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ETHICAL AND PRACTICE QUESTIONS FOR COUNSEL AND ARBITRATORS

by

Kenneth Glasner, Q.C., C.Arb, C.Med., JJP

Copyright © All rights reserved by author April 22, 2010

TABLE OF CONTENTS

INTRODUCTION TO THE TOPIC

Ethical
1. Relating to morals, especially human conduct
2. Morally correct, honourable

(Concise Oxford Dictionary 9th edition)

Sir David Napley in, The Technique of Persuasion, states in the section titled, “The Ethics of Advocacy”, the following:

They are matters of fundamental commonsense when applied against the principle that it is the function of the advocate to assist the court to reach a just decision on the facts properly adduced before it in accordance with a correct interpretation of the law.

Good Faith

Certainly an advocate must never positively deceive the court; he must place before it all the information which the court is entitled to have; he must never state facts to the court which he believes to be untrue, and he must bring to the notice of the court every legal authority which his researches have revealed, even although they may be adverse to his client’s case.

In Pioneer Shipping Ltd. and another v BTP (The Nema):

To my mind, in the ordinary way, once the arbitrator has given his award, containing his interpretation of the clause, the judge should not give leave to appeal. Not even when a large sum of money is involved. For this reason. On such a clause, the arbitrator is just as likely to be right as the judge, probably more likely. Because he, with his expertise will interpret the clause in its commercial sense, whereas the judge, with no knowledge of the trade, may interpret the clause in its literal sense.

Lord Denning in Pioneering Shipping Ltd. and another v BTP (The Nema) [1980] 3 All ER p. 124.

THE LAWYER’S ROLE

The lawyer’s role in the arbitration is similar to the lawyer’s role in litigation; that is to say the lawyer is an identifier, selector, and marshaller of the evidence. In fact, one text describes the role of the litigators as that of historians and litigation largely a process of recreating historical facts. One needs only to look at the division of time spent on a case. The majority of time is spent gathering and presenting the evidence as opposed to gathering and arguing the law.

During the process of dispute resolution, the client and their counsel deal with the evaluation of risk taking. By risk taking I mean assessing a risk – namely, the cost if things go wrong and the probability of that occurring. If the cost is high, the probability must be minimized. If the cost is low, the probability may be allowed to increase according to the party’s personal assessment of "acceptable risk".

Risk are controlled by:

  1. The elimination of the risk.
  2. Eliminating activities that produce undue risk.
  3. Insuring for uncontrolled risk.
  4. The informed consent of the client.
  5. The establishment of standards, controls and regulations.

These factors come into play in any dispute either as a proactive or reactive procedure.

THE PROACTIVE ARBITRATOR - APPLYING MANAGEMENT PRINCIPLES TO ARBITRATION

By proactive, I mean active rather than passive conduct by the arbitrator.

The management skills required of an arbitrator are numerous. He or she is in fact not a “public” judge, while still having judge like powers, with the ability to bind the parties in a manner similar to that of a judge. They are in fact decision makers. At the end of the day when they act as decision maker in the arbitration process, one party will be happy and one party will be unhappy. It is important for the arbitrator to ensure that they write a decision that clearly explains to the unsuccessful party the reasons for the decision. If not, the arbitrator will be performing economic suicide.

There has been criticism by lawyers and their clients that the arbitrator fails to take a leading role in controlling the proceedings from the commencement to the completion of the arbitration. Such control, without arrogance, is I suggest required in most arbitrations. Generally counsel prefer an arbitrator who manages the whole hearing process so that decisions are made promptly, clearly and concisely. People like to win but when they don't win they need to know that the process was fair - procedural justice.

Arbitrators need confidence in their expertise and experience coupled with the working knowledge of business and management. One must remember that the arbitrator relies on the parties to perform his or her directions and orders so that the process works smoothly.

This process requires preplanning on the part of the arbitrator with substantial input from the parties or their counsel, or both; including deciding whether or not they are going to conform to a specific set of rules or adapt their own rules, or both. Other forms of appropriate dispute resolution may be used. For example, it is not uncommon in certain situations to use Med/Arb.

The structure and process should evolve and everyone should know what has to be done and who will be doing it and within what time frame. Throughout this process the arbitrator must have a clear idea of the necessary personal duties and responsibilities while retaining command of the proceedings. This form of discipline and control must be evident together with hopefully, a trace of humility and gentle humour.

The process may commence with correspondence sent out by the arbitrator setting out a prehearing agenda, inviting counsel for input to the agenda. This letter is generally followed by a prehearing meeting (preferably at the arbitrator's office) to decide a number of issues. The alternative is to have a conference call. By taking this approach no one is caught off guard or is subjected to "trial by ambush".

It is important for an arbitrator to anticipate, to think ahead of possible developments, and make the parties aware of events to come in a timely fashion. The proceedings should be controlled with flexibility and humanity. The arbitrator must be prepared to make clear decisions and offer directions at critical stages.

What is more, the parties must be aware of the arbitrator's objective at all times, which is to ensure that natural justice (procedural justice) and common sense prevails, based on good commercial practice.

I suspect that no arbitrator comes close to being a Solomon, however, certain leadership qualities are essential.

Derek Sharp in his article, Applying Management Principles to Arbitration, published in Arbitration, February 1996, listed those leadership qualities:

  1. Knowing and understanding what is wanted by the parties and communicating it to all involved.
  2. Creating a personal atmosphere, having the right appearance, body language, voice quality and formulating the appropriate package with flair.
  3. Demonstrating integrity, fairness, truthfulness and the confidence to act alone.
  4. Having the confidence to dominate encounters, meetings and hearings, being able to set the scene, begin to set the pace, keep control, manage change and stop proceedings when appropriate.
  5. Remaining calm in crises, absorbing stress, standing off to see the whole problem, creating order from chaos, giving simple, clear directions and knowing how to get relief from the tension after each crisis is resolved.
  6. Making the parties aware of where their authority, responsibility and accountability lie and ensuring that each party performs their role and focuses on the desired results.
  7. Maintaining discipline by establishing ground rules of behavior, being punctual and reliable and by offering a good example.
  8. Gauging the place and timing of action, knowing the right moment to intervene, being consistent in directions and stimulating action by the parties at the right time.
  9. Ensuring balanced, harmonious progress, tying up loose ends, giving clear directions on time and maintaining continuity and enthusiasm.
  10. Maintaining good morale - we are all human and the best results are based on trust, recognition, rewards, satisfaction and fulfilment, allowing people maximum freedom of action.

In addition I have added a rather comprehensive list of skills for the “model” arbitrator aspublished in an article by Robert Nelson of Gowlings in 2006.

Bonita Thompson, Q.C. in her article Commercial Dispute Resolution: A Practical Overview found in Paul Emond’s book Commercial Dispute Resolution, refers to the avoidance of problems which can plaguearbitration. She says:

Most of the problems that can plague the arbitration process can be avoided by:

  1. choosing counsel who are knowledgeable in the process;
  2. choosing highly experienced arbitrators;
  3. using rules of procedure that provide for an efficient and timely disposition of the arbitration;
  4. citing the arbitration in a jurisdiction with laws that are supportive of the arbitral process.

PARTICULAR CHALLENGES TO COMMERCIAL ARBITRATORS

One of the greatest challenges faced by an arbitrator is where a party attempts to delay the process thereby lengthening the process, adding to its costs, its expenses and antagonizing the other parties and their counsel.

They can come in the form of:

  1. Jurisdictional Challenges
    1. the substantive law applied to the dispute
    2. the governing law re the arbitration procedure
    3. the validity of the arbitration clause
    4. the rules of the administering organization
  2. Discovery Challenges
  3. Perceived Procedural Irregularities
    1. arbitrator’s impartiality
    2. unfair treatment of the arbitrator

(See The Dorchester Hotel Limited v. Vivid Interiors Ltd. [2009] EWHC 70 (TCC). Also, see Bovis Land Lease Limited v. The Trustees of the London Clinic [2009] EWHC 64 (TCC))

While arbitrators have no ability to control delays prior to their appointment, good and active management skills after being appointed from the preliminary hearing stage to the rendering of the final award allows the process to move to a prompt conclusion and thus giving effect to the positive aspects of private arbitration.

I have included with this material as an appendix, the articled titled Delaying Tactics in Arbitration by Alain Frecon as published in the November 2004 Dispute Resolution Journal published by the American Arbitration Association. That article deals with the games played by counsel using delaying tactics contra to the fundamental protocol of Commercial Arbitration as set out in rule 19(2) of the Domestic Commercial Arbitration Rules of Procedure in British Columbia:

19(2) The Arbitration Tribunal shall strive to achieve a just, speedy and economical determination of the proceeding on its merits.

I have left out any specific discussion regarding the ethics of an arbitrator save as to relate those ethics to those of a judge. I can do no better than to direct your attention to this subject matter in the publication, Commercial Arbitration in Canada by J. Kenneth McEwan, QC and Ludmila Herbst and published by Canada Law Book.

BRITISH COLUMBIA’S COURTS ATTITUDE TO ARBITRATION

The British Columbia Court of Appeal in Hayes Forest Services Limited v. Weyerhaeuser Company Limited, January 24, 2008 ,2008 BCCA 31 in its decision written by Chiasson J.A., a judge well versed in the law of arbitration, stated:

In Hayes Forest Services Limited v. Teal Cedar Products Ltd. et al Docket CA034926 The Honourable Chief Justice of British Columbia speaking for the court said as follows:

ARBITRATION CLAUSES – DOs AND DON’Ts FOR LAWYERS

While arbitration offers significant advantages over litigation, poorly drafted clauses lead to not only costly and time consuming delays but also fail to meet the intentions and expectations of the parties - in particular the businessmen who have entered into contracts to achieve some rational commercial purpose. Counsel should adopt the same importance to a dispute resolution clause as they do in any other fundamental term of the agreement.

Agreements to arbitrate are formed:

  1. during negotiating a contract, or
  2. after a dispute has arisen.

The preferred system is to negotiate a process prior to entering the main contract and not after acrimony has developed. The arbitration clauses stand separate and apart from the main agreement. I refer you to Premium Nafta Products Limited v. Fili Shipping Company Limited, [2007] UKHL 40. I quote from paragraphs 18 and 35 of that case:

Considerations in domestic arbitration may be different from considerations in international arbitration. The starting point would be to carefully review the statutes which will be applicable in your client’s case. Clauses dealing with costs, confidentiality, restrictions to the court and a plethora of other matters must be considered in each case. There are very few cases in which one can apply a standard arbitration clause that meets the needs and commercial expectations of the client. In addition, consideration must be given to a set of rules (such as institutional rules) dealing with the process which will govern or whether rules will be decided on ad hoc basis, or blending of the two.

I have provided a checklist which includes some of the dos and don’ts in considering arbitration provisions. A number of these points are set out in an article written by Karen Birch of Allen & Overy LLP in the United Kingdom.

DO

  1. have a clear, unequivocal agreement to arbitrate.
  2. consider the dispute resolution clauses early in negotiations.
  3. consider whether to include a formal pre-arbitration procedure, eg mediation.
  4. make an informed choice between institutional and ad hoc arbitration and read any relevant rules. In British Columbia direct your attention to section 22 of the Commercial Arbitration Act.
  5. specify the “seat” or formal place of arbitration.
  6. specify an odd number of arbitrators, the manner of appointment, and if it’s an ad hoc arbitration the appointing authority.
  7. specify the language of arbitration.
  8. consider the scope of the agreement to arbitrate.
  9. specify the governing law.
  10. consider whether a waiver of judicial review or appeals of decisions of the tribunal is desirable and enforceable. Subject to the applicable arbitration legislation (See sections 23, 31, and 35 of our Domestic Act) the parties should clearly state their intentions with respect to appeals. The joint intention should include that the decision of the arbitrator shall be final and binding and shall not be subject to appeal on a question of fact, law or mixed fact and law.
  11. consider providing for joinder or consolidation of disputes if it is a multi-party or multi-contract situation.
  12. obtain an understanding of your client’s business including whether or not products or services sold are within the province, the country, or another state.
  13. consider the nature of relief an arbitrator may impose having regard to the law in a particular jurisdiction.
  14. what is the effect of an arbitration clause in one agreement where the parties have other agreements in place

(See Dancap Productions Inc. et al v. Key Brand Entertainment Inc. et al and Ed Mirvish Enterprises Limited 2009 ONCA 135.)

DO NOT

  1. assume that dispute resolution provisions do not really matter.
  2. assume that arbitration is the best option for all disputes.
  3. assume that all jurisdictions are supportive of arbitration.
  4. blindly adopt an arbitration clause from another agreement.
  5. draft an arbitration clause without examining the rest of the agreement and related agreements.
  6. choose more than one governing law or seat. It is important to remember that the substantial rights may be different from the procedural law ("lex arbitri"). Generally the seat of the arbitration will be the lex arbitri. This is one of the reasons why Canada is most suited for international arbitration.
  7. choose arbitration rules that are inconsistent with the arbitration clause without specifying that such rules are being amended by agreement.
  8. assumed that “split clauses” (which provide for one party to have the option to arbitrate or litigate while the other party can only litigate) are valid in all jurisdictions.
  9. include restrictive criteria for the qualifications of arbitrators that may make it difficult or impossible to appoint suitable arbitrators.
  10. specify as an appointing authority a person, position or institution unless your are sure that it exists and will be willing to make the appointment.
  11. assume that arbitration will be confidential. If the parties want confidentiality, provide for it expressly.

Another excellent arbitration clause checklist may be found at, The Advocates’ E-Brief, Vol. 19, No. 3, Spring 2008, written by Barry Leon and Jana Slettnee, of Torys LLP. A copy of this article may also be found on Torys’ website.

LEGAL CULTURE – THE SETTING

Legal culture has changed in the last 30 years. The skills set for lawyers of the 1970’s are inadequate for problem solving in this decade. Professor Julie Macfarlane in her book, "The New Lawyer", suggests that:

The new lawyer takes on all the traditional professional responsibilities of counsel as well as some additional ones. These include the responsibility to educate the client on a range of alternate process options, to establish a constructive relationship with the other side that does not undermine her loyalty to her client, to commit to the good faith use of appropriate conflict resolution processes and to model good faith bargaining, attitudes, to anticipate pressures to settle, and to advocate strongly for a consensus solution that meets, above all, the needs of her client. It is in relation to these additional responsibilities that the new lawyer faces the greatest challenges in developing an appropriate professional response to new (or reconfigured) ethical dilemmas.

Allen Soltan of Davis LLP recently reminded me of the culture we are introduced to the first day of law school. We read our first case of a failed negotiation.

Rodney MacDonald in his discussion paper of February 23, 2005 for the Civil Justice Reform Working Group cites the Australian Law Reform Commission:

significant and effective long term reform [of the system of civil litigation] may rely as much on changing the culture of legal practice as it does on procedural and structural change to the litigation system. In particular, lawyers, their clients and courts may need to change the ways in which they perceive their relationship and responsibilities.

Compare the words written by Peter Behie, Q.C. in his paper delivered at a CLE dispute resolution conference in 2006 to that of the following quote from Professor Macfarlane’s book:

It is hardly controversial to suggest that you and your client should know where a file is headed. As the inimitable Yogi Berra said, “If you don’t know where you’re going, you’ll end up somewhere else.” The development of a road map will fulfill this role. More importantly, the early development of a game plan or roadmap is essential if you are to solve your clients’ problems in the most efficient way and in a manner that puts the client in the driver’s seat (two goals that I also take to be not controversial).

...

I spent the first many years of my practice transforming my clients’ problems and concerns into legal issues and the advancing those legal issues through the litigation process. I undertook this kind of approach in a rather unexamined sort of way. I simply saw myself as and referred to myself as a commercial litigator. I formed litigation strategies sometimes only vaguely related to clients’ problems and, I am embarrassed to admit, without a keen awareness of the costs (both soft and hard) of delivering these legal outcomes.

I began to realize that this approach was impoverished. It often did not deliver results that clients expected or wanted, or did so at a price that was unacceptably high. Clients routinely reported feeling disaffected and dissatisfied. Worse still, I sometimes felt that my training and understanding of the process became an impediment to solutions and outcomes. Often disputes were not being resolved, not because the parties were not willing to resolve them, but rather because counsel, caught in the system, resisted resolution. More information was required; a higher level of understanding of the intricacies of the facts was needed; discoveries had to be completed. These I began to see were my needs not necessarily my clients’ needs.

...

Now, I say that what I do is solve clients’ business problems often with, but not exclusively through, the litigation process. I also resist the temptation to merely transform clients’ problems into legal problems and only address the latter and ignore the former. Clearly, one must apply legal analysis to the problems and use case law as a predictor of outcomes. The analysis should not , however, presuppose that litigation is inevitable or if the process is issued, that a trial is certain. The litigation trial should not wag the dog. When I use the litigation process I do so with an eye on the clients’ commercial problem all times.

It is against that backdrop that I turn to the initial assessment. It goes without saying that if one’s job is to solve commercial problems then the initial assessment has to focus on identifying what those problems are and developing a strategy that addresses the resolution of these commercial problems.

The goal, then, of the initial assessment is to form a strategy based on a clear understanding of the client’s goals. It is my view that this strategy should be reduced to writing sent to and reviewed with the client. It should include the following:

  1. a description of the client’s goals as you understand them together with the facts as you apprehend them;
  2. clear options for the client which should include options short of or separate from litigation;
  3. an honest estimate of the costs of each option;
  4. some rough time lines for each option;
  5. an analysis of the legal issues (both on liability and damages) and outcomes; and
  6. the probability of success to at least the litigation options (based on your judgment of the risks).

There a number benefits to doing this. This road map will force discipline into your thinking from the outset, make you accountable to the client as the matter moves forward and gives the client the clearest possible picture of what lies ahead. It is a road map that will help you and your client avoid, as Yogi said, ending up somewhere else. In providing this road map, you will be allowing the client to exercise control over the decision making. In my view, it is no longer adequate to say that the litigation road has too many unexpected turns to undertake such any analysis or provide a road map. You can – and indeed must – explain the uncertainty of litigation and the difficulty of precision.

...

The first meeting is critical. You will want to expand on the information that has been provided to you. But more importantly, you will want to ask what the client wants to achieve. You must divine the client’s goals; what they want, need and what can be done. You should obviously pay attention to the context in which the problem arises. Consider the relationships at play. Often I deal with shareholders’ disputes in which the falling out is between old and dear friends or even family members. You must be attuned to these sorts of dynamics and they should weigh heavily on the judgment you bring to bear on course of action.

Professor Macfarlane quotes one lawyer as saying:

I mean, we’re trained as pit bulls, I’m not kidding you, I mean we’re trained pit bulls and pit bulls just don’t naturally sit down and have a chat with a fellow pit bull, the instinct is to fight and you just get it from the first phone call. I’m bigger and tougher and strong and better than you are.

And what of the client? How have they viewed the culture of civil litigation?

It was the British humourist, Jerome K. Jerome who wrote:

If a man stopped me in the street, and demanded of me my watch, I should refuse to give it to him. If he threatened to take it by force, I feel I should, although not a fighting man, do my best to protect it. If, on the other hand, he should assert his intention of trying to obtain it by means of an action in any court of law, I should take it out of my pocket and hand it to him, and think I had got off cheaply.

In 2003, the Honourable George W. Adams, Q.C. in his book Mediating Justice: Legal Dispute Negotiations, comments on the present judicial culture:

Lawyers increasingly distrust one another. The profession is no longer a seamless cadre of legal professionals. Recessions and the economics of lawyering have also increased the number of inexperienced lawyers willing to handle lawsuits. The courts have been slow to adopt modern management techniques to administer the growing caseloads primarily because our traditional conception of justice encourages judges to be passive, disinterested and impartial. Dealing primarily with “private” disputes, judges have tended to leave the pace of pursuit to the parties.

Professor Richard Susskind speaks of paradigm changes in the practice of law in his book The End of Lawyers?. He refers to challenges faced by lawyers and law firms and how clients perceive legal services and the challenges for law firms to provide those services in proactive as opposed to a reactive way.

As he says:

Clients want a fence at the top of the cliff, not an ambulance below.

To those who fail to appreciate those changes I again quote Professor Susskind when he says:

The future has arrived, it's just not evenly distributed yet.

BRITISH COLUMBIA INTERNATIONAL COMMERCIAL ARBITRATION CENTRE (BCIAC)

BCIAC was established by the Provincial Government in 1986. As mentioned earlier the BCICAC rules govern domestic arbitration pursuant to section 22 of the Domestic Act. The entity is also referred to in the International Act and in numerous national and international articles which refer to regional arbitration institutions.

The advantages of using BCICAC include:

  1. Pre-establish rules and procedure
  2. Administrative assistance, including the handling of arbitrators fees and disbursements
  3. Lists of experienced arbitrators
  4. The appointment of arbitrators

While BCICAC does not have physical facilities, Vancouver is blessed with private facilities which are set up to deal with arbitrations and mediations. Its administrative charges, particularly in the field of International Arbitration are reasonable when compared to other institutions.

Part of the history of BCICAC can be found in the comments regarding the development of arbitration in British Columbia in Commercial Arbitration in Canada: A Guild to Domestic in International Arbitration (2007) by J.K. McEwan and Ludmila Herbst:

British Columbia was the first jurisdiction to adopt the Model Law anywhere in the world. British Columbia was particularly interested in attracting arbitration business as is reflected in the preamble to its International Commercial Arbitration Act, which was essentially a reworked version of the Model Law.

. . .

British Columbia took a leadership role in enacting new domestic commercial arbitration legislation as well. In this regard, the Law Reform Commission of British Columbia issued a Report on Arbitration in 1982 recommending the adoption of modernized legislation. The report has been described as the first proposal for modernizing the legislative regime then in place throughout common law Canada. Legislation influenced in part by the Model Law was drafted and enacted

The decision in Cold form Industries v Mitsui in 1991 established that in the Province of British Columbia, BCICAC is the governing authority for the appointment of arbitrators pursuant to section 22 of the British Columbia Commercial Arbitration Act and rule 15 of the applicable rules.

CAVEAT

In July 2009, in the decision of Bell Canada v The Plan Group et al, the Ontario Court of Appeal had the opportunity to deal with the failure by one party to an arbitration to follow the then current rules of the Arbitration and Mediation Institute of Ontario Inc. by failing to commence the arbitration process pursuant to those rules, including payment of the Institutes’ fees.

The Court of Appeal found that under the agreement, Plan Group failed to follow the process agreed to by the parties, with the result that they were barred from seeking and hopefully obtaining a substantial sum of money from Bell Canada. The Plan Group case cited an earlier decision of the Ontario Superior Court of Justice between Spectra Innovations v Mitel Corporation [1999] O.J. No. 1870 where that court found that a party could not pick and choose which rules of the ICC they wish to follow.

In British Columbia in the absence of specifically drafted rules and protocols contained within a contract the parties are obliged to follow section 22 of the Commercial Arbitration Act. Notwithstanding those rules the parties may, by consent, amend those rules to meet the particular situation, provided firstly that they commence the proceedings and follow the initial protocols set out in section 8 of the rules, which include submitting an Arbitration Notice and pay the commencement fee.

CLOSING

Someone once said:

As a businessman, if I don’t listen to the market, I am not in business. If I were an attorney, I’d make sure I was involved in Alternative Dispute Resolution, because it may well be the service that the market will demand and I will have to offer in the future.

I've added for the purposes of discussion a copy of the British Columbia Commercial Arbitration Act and Domestic Commercial Arbitration Rules of Procedure which in the absence of specific clauses contained in agreement form the binding protocols in this Province for domestic arbitration.

There are many publications available to the practitioner and arbitrator, two of which would form the foundation of essential reference material. They are:

  1. Drafting ADR and Arbitration Clause for Commercial Contracts, by Wendy Earle, Carswell.
  2. Commercial Arbitration in Canada (A Guide to Domestic and International Arbitrators) by McEwan and Herbst, Canada Law Book.

I now invite questions and discussion.

Cobbled together on by:

Kenneth J. Glasner Q.C., C.Arb, C.Med., JJP

FOR DISCUSSION?

Professor Susskind posed a question to his colleagues – “is court a service or a place?”

(See, The End of Lawyers? Page 218)

If it’s a place then can dispute resolutions be held at another place? If it’s a service does that service meet the needs of today’s society and in particular the commercial world. If not, why not – what are the options?


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