Corporate clients rely on a diverse toolkit of techniques and options beyond litigation—ranging from negotiation, mediation and arbitration to expert determination and dispute resolution boards—to resolve their disputes. The three incentives below might help convince your outside counsel to get out of the courtroom and join you in exploring alternative dispute resolution (ADR) techniques if they have not yet done so.
1. Clients prioritize ADR and global dispute management
The role of corporate law departments has transformed significantly in recent decades. Gone is the notion that in-house counsel manage disputes by overseeing litigation after the eruption of a dispute.
The first wave of change began with a movement by companies to embrace ADR before turning to litigation in recognition of the business advantages of ADR, including:
- ADR allows companies to tailor dispute resolution to their issues and disputes.
- In many cases, it provides a cheaper and quicker alternative to litigation that better preserves long-term business relationships.
- ADR can often be deployed in the resolution of cross-border disputes more effectively than domestic litigation which has little value if the foreign counterparty does not have assets in the jurisdiction where domestic litigation is being pursued.
Proactive dispute resolution management is the next frontier. Rather than handling disputes on an ad hoc basis each time a new one arises, companies are adopting processes for global, systemic dispute management that allow for early detection and resolution of disputes in order to further reduce the costs, time, and risks of dispute resolution.
These trends have changed not only the way companies manage disputes within the organization, but also how they select outside counsel. For example, a 2013 survey on “Best Corporate Practices in Conflict Management” from France published by the American Arbitration Association (AAA), the International Centre for Dispute Resolution (ICDR) and French law firm Fidal showed that dispute-savvy French companies no longer outsource individual cases to outside counsel on an ad hoc basis, but instead partner with law firms to develop a dispute resolution approach that is tailored to the dispute and the underlying issues.
By adapting their skill-set and philosophy to align with their client’s dispute management objectives and strategies, outside counsel can develop broad, long-term relationships with their clients based on a shared culture of dispute resolution.
2. Outside counsel can work side-by-side with clients to tailor ADR processes
The ADR landscape has a built-in feature that can respond to users’ needs and drive change: the institutions that administer arbitrations and other ADR processes.
Recent initiatives to reduce costs and improve efficiency in arbitration are one example of how the ADR community has taken action to address user complaints. In addition to protocols and guidelines that establish best practices for efficient and cost effective dispute resolution, most of the major arbitral institutions have amended their arbitration rules within the last two years to further these objectives. Some of the changes include new provisions that allow for emergency arbitration as well as joinder of additional parties and consolidation of multiple arbitrations, expedited procedures that apply to lower value disputes, and amendments that encourage mediation. While each institution follows its own process for amending its rules and preparing guidelines, the process typically includes consultation with in-house counsel, outside counsel, and arbitrators who sit together on task forces and committees.
A few lessons can be gleaned from these recent initiatives.
First, ADR offers a unique opportunity for outside counsel to play a role in the organizations and institutions that drive the ADR processes to advocate for changes that are in their clients’ interests.
Second, outside counsel can work alongside in-house counsel on committees and task forces, opening the door for outside counsel to build new client relationships.
Third, if these initiatives are successful, more in-house counsel will likely turn to arbitration to resolve their disputes. In a 2013 survey on “Corporate Attitudes in International Arbitration” prepared by Queen Mary University of London’s School of International Arbitration and PricewaterhouseCoopers, 52 percent of respondents considered arbitration as the preferred method of dispute resolution for cross-border disputes, while 73 percent indicated that arbitration is suited to the resolution of their disputes. For those respondents who stated that arbitration was not well-suited to their industry, the most common complaint was cost, followed by delay, rather than any industry-specific factors, suggesting the potential for arbitration to grow if the community can rectify cost and delay issues. Outside counsel can position themselves to handle these new matters by expanding their dispute resolution toolkits to include arbitration.
3. ADR raises cutting-edge policy issues
As an alternative to dispute resolution before national courts, ADR gives outside counsel an opportunity to participate in a dialogue on cutting-edge policy issues.
The current debate on whether the U.S. should sign the Trans-Pacific Partnership (TPP) in light of its investor-state dispute settlement (ISDS) chapter is a case in point. The ISDS provisions would allow nationals of one state to bring an arbitration against another state for violating certain minimum standards of treatment with respect to investments made in that state. ISDS provisions are common in trade agreements and bilateral investment treaties. They provide a forum for investors to bring claims against host countries where none existed previously outside of domestic legal systems that are often partial to state interests (or are perceived to be by foreign investors) and international diplomacy. Opponents of ISDS in the TPP have criticized it, among other reasons, as an infringement on state sovereignty that would have a chilling effect on state regulation in the public interest.
As clients look to settle their disputes with techniques other than litigation, the pool of litigation work for outside counsel will shrink. However, by embracing dispute resolution options other than litigation, and working with ADR institutions and organizations to drive change, outside counsel can position themselves optimally as a long-term partner of their clients in building a dispute management strategy. An added bonus is an opportunity to work on the frontline of cutting-edge policy issues.
If made aware of its importance to their clients, most outside counsel would willingly educate themselves about ADR and begin a dialogue about using ADR to further the client’s business objectives, keeping in mind that dispute resolution is not one size fits all.