ADR RUC LAW SCHOOL CLASS 1

1. ADRRUC LAW SCHOOLCLASS 1 Stephen Leonard (李文） Sleonard18@gmail.com

2. My experience as a dispute resolution lawyer is, save for 2 cases in France, in the common law world of England, the US, Bermuda and Hong Kong. My comments will mainly be about ADR in these places and where possible I will tell you about what actually happens in practice.

3. Dispute resolution is a very important subject for business lawyers. You must be able to give clients advice about the options for dispute resolution with the benefits and disadvantages so the client can decide what to do. This course will help you do this. The best time to do this is when the client is negotiating a contract and so can negotiate an appropriate dispute

4. resolution clause in a contract . All commercial contracts should contain a dispute resolution clause. We will look at some of these later on. Your client will also need advice if a dispute arises that is not covered by a dispute resolution clause in a contract. In my experience a client usually wishes to resolve a dispute in the most efficient and cost effective way with the

5. minimum disruption to its business. It is vital to always think about how to quickly and cheaply resolve disputes in the best interests of the client. You must try to find the best dispute resolution option to achieve this. The aim is to have a client trust you! For centuries lawyers have had the reputation of using disputes to make the most money for themselves!

8. Q: What's the difference between a good lawyer and a bad lawyer?
 A: A bad lawyer makes your case drag on for years. A good lawyer makes it last even longer. This is now new. Here is what Charles Dickens says about law in his novel Bleak House published in 1853

9. ‘The one great principle of the English law is, to make business for itself. There is no other principle distinctly, certainly, and consistently maintained through all its narrow turnings. Viewed by this light it becomes a coherent scheme, and not the monstrous maze the laity are apt to think it. Let them but once clearly perceive that its grand principle is to make business for itself at their expense, and surely they will cease to grumble.’

10. It is better to be a mouse in a cat's mouth than a man in a lawyer's hands. Spanish Proverb Litigation: A machine which you go into as a pig and come out of as a sausage. Ambrose BierceThe Devil's Dictionary. A Lawyer will do anything to win a case, sometimes he will even tell the truth. Patrick Murray “The first thing we do, let's kill all the lawyers.” Shakespeare - Henry VI part 2 (Act IV Scene II)

11. There are a number of forms of ADR but • I will concentrate on the popular ones • that are used to resolve business disputes • arbitration - England, the US and HK • have different arbitration regimes - HK • applies the UNCITRAL Model Law on • International Commercial arbitration (as • does Bermuda and a few states in the US • but not the UK). We will look at these • regimes in more detail in later classes.

12. Mediation where the parties try to • negotiate a settlement using a mediator. • I like mediations and we will talk more • about how they work next class • Conciliation - similar to mediation - We • will consider the UNCITRAL Model law • And rules on conciliation. Not so popular • in the common law world in my • experience. Only 6 countries have adopted • including Canada.

13. Useful Resources I will produce a note a day or so before each class and then have a powerpoint that will be posted after each class. Some useful resources are set out on pages 2-4 of the notes. Let’s have a quick look.

14. Why is dispute resolution important? • It is vital for the social and economic • well-being of society that disputes are • resolved • fairly • transparently and • consistently using properly regulated • dispute resolution techniques

15. The development of dispute resolution techniques in the common law world provided an alternative to dispute resolution by violence or abuse of economic or political power. In the 18th and 19th centuries in England and the USA some people resolved disputes by fighting duels A famous instance involved vice president Aaron Burr and Alexander Hamilton

16. Burr kills Hamilton July 11 1804

17. Nowadays some lawyers in the US and UK want to appear to be tough and aggressive and so use violent language such as “kick ass” I usually laugh when I meet such lawyers as invariably the most aggressive lawyers are the smallest and the weakest. I suppose it makes these people feel more important if they say they spend their days “kicking ass” rather than writing letters or attending meetings. .

19. In the common law world the original type of dispute resolution was through the courts and judges and juries. In England the monarch was regarded as the source of justice and so the monarch introduced courts to resolve disputes between the people. In modern times there are procedural differences between a civil action in HK, England and the USA.

20. However, the basic structure is similar First, pleadings -the parties set out their case and identify the issues in dispute; followed by evidence production - this is production of documents (discovery) and fact and expert witnesses (by written statements in HK and England and depositions in the USA). Parties must produce documents that harm their case!

21. Finally, there is a trial before a judge and (in the US usually) a jury. Witnesses usually have to attend to be cross examined by the parties. This and the obligation to produce harmful documents are big differences with the civil court system However, over the last 30 or so years there has been growing dissatisfaction with this system especially in the business

22. community. In particular, there are • problems with: • The tremendous cost of litigation. • In England and HK, the risk is even • greater as the party who loses a case • usually has to pay the costs of the winner. • Uncertainty about the outcome and in • particular with cases involving witnesses. • Delay. It depends on how busy the • judges are, but a large case can take • several years to get to trial.

23. The delay and time-consuming nature of • litigation means that the parties have to • devote a lot of management time and • resources to each case. • Sometimes complicated business cases • may be heard by non-specialist judges or • (in the case of the US) juries. Obviously, • the parties have no control over who hears • their case in Court. • There are greater risks in the US as many • civil cases are decided by juries. • Obviously, juries may not be so interested

24. in technical legal arguments and they often • award very high damages. • There is also the risk of punitive damages • in the USA. • Finally, the parties have very little control • over the procedure that is used in a case. • They must use the procedural rules of the • court and so there may be a lack of • flexibility. • In particular, the US is regarded as the • most litigious place on earth and most

25. businesses are careful to reduce the risks of having to litigate before the courts. I personally think the US system, and in particular the tort system is stupid. See what Lord Denning has to say at para 15 of the notes. It is against this background that the business community started to develop alternative forms of dispute resolution. Let us look at these and see what advantages they have over litigation.

26. The options

27. Arbitration - known as binding or • compulsory ADR as there is an adversarial • trial (similar to a Court case) after which a • decision is then given that is legally • binding on the parties and can, if • necessary, be recognized and enforced by • the Courts. • Its benefits include • Arbitraton may sometimes be quicker and • cheaper. This may not always be the case • as arbitrations can be as complicated

28. as litigation and also the arbitrators must • be paid. • The parties do have control over who the • arbitrators areand what their experience/ • qualifications are. Lawyers spend a huge • amount of time deciding who to pick. We • will discuss this in later classes. • The parties have greater control over the • procedure used and can usually decide • what procedure applies.

29. Proceedings are much more informal than • court. For example, pleadings do not have • to follow the technical rules used in • litigation. Nor the technical rules relating to • admissibility of evidence. • Because of the provisions of the New • York Convention 1958, arbitration awards • may generally be easier to enforce in other • nations than court judgments. We will talk • about this in a later class.

30. Arbitrations are usually private and • confidential. This is usually attractive to • businesses who do not want the confidential • details of their business made public. • The parties can also decide what power • the arbitrators have to order the losing party • to pay the costs of the winner. • The law in the USA, UK and HK actively • protects and promotes arbitration. So if a • party brings an action in a court that falls • within an arbitration clause, then the

31. Courts will usually stop the litigation and compel the party to honour the arbitration clause. See the provisions of UK, US and HK/ Model Law set out at paragraph 7 of the notes. I have first hand experience of this when a Texas court stopped an action against my client and ordered the party to arbitrate in

32. Bermuda in accordance with the agreed arbitration clause.

33. Mediation/Conciliation These operate in a completely different way and are often referred to as non-binding or voluntary ADR. Mediation and conciliation are really means of helping people negotiate a settlement. I like mediations and have been involved in a number in London, Bermuda and the US. Obviously the key difference from usual negotiations is the involvement of a mediator or conciliator to help the

34. negotiations. We will discuss this in more • detail in the next class. • Benefits over the parties just negotiating • themselves include: • The parties can agree a structure to their • negotiations and so this can help the parties • focus on the important issues. • Sometimes the parties and their lawyers • hate one another or do not trust each other. • The involvement of an independent • mediator/conciliator can help to build

35. trust between the parties. The parties do • not have to deal face to face but through • the mediator - this can help reduce some • of the emotion and animosity. • Sometimes a client may have an • unrealistic view of the strength of its case. • It can be useful for an independent • mediator/conciliator to point out the • weaknesses of each party’s case and the • risks they face.

36. Most mediators/conciliators are trained • and experienced and they are therefore • skilled in trying to find the areas of • agreement between parties. • Litigation and arbitration are adversarial • and often ruin business relationships. The • parties stand a better chance of preserving • their future business relations by • negotiating a settlement. • There is tremendous flexibility in • procedure. The parties/the mediator can • agree a procedure they think best suited

37. to the dispute. • A negotiated settlement obviously reduces • legal costs and avoids the risk of losing in • court or at arbitration. • A sign of the importance of mediation is • that the Courts in England, the US and HK • all encourage parties to litigation to use • ADR (usually mediation) to try and resolve • their disputes. See paragraph 19 of the notes • I have first hand knowledge of this in the • Commercial Court in London. My client

38. wanted to mediate and our opponent did not. We told the judge and the judge asked the opponent why they did not want to try. In the end the Judge told the parties to at least try. The case was eventually settled at the mediation. Over the last 15 or so years, the Courts have persuaded many litigants to try mediation. I like the process but I remember many older lawyers not being Enthusiastic at the start.

39. Nowadays most lawyers are enthusiastic because it is what their clients want!

40. These different types of ADR work in different ways. Arbitration is an alternative to litigation - You cannot arbitrate and litigate the same dispute at the same time. However, the parties can (and often do) agree to mediate or conciliate a dispute that is before the courts or arbitration.

41. However, all share one important feature. All forms of ADR are consensual and so they only can apply if all parties agree to participate. This is, of course, different from litigation in the courts where a party has no choice about participating in a lawsuit as a defendant provided that the court has jurisdiction to hear the dispute. One party cannot compel another to arbitrate or mediate.

42. There are two ways that parties may • agree to use ADR • In a contract in a dispute resolution clause • before there is a dispute (this is my • favoured option) or • Agree after a dispute has arisen. • There are many types of clauses - a lawyer • must give the client the advantages and • disadvantages of each option so the • client can make an informed choice.

43. It is possible for the parties to agree to try mediation/conciliation before starting arbitration of litigation. Let’s look at some of the clauses in para 12 of the note.