in a workplace disputes program, citing fairness. He said that arbitrator selection is an important factor in presenting a fair process, with a say for the employees.

Al Feliu noted that there is a dearth of diverse panelists, but major providers have made strides and continue to work on the problem to enhance and ensure fairness.

Cheryl Manley agreed with the comments, and emphasized that panelists need to reflect the workplace population.

Manley discussed Charter Communication’s Solution Channel, which she described as a 2017 program to compel arbitration use—a mandatory program for newly signed-on employees, with about 10% of the company’s 90,000 employees opting out when it was launched.  She reported that the complaints are restricted to legal claims—non-legal disputes are addressed in other ways–that are submitted through a third-party vendor which create a record over the claim. She said the American Arbitration Association is the provider.  The company absorbs the AAA filing fees and the arbitrator costs. If either side is unsatisfied with the panel, they return to the AAA for more choices.

Weissler says arbitration should be part of any dispute resolution system but if it’s made mandatory and employees are forced to use it, he said, it is counterproductive and it creates problems going forward due to the “asymmetrical” views.

Weissler said he encourages mediation as a best option. He said he is skeptical of programs that outline steps that do not allow a course of mediation to be developed.

Feliu says he has been mediating for 30 years and familiarity has grown during his period of practice after skepticism.  He agreed with Weissler’s points, but noted that mandatory mediation in New York federal court, where he said he would have expected resistance—mandatory is counterintuitive, said Feliu—it has been just as successful as voluntary mediation over about the past 10 years.

Feliu said sometimes there is grumbling but mostly, when parties get to the bargaining table, they try to settle. And he said that while joint sessions are fading, flexibility is needed.  “Every mediation is different,” he said.

Wayne Outten said that he shared Al Feliu’s experience.  In the mid-1980s, he said, the plaintiffs’ bar “viewed this newfangled process as a conspiracy to take away their rights, and I soon discovered that was not necessarily the case and became a big advocate.”

Over the past 35 years, said Outten, mediation “has become quite normal.” He echoed Feliu again,  noting that when parties attempt mediation in good faith, it is successful.

Even in situations with a lot of open issues, he said, mediation “has a very high success rate, . . .  and is always worth trying.”

Cheryl Manley said that pre-pandemic, her company didn’t want anything done virtually or remotely—all depositions, mediations and arbitration hearings were done in person, exclusively.  The change was swift, she said. “Fast forward seven, eight, nine months, . . . when we finally emerge from this pandemic, we aren’t going to go back to all depositions in person, all mediations in person or hearings,” said Manley, adding, “In fact, I think that there is no reason . . . to start putting people back on planes traveling all over the country.  It is expensive. It’s time consuming.  And it is not efficient. “ She said that the “only issues” are “the occasional technological” problems.

A.J. Weissler said he has participated in virtual matters frequently during the pandemic, and found “an incredible benefit.” Having the people resources ready on video, whether from home or for those back in their offices, has “been an incredible thing,” he said, adding that he strongly supports virtual mediations.

Wayne Outten said he always has had a concern whether real decision makers would be in the mediation room.  “Now with virtual mediations,” he said, “that problem can be more readily addressed.”

Al Feliu said he has only done virtual mediations since his first in March.  “All of the impediments, and all of the arguments against them, have been rebuffed, “ he said. For example, he explained, he can evaluate credibility better on close-up video than across a bargaining table.

Feliu conceded that there is a different feel in an in-person gathering where people have committed to the process.  That intensity, he said, isn’t present where people are sitting on their couches, are more relaxed, with their dogs nearby.  “It’s just a different process,” he said.  “I don’t have the shrieking episodes. I don’t have a lot of emotions.  Is it good or bad? It’s just different.”

The result, he said, has been that he isn’t settling cases on the first day as much as he did at in-person mediations.

Addressing audience questions, Al Feliu said he discusses confidentiality with the parties with heightened concerns, noting that a potentially serious issue could be where extra people are present, and not visible on screen, as well as individuals texting on the side. “These are all serious concerns we need to get equilibrium on” going into the mediation, he said.

* * *

The author, a second-year student at New York’s Benjamin N. Cardozo School of Law, is a CPR 2021 intern. Alternatives editor Russ Bleemer contributed writing and research to this report.

[END]

A Letter from CPR President & CEO, Allen Waxman

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It has been a month since my last update to you, and certainly much has happened during this strange and challenging time. I hope that you are finding ways to tend, not only to the health of your businesses and professional lives, but also to yourselves personally. While honoring our responsibilities to our companies and clients/customers, I believe it is of paramount importance during this time also to be gentle with ourselves and each other. If it feels difficult, it is because it is difficult! We are trying to take the same counsel at CPR.  Our staff has all been working remotely, and finding ways to connect with each other over diverse platforms.  I now know the look of the kitchens, living rooms or guest rooms of each of my colleagues.  That takes us to a whole new level!

At the same time, I am so very proud of our staff in being true to our mission – managing conflict to enable purpose.  We have continued to offer insightful programming on how to prevent and resolve disputes most effectively during this time while also providing our dispute resolution services.  Your engagement and support (financial and otherwise) for us is more important than ever to enable us to pursue our mission.  Thank you.

I thought I would take this opportunity to review with you some of our activities over the last month.

CPR DISPUTE RESOLUTION REMAINS OPEN FOR BUSINESS

CPR Dispute Resolution continues to operate seamlessly, offering our full suite of dispute prevention and resolution services. Given the backlog in the courts, the time for ADR is now.  DRS’ services, rules and protocols, and Panel of Distinguished Neutrals can help resolve matters efficiently and effectively.

Arbitration – For parties in disputes during COVID-19, you may want to consider converting a pending court case to a CPR Administered Arbitration, or entering (with the other party) into an arbitration clause more appropriate under the circumstances. In both cases, you will need to enter into an arbitration submission agreement with your counterparty. Model language for doing so can be found HERE.

Mediation –CPR’s Mediation Services are also available to assist businesses in these difficult times. You can find more information on these services HERE. In addition, CPR has just announced the upcoming launch of a new COVID-19 Flat Fee Mediation Program, in collaboration with Legal Innovators and FTI Consulting, to resolve disputes below $5 million. That program is being kicked off with a free May 13 webinar.

Dispute Prevention – We have launched a new Dispute Prevention Panel, comprised of neutrals who have the experience to facilitate resolution of a dispute before it becomes a legal conflict.  You can find more information HERE.

Because our offices remain closed, new filers should continue to submit electronically at cprneutrals@cpradr.org, and all payments should be made via credit card or wire transfer (please specify in your cover email how you would like to pay); paper filings cannot be accepted. To send files via Voltage encrypted email, please email herickson@cpradr.org to be authorized.

NEW PROGRAMMING

We recently hosted one of many programs that are part of our COVID-19-related focus, titled “Stability in the Pandemic: Personal, Professional and Global Targets.” This webinar featured renowned academics Lela Love, Professor of Law and Director of the Kukin Program for Conflict Resolution at Cardozo Law School, and Sukhsimranjit Singh, Assistant Professor of Law and Practice and Managing Director of the Straus Institute for Dispute Resolution at Pepperdine University Caruso School of Law. The speakers discussed holistic methods to approach conflict while social distancing, touching on key mediation strategies and self-care techniques to create a positive and conflict-free living and work space. A recording will be available soon and can be found in our “ADR in the Time of COVID-19” section, along with numerous other resources, HERE, and I encourage you to explore and check back often for updates.

SOCIAL DISTANCING – BUT STILL SURGING AHEAD ON ALL FRONTS

CPR continues to forge ahead and grow in numerous other ways I am delighted to share with you.

New Partnerships – CPR recently announced a strategic partnership with the International Association of Defense Counsel (IADC), through which IADC named CPR as a recommended ADR services provider. The IADC will be promoting CPR membership, DRS services, and arbitration and mediation rules to its 2,500 members, which in turn will gain access to valuable CPR benefits, resources and discounts, including CPR membership and other joint programming opportunities. And this collaboration is bearing almost immediate fruit, in the form of our upcoming joint webinar, “Resolving Legal Disputes in the Era of COVID-19.”

Support for Remote Video Arbitrations – Ever responsive to the changing legal landscape, CPR quickly convened a task force that created an Annotated Model Procedural Order for Remote Video Arbitration Proceedings. The model order puts into one, user-friendly document the best practices that the arbitration community needs to navigate remote video hearings. This new model procedure is a perfect example of what CPR can do and does regularly – harnessing the rich insights and vast experience of its membership to create timely and cutting-edge resources that both benefit users and enhance the capacity for ADR, in general.

The Drive for Diversity Continues – Since my last update, CPR also took a further step toward promoting diversity in alternative dispute resolution (ADR) by launching a new clause to be used by parties who wish to pre-commit to a diverse panel of neutrals in a future dispute to be resolved by arbitration. Read the full press release HERE.

New Data Security Resources – CPR continues to take steps to help parties and neutrals address the challenges of maintaining data and cybersecurity in ADR matters. In our new website section, you will find information relating to communicating with CPR on case-related matters, cybersecurity in arbitration and other ADR proceedings, data protection and the CPR online dispute resolution platform, as well as other technology tools and member discounts for e-filing services.

Networking for Neutrals – CPR has continued its role of providing service to the ADR community by convening three Neutrals Forums in different time zones to provide a space for the exchange of questions, learning and best practices for remote proceedings during the time of COVID-19. Participants were able to discuss issues that have arisen or are anticipated to arise in such proceedings such as the potential for witness coaching and the handling of exhibits during such procedures. The CPR Annotated Model Procedural Order was circulated to attendees and several of its provisions highlighted. Neutrals, please watch your email inbox for future invitations.

A RICH SCHEDULE OF UPCOMING PROGRAMMING

Our events calendar continues to be as relevant as it is robust. Upcoming virtual events include:

New events are scheduled regularly, so be sure to check our website Upcoming Events section regularly for new offerings.

STAY SAFE AND STAY STRONG

This has been a trying but also a productive time.  Keep engaging with us as we navigate this new normal together.  We in the CPR community are a resilient and resourceful bunch, and I am confident that, with generosity and patience, we will continue to overcome these challenges together.

As always, please let us know if you have any questions or concerns, or just let me know how you are doing. (Instead of hitting reply, please drop me a note at awaxman@cpradr.org to make sure I see your message quickly.)

Warm regards,

Allen Waxman

Membership Minute: A Treasure Trove of ADR Resources

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This posting is the second in an ongoing series written by Niki Borofsky, Vice President of Membership, focusing on CPR Members and ways to make the most of CPR Member Benefits.

For 40 years, CPR has been bringing together in-house counsel, outside attorneys, academics and neutrals to think creatively and forge new tools, better rules, and improved processes – all with the goal of making dispute resolution more cost effective, more efficient, and better for business in the long run.

As an independent, not-for-profit think tank and dispute resolution services provider, we have the unique ability to convene all stakeholders and pick the brains of experts from every perspective.

CPR’s corporate members bring the practical in-the-trenches advice on how they use ADR, law firm advocates speak from decades of practice in multiple jurisdictions, our neutrals illuminate what is integral to their decision-making processes, and academics inject research and theory into the equation. The result is a collection of products that have been vetted, approved and road tested by businesses and top practitioners.

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A Menu of Options for All Levels of Expertise

The fruits of CPR’s committees’ labors are available to members through our website. The first step is to register for our website (if you have not already done so). Once you are registered and logged in as a member, these time and money-saving tools are all at your disposal free of charge, so be sure to bookmark our Resource Center on your browser.

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Start with the basics.

Even if you are a master of dispute resolution yourself, there are likely other teams or lawyers in your organization who may benefit from learning the ropes. CPR’s resources can help you to bridge the gap and give you an excellent platform to share how important careful dispute resolution clause drafting is to sustaining a business relationship through difficult times. Having thoughtful contractual dispute resolution mechanisms in place is key should conflict arises, and these choices are made when drafting.

Hone in on industry-specific learning.

The classic lawyerly response to even the most straightforward question is often – “It depends.” And rightly so, different parties and diverging matters require special consideration. Thankfully, CPR has had the time, expertise and focus to explore a variety of ADR solutions that are tailored to particular industry challenges and constraints.

Resort to the Rules.

For corporations and practitioners, one of the most concrete and powerful resources CPR has to offer (not just to members, but to all parties) is the 2014 Rules for Administered Arbitration of International Disputes. These rules benefit from CPR’s emblematic multi-stakeholder engagement, and as a result encompass best practices and are streamlined, high-quality and cost effective.

Of course, the best wat to familiarize yourself with the Rules is by reading them, skimming their Key Features, and flipping through the Frequently Asked Questions. To whet your appetite, here are a few of the most talked-about features:

  • Screened Selection Process (Rule 5.4), which enables parties to appoint arbitrators without them knowing who chose them (winner of the 2016 GAR Innovation Award)
  • Default reasoned award requirement (Rule 15.2), enhancing enforceability and discouraging unprincipled “baby-splitting”

Parties also like to know that administration of all CPR cases is handled by qualified attorneys with multilingual skills (our staff speaks French, Portuguese and Spanish).

CPR has a lot to offer, and we are always happy to help guide you through our ADR resources – including scheduling a webinar or presentation for your organization on any of our rules, tools or services.

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Niki Borofsky can be reached at nborofsky@cpradr.org or 646.753.8225. 

Thoughts on Non-Administered Arbitration

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johnwelborn By

Non-administered arbitration (“NAA”) is an informal dispute resolution process designed to proceed without the involvement of a separate administering entity. The arbitrator and parties administer the proceedings.

The proceedings may be guided by a procedure the parties define, or the parties may agree to use institutional rules and procedures such as Rules for Non-Administered Arbitration published by the International Institute for “alternative” Conflict Prevention and Resolution (“CPR”). The objective is a dispute resolution process that is truly alternative – more efficient, flexible and expeditious than both adversarial litigation and formal administered arbitration.

I was recently an arbitrator in an NAA proceeding under the CPR Rules. This posting provides some of my reactions.

Avoid litigation in disguise

The effectiveness of the NAA alternative is only as good as the joint effort of all participants – the parties, their representatives and the arbitrator. Everyone involved in a non-administered arbitration proceeding must share the objective and make certain that the speed, flexibility and efficiency that the NAA process offers are realized and that the proceeding doesn’t devolve into litigation in disguise.

Parties who agree contractually to resolve their disputes in an NAA process seek a non-appealable, binding, just and fair result. That’s the low hanging fruit. Those contracting parties also deserve fruit higher up the tree – they deserve a dispute resolution proceeding that is focused, flexible, and less costly and time-consuming than formal administered arbitration or litigation. Everyone involved has an obligation to work to that end.

The approach

An important factor in meeting that obligation is how each participant approaches the NAA proceeding. Helena Tavares Erickson, a Senior Vice President at CPR, published an article on point some time ago (2006). Among her several valuable messages is the view that those involved must approach the dispute “as a problem to be solved, not a contest to be won.”

I agree. Contests to win are more expensive, more time consuming and less controllable than joint problem solving efforts. The benefits of an NAA proceeding are best realized in a problem solving context.

The schedule – agree and stick to it

As soon as the parties acknowledge the existence of a dispute to be arbitrated under NAA rules, they engage a mutually acceptable arbitrator. Then all concerned, including the arbitrator, should quickly (within days, not weeks or months) confer and agree to a date for a substantive hearing on the issues. This date should be written in stone, i.e., should be changed only (i) due to force majeure events and (ii) if and when not changing the date would mean genuine prejudice to a party.

The date should be realistic in terms of time needed for preparation. The original agreement which calls for dispute arbitration may provide unrealistic timing, e.g., 60 days to select and appoint an arbitrator and get to hearing on complicated factual/legal matters. It’s fine to override that prior agreement in the face of an actual dispute.

What shouldn’t be overridden is the clear intent of the parties to have the dispute heard and resolved quickly. Not getting to a substantive hearing on the merits of the dispute many months or more after arbitrator appointment is not the expeditious, economical dispute resolution process the parties originally bargained for.

Core issues – early identification and focus

Identification of the core issues in dispute, and early focus on those issues, can and should happen in arbitration, especially NAA. The flexibility to make this happen is a major advantage of the NAA process.

To get there, the parties and their representatives need to find the courage to work together to prioritize the factual and legal issues that comprise the dispute. This makes it possible to bring these core issues to the arbitrator for preliminary, non-binding review, or perhaps even for formal determination. Either way, the expertise of the arbitrator, the primary reason he/she was retained, is taken advantage of early on, and the possibility of mediation, or even settlement, of the entire dispute is increased.

If the parties and their representatives are reluctant to single out core issues for early scrutiny, the arbitrator should be ready to encourage them in that direction. The arbitrator needs to be sensitive to the time/cost value of bringing his/her expertise into the dispute in a constructive way early on.

This preliminary issue review requires two things:

1. Confidence on the part of the arbitrator — the ability to express a high level opinion (make a call) based on the experience and expertise that he/she is bringing to the table without first having to see every possible bit of data or hear every possible legal argument.
2. Parties and party representatives who are willing to listen and act on the arbitrator’s early stage opinion regardless of whether they agree that this preliminary arbitrator opinion is binding.

Atmosphere – informal, open

This is a challenge, especially for lawyers trained in the courtroom. I’m not suggesting that everyone arrive at each session in blue jeans and flip-flops. I am suggesting that the participants strive for an atmosphere that is conducive to problem solving, that fosters professionalism as well as mutual respect and friendliness, and that leaves room for important openness and listening.

For the parties and their representatives, this requires:

• Self-control in terms of what each participant brings to the table,
• Fewer motions and objections in response to what has been put on the table,
• The courage to make their own conscience-guided determinations of what is truly relevant and helpful to the effort, and
• Confidence that the arbitrator is good enough not to need formal motions in order to see every weakness in what has been presented.

For the arbitrator, this is about not letting evidentiary issues get in the way. Let your experience, judgment and expertise (the qualities that brought you to this proceeding in the first place) tell you what you don’t need to know or listen to in order to do your job.

The record – do we need one?

The reasons for making a record in a formal dispute resolution proceeding don’t exist in an NAA proceeding. There won’t be an appeal on the merits of the final award, so that’s not a reason. Preserving a possible challenge to the final award based on arbitrator conflict or bias is also not a valid reason for a record. The potential for such a challenge should be raised and resolved long before the proceeding commences. That leaves the possible need for a record for reference purposes for final briefing and arguments to the arbitrator, and the making of the record can be tailored to that need.

So, this is not to advocate that NAA proceedings not be recorded. I am suggesting that the participants first work together to determine why a record is needed. They should then tailor the making of the record to the identified need before engaging in the expense and the additional logistics of making a record of all evidentiary presentations.

CPR is a leading NAA advocate. Their website is a valuable tool for those interested.

In summary

• The benefits of an NAA proceeding are best realized in a flexible, problem solving context.
• The judicial process, the formal administered arbitration process, and all of the evidentiary and other rules and procedures that go along with those processes, are designed for win-lose contests. They don’t allow for the flexibility that is an important benefit of an NAA proceeding, and they cost money and consume time.
• Participants (parties, representatives and arbitrators) who are committed to the expediency and effectiveness of the NAA process must avoid engaging in litigation in disguise. They should welcome and take full advantage of the flexibility that comes from working together to solve a problem.

John F. (Jeff) Welborn is Special Counsel at Welborn Sullivan Meck & Tooley. He specializes in serving as a mediator/facilitator in disputes that involve (U.S. and international) oil and gas, mining or other natural resource matters.  He has almost 40 years of experience in oil & gas and mining transactions and matters, both in the U.S. and globally, in natural resource regulatory matters and in negotiating and drafting natural resource development agreements, financing arrangements, and conveyance documents.

Copyright (2016) John F. (Jeff) Welborn – Welborn Sullivan Meck & Tooley, P.C.  All Rights Reserved. This post originally appeared on the firm’s blog at http://www.wsmtlaw.com/ and is republished with permission.

Shall We Have an Adult Conversation About Legitimacy?

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[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

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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

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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

Avoiding and Resolving Information Technology Disputes (CPR Master Guide)

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By Meghna Talwar

The latest survey released by Queen Mary University of London, in collaboration with Pinsent Masons (“the Survey”), highlights the growth of ADR in Technology, Media and Telecommunications (TMT) disputes. The Survey records 67% of the total disputes which are IT related.

Foreshadowing this important development, in 2005, CPR’s IT Committee released its master guide titled “Avoiding and Resolving Information Technology Disputes” which provides detailed information about resolution of IT disputes with the help of ADR mechanisms. The master guide’s 7 chapters provide different methods for addressing IT disputes from avoiding them in the first place to resolving them by arbitration. The first chapter gives companies a head start to set things in place prior to dealing with external parties. The chapter provides cues on how companies can assess, prioritize and define their goals and identify the possibility of dispute in the long run in order to plan their resolution techniques right from the beginning.

Chart 5 of the Survey states that 61% of the disputes related to IT systems are caused due to delay. The survey also mentions that such delay may be caused due to several attributing factors rather than one cause. Chapter 2 of the master guide suggests practices which companies may adopt to avoid delay. The chapter which is titled “Avoiding Disconnect Between Negotiation and Implementation” describes ways in which companies can formulate healthy negotiations with other parties thereby building a strong working relation with them. The chapter also focuses on how parties can develop a good understanding of the project as well as their own interpersonal relations which could ultimately lead to limiting the risk of contracting any disputes.

While Chapter 2 discusses building strong relations, Chapter 3 encapsulates the technique of building a strong project foundation based on strong partnerships. The chapter highlights the advantage of building partnerships at an early stage and describes methods to sustain such partnerships once they are formed. Also, the chapter offers interesting suggestions on conducting workshops with stakeholders to create synergistic relationships.

Often guidelines are limited to dos and don’ts of a process which are purely theoretical in nature. However, Chapter 4 of the master guide carries out case study of an IT dispute which enables companies to understand the practical implications of the master guide. The case study is an interesting concoction of facts and analysis with suggestions from the IT professionals who comprised the CPR IT Committee. Thus, the master guide provides a well-rounded view of IT disputes and the complications involved therein.

The Survey states that 50% of the respondents prefer mediation followed by 47% who prefer arbitration. Hence, there is an earnest intention on the part of the companies to resolve disputes without resorting to courts. However, it would be effective to resolve disputes at a preliminary level. Chapter 5 of the master guide speaks about the use of hierarchical positions to defuse disputes at an early stage. The chapter also emphasis on the need for protecting stakeholders, thereby maintaining a dispute-free atmosphere.

Chapter 6 introduces the concept of appointing a standing neutral. The chapter describes a standing neutral as someone who is appointed as a neutral in advance of any conflict. The appointment of a standing neutral could save the parties a substantial amount of time and cost in a way that the parties would get neutral assistance immediately on detecting a dispute without having to search for it when the dispute arises.

It is understandable that in certain cases it is impossible to avoid disputes despite adopting prevention mechanisms. Proliferation of social media is an example of unavoidable disputes. The Survey recorded 93% disputes arising out of social media attacks and 54% disputes arising out of traditional media attack. Chapter 7 of the master guide describes the dispute resolution program which companies may adopt if avoidance strategies do not work. The Survey points out the importance of Dispute Resolution (DR) policies which companies adopt. It stated that only 25% of the respondent companies did not have a DR policy. Thus, Chapter 7 could be helpful for companies which fall within the 25% bracket and could give the remaining 75% some tips for improvement, if required. The chapter also introduces the CPR Rules on Expedited Technology Dispute Resolution which includes rules for both arbitration and mediation proceedings.

The CPR master guide was introduced long before the introduction of the Survey. However, from the Survey it is quite evident that the issues revolving around IT disputes that were discussed in the manual remain to be a cause of concern, even today. Hence, the master guide proves to be an effective tool for addressing such problems and acts as a catalyst to innovate and introduce mechanisms for resolving IT related disputes.

Meghna Talwar is a fall intern at CPR.

To order a copy of CPR’s Master Guide, “Avoiding and Resolving Information Technology Disputes,” click HERE. And be sure to browse our many other publications in The CPR Store HERE.