May 12, 2017

Arbitration – What is it and will it work?

No corporation enjoys legal disputes. Many people assume that a dispute will involve lawyers, great expense, great delay, unwanted publicity, frustration, and a real sense that they simply “won’t be heard”.

You can choose to go to trial, but you should always consider arbitration. The process will still be somewhat expensive, and it will still involve lawyers, but it will happen a lot more quickly than a trial, you will be a lot less frustrated, and you will be heard, because the “judge” will know your industry!

 

What is an arbitrator?

An arbitrator is a lawyer who has been trained to act as an arbitrator. In a sense, she or he is a judge. The advantages are that an arbitrator will be selected by the parties, and the lawyers   invariably pick someone who is well familiar with the issues at hand. Conversely, many judges are generalists, and for good and valid reasons may not be familiar with your particular type of industry, or the issue to be dealt with.

 

How do I get into arbitration?

It is important to engage in arbitration at the earliest possible time. Your supply contracts and the customer contract should all provide for arbitration. If there is no written agreement to submit to arbitration, both parties have to consent and you may find someone is not willing to do so.

 

What happens when arbitration starts?

You should hire a lawyer, and your lawyer should contact the lawyer for the other side. The arbitration clause should be engaged then you and your lawyer should review a list of possible arbitrators. Arbitrators are available through BC AMI or a number of other service providers. Since you are choosing your own “judge” your lawyer should take some time to select the best possible arbitrator; one who knows the nature of the industry, who is reasonably inexpensive, and one who is available as soon as it is possible to start the process.

 

What happens next?

The arbitrator will ask for a retainer “up-front” and she or he will arrange a pre-arbitration meeting. At the pre-arbitration meeting, everyone will agree as to how the arbitration will be conducted, who will be called to give evidence, how documents will be handled, and how any preliminary objections might be resolved.

 

The hearing

On the date set, which will likely be within six months of the arbitration being initiated, everybody goes to a particular room, the arbitration commences, documents are filed and people are sworn to give evidence – this means they will give oral testimony in response to their lawyer’s questions and will be cross-examined by the other side’s lawyer. The arbitrator may also ask questions.

Shortly after the hearing concludes, the arbitrator will make her or his “award” which is basically who wins, and sets out the reasons why the arbitrator’s decision has been made. The arbitrator will then render an account.

 

What happens afterwards?

Typically, the parties simply comply with the arbitrator’s award. If one party is reluctant to do so, an application can be made to court for a court order to enforce the arbitrator’s award.

 

Give me an example

Our firm was involved on behalf of a company that supplied industrial material. (This example is a composite of several cases, to protect confidentiality.)  After completing an extensive industrial site, they were having trouble getting paid and the owner of the property alleged that the work had not been properly completed. After several heated email exchanges, it also became apparent that the person who drew up the blueprints at the architect’s office may have made some errors. Everybody went to see their lawyers and it became obvious that a very lengthy trial might result which would likely cost each party $100,000 and take many years to resolve. This was going to be complicated. If the dispute became public – such as it would in the event of a court filing  –  a number of people were going to be embarrassed and probably unnecessarily so.

Fortunately, the supply contract provided for arbitration. As well, the three parties and their lawyers were fairly practical in their approach. An initial meeting was held between the lawyers only, and an arbitrator was chosen in downtown Vancouver. A preliminary meeting was held between the parties, including the insurance company for the architect, and an arbitration date was set to start in 180 days. A second preliminary meeting was held to narrow down the documents and to discuss whether expert witnesses were to be used.

The arbitration commenced, and the proceedings took four days. The arbitrator was an experienced commercial litigator who had in the past acted for both contractors and owners and who had experience with almost exactly the same sort of dispute. Everybody spoke the same language. The hearing was held in complete confidence. After 14 days, the arbitrator handed down her ruling. To no one’s surprise, not everybody got everything they wanted, but everyone was surprised about the knowledge that the arbitrator brought to the dispute and her very practical rulings. The parties agreed with the arbitrator’s decision and within 12 months of the dispute arising, the matter was completely resolved and everybody went back to work.

 

Interested? Call Jon Goheen at our firm if a dispute is pending. Call Scott Johnston of our firm to have an arbitration clause put into your standard contracts.