In the past few years, arbitration has become the preferred method of resolving domestic and international disputes in all sectors including construction, said a panel of experts discussing trends and developments in the process and the practical benefits of arbitration clauses.
A seminar was held Sept. 19 by Gowling WLG at the law firm’s downtown Toronto office.
"In the last 10 years, the number one ranked method of dispute resolution around the world is arbitration," explained Robert Armstrong, a lawyer and co-leader of the arbitration group at Gowling WLG, adding Canada is one of the two fastest growing arbitration centres in the world because of its long history of independence and the rule of law.
"I have said to my corporate partners for years that they spend all of their time doing deals and thinking of the closing dinner and how happy they are that they did the acquisition or the investment, but they spend almost no time in those deep negotiations thinking about what is going to happen when something goes wrong. It almost invariably goes wrong.
"If they had spent some time thinking about that possibility and they had considered what we are going to talk about today, they might give themselves enormous leverage in dealing with the other side of the transaction when the dispute comes about."
Panellist Robert P. Armstrong, who is a former court of appeal judge and a senior trial and arbitration lawyer, working now as an independent arbitrator at Arbitration Place in Toronto, explained there are three reasons to go the arbitration route: you get to choose your arbitrator; arbitrations are by and large confidential; and in Ontario it is generally faster than going through the courts.
The presentation outlined several advantages for businesses preparing an effective arbitration clause including the business chooses the applicable law, where the arbitration will take place and the arbitrator; the business has the benefit of an independent arbitrator in contrast to local courts in foreign jurisdictions which can be unpredictable; the arbitration is confidential if a business chooses; the flexibility as to the speed of the arbitration; the arbitrator will have subject matter expertise; and if an arbitration clause is prepared carefully, the business will have a high probability of being able to enforce any award it receives.
Gordon Bell, a senior partner at Gowling WLG in the U.K. and an international arbitration specialist, said arbitration between two domestic parties in the U.K. is not as common as it used to be.
"Our court system is very good. We’ve got a really good commercial court, we’ve got a really good high court and the parties are probably fairly relaxed about taking matters to the English court for resolution rather than arbitration, but it’s different in international arbitration," Bell explained. "When you’ve got international parties from different jurisdictions or somebody investing in another country, we find more and more that the dispute clause in their contract is arbitration."
John Callaghan, a senior partner at Gowling WLG in Toronto, said the Canadian experience with arbitration is quite different.
"I see more arbitration clauses in the domestic situation than less at the moment," he stated. "If you do a lot of infrastructure projects, say with Infrastructure Ontario, there will inevitably be an arbitration provision rather than resort to the domestic courts. I can’t tell you why that is and why the difference exists."
There was also talk about enforcement.
"In the U.K., domestic arbitration awards are generally enforced pretty easily," said Bell. "Internationally, it brings into play a couple of different issues, but certainly one of the big advantages of international arbitration versus courts is that we have the New York Convention (on the recognition and enforcement of foreign arbitral awards) which 150 countries have signed. The purpose of the convention is to regularize the recognition and enforcement of arbitral laws."
Callaghan said in Ontario arbitration has always been very deferential.
"In the Canadian context you have a very limited right of appeal almost to the point that only if the arbitrator exceeds their jurisdiction do you get an opportunity to actually have a review," he said. "The reality is on the good side there is going to be pretty much finality in your arbitration in Ontario and on the bad side if you get a wonky arbitrator you’re going to have a hard time getting an appellate review."
Robert P. Armstrong agreed stating B.C. and Alberta are less open to the process and arbitrators.
"In Ontario we certainly, as some people might say, drank the Kool Aid and arbitration is where it’s at and courts keep their hands off," he stated. "If you’ve got a good arbitration clause and a good arbitrator you’re in good shape here."
Bell said arbitration has changed over the years.
"I think the issue that the arbitration world is finding difficult to deal with at the moment is the time and cost," said Bell. "The biggest benefit 15 to 20 years ago to arbitration was the cost because the whole point of arbitration was to get through a condensed process quite quickly and relatively cheap. Now, lawyers are practicing arbitration in a slightly different way…arbitration is starting to take longer because counsel is starting to treat it more like litigation."