Smaller disputes with arbitration or litigation? No way! Innovation…

In my role on the “disputes, claims and conflict management” section of the IACCM council, I had the pleasure to organise a webinar regarding innovative ways to resolve smaller disputes. In this post, I will share the first part of messages from the webinar.

Jan Bouckaert, AfiTaC and dispute adjudicator /arbitrator

Smaller disputes are disputes for projects with a relatively modest contract amount or disputes on larger projects where a smaller amount is at stake.

There are two “traditional” ways to resolve disputes: informal and formal processes. Each has its strong points and disadvantages as shown on the image below:

The question of the webinar is whether there is any possibility to overcome the disadvantages of both informal and formal dispute resolution processes. In other words, can we get a fast dispute resolution which is inexpensive to obtain and enforceable?

Tom Cadman, CIArb (Deputy Director General of CIArb, responsible for CIArb’s Dispute Appointment Service)

Tom Cadman from CIArb has strong arguments is to convince us that there are arbitration schemes that are both quick and not particularly expensive.

At the start, he reminds us of the context of small businesses and their problems:

• Late and non-payments account for 72% of all commercial disputes.
• 30% of payments are typically overdue.
• Billions are tied up every year in commercial disputes.
• 70% of small businesses were involved in commercial disputes during the past five years.
• Overdue payment can mean the difference between survival or failure for small businesses.

For a deeper understanding of the Chartered Institute of Arbitrators, we highly recommend you to have a look at their website: https://ciarb.org/ Anyway, here are some points you should definitely remember about CIArb:

• It is the professional membership organisation representing the interest of alternative dispute resolution practitioners worldwide.
• Dealing with all forms of Alternative Dispute Resolution (ADR) : mediation, arbitration, adjudication, conflict avoidance board.
• Provides globally recognized education and training for arbitrators, mediators and adjudicators. And also training in negotiation skills and conflict avoidance techniques for a wider public.
• It offers a wide range of resources to the members including a Dispute Appointment Service making approximately 500 appointments per year.

The main characteristics of the Business Arbitration Scheme (BAS) are shown in the following three slides:

Additional documentation on the Business Arbitration Scheme can be found here for downloading:

Questions and Answers on resolution of smaller disputes with ADR

In the second part of the webinar, a very interesting Question and Answer session took place:

For training by CIArb, what are the cost involved?

It depends. Pathway training, to become a neutral, is more expensive. But shorter (non-member) courses are much cheaper. You can find them on CIArb’s website. The e-module “introduction to ADR” is currently available at a discounted rate.

Is a BAS award enforceable under the New York convention?

Absolutely, such an arbitral award is globally enforceable (UK is a signatory of NY convention).

Do you know if any of the Government bodies or companies in the UK and USA use arbitration? In the Middle East, companies seem to prefer litigation.

In the UK, parties are encouraged to use Alternative Dispute Resolution rather than litigating to avoid overburdening of the courts. Especially in the infrastructure business it is quite normal to see a dispute board or a neutral embedded into the project. Large projects like Transport for London, Crossrail or the Olympics projects had conflict resolution mechanisms embedded into the contracts. There are also a number of statutory schemes which compel the parties to go into ADR (e.g. between Pubs’ landlords and tenants, schemes under the medical and healthcare regulatory act, construction adjudication etc). UK Government does promote, encourage and compel parties (in certain circumstances) to adopt ADR mechanisms.

What is the most common cause for arbitration / litigation?

Late payment of invoices or non-delivery of goods. And these are ideally suited for the Business Arbitration Scheme.

Are legal institutions supporters of ADR?

Yes, some lawyers may think of ADR’s low-cost schemes as “taking work away from them”. However, arbitration and other forms of ADR are practiced in all the major law firms, globally.

While only 30% of CIArb members are actually lawyers, the processes themselves are embedded in the law. Legal practices see ADR as very valuable mechanisms, not least because they are encouraged by the courts.

Raising awareness is necessary, not just within the community of the lawyers, but within the whole mercantile world so that lawyers can advise their clients to have confidence in such schemes.  

About AfiTaC

AfiTaC.com is the blog on commercial and contractual subjects for the Project Businesses (Construction, Infrastructure, Oil & Gas, Power & Renewable, Water Supply & Sanitation, etc). Its objective is to stimulate reflection, learning, convergence to balanced contracts and positive dispute resolution. You can subscribe to our newsletter by writing to “newsletter@afitac.com”. You can also connect to our LinkedIn page. Engagement with the readers is what keeps us going. So, don’t hesitate to exchange with us by commenting here below, liking our publication on LinkedIn and writing to us “info@afitac.com”.