Commercial Arbitration Can be Better than Court

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“The definition of insanity is doing the same thing over and over and expecting different results.”

That sentence has been attributed to Albert Einstein, Mark Twain and others. Whoever said it has a point that applies to commercial dispute resolution.

Developed countries have very complicated rules to resolve commercial disputes in courts. In Canada there are formal statements of claim and defence, counterclaims and third-party claims. We exchange sworn affidavits listing all relevant documents, and produce copies of them to everyone in the lawsuit. Then it’s on to formal examinations for discovery (depositions) under oath, usually the preparation of expert reports, and eventually a trial and perhaps an appeal. And all along the way, there are motions when the lawyers disagree.

Too often, cases are settled before they have a chance to be decided by a judge on the merits.

And all of this is expensive and time-consuming, not to mention distracting and sometimes frustrating for businesses. So it makes sense to try to make things shorter and less expensive but at the same time, fair. Fair, meaning that litigants have to have a reasonable opportunity to gather evidence and then present a case.

What about commercial arbitration? Can it be shorter, less expensive and still fair? Yes it can.

But often it’s not. Sometimes that’s because when arbitration is selected by commercial parties, they (or their legal counsel) may, instinctively, simply adopt the same rules that are used in court litigation to apply to the arbitration. Literally, parties often agree in Ontario that the arbitration will include document production, oral examinations and other steps in accordance with the Ontario Rules of Civil Procedure.

Doing so admittedly can have great benefits: legal counsel and the tribunal (which often includes a retired judge) are comfortable with those rules, there is a body of case law interpreting the rules and there is a balance between the interests of the claimant (plaintiff) and the respondent (defendant) that lends itself to procedural fairness before trial.

But incorporating the usual rules applicable to court litigation also means that at least one central benefit of commercial arbitration can be lost.

That benefit is better control of the process.

Commercial arbitration is by definition controlled by the parties and the arbitral tribunal. They make and enforce the rules. The trick is to take that control and use it wisely. Some rules can come from applicable legislation but the stuff that is really expensive and time-consuming is mostly within the control of the parties and the tribunal. To ignore the opportunity to take better control is to expect a different result by repeating the same thing you and so many others have done before.

In my next Thought Network post, I’ll discuss some ways to use that control that help achieve better results using commercial arbitration.