Posts by Herb Silber

Herb Silber
Wednesday, October 8th, 2014    Posted by Herb Silber (posts)
Herb Silber
Herb Silber brings a strong combination of experience, knowledge and empathy to the arbitration process as Arbitrator or Counsel. Herb’s approach creates the positive, respectful atmosphere critical to a successful arbitration process.

Sattva Capital Corp v. Creston Moly Corp, 2014 SCC 53 (Sattva)

In the past I have posed the question as to whether Arbitration can be more cost effective and efficient than a court process. The recent Supreme Court of Canada decision, Sattva, provides a complete compendium on the right to appeal a decision of an arbitrator. The upshot of that case is to clarify (if it had been required) that the right to appeal an arbitrator’s decision, particularly when the subject matter of the arbitration is the interpretation of a contract, is very limited- even more so than an appeal from a decision of an inferior court. The result is that it presents another benefit to the insertion of an arbitration clause in an agreement for those parties who wish to ensure that, in the event of a dispute, the outcome of a decision by the arbitrator is likely to be final, thus limiting the cost and enhancing the efficiency of this alternative dispute mechanism. Sattva represents the latest pronouncement of the Supreme Court of Canada’s philosophical adherence to providing parties access to justice by limiting the ability to appeal an arbitrator’s decision, thus ensuring that the more financially robust party will not be able to “tilt the playing field.”

Briefly, the facts in Sattva involved a contractual dispute over a finder’s fee that Sattva alleged was owing to it. In particular, under their contract, Sattva was to be paid a fee of US $1.5 million in shares. The issue that the arbitrator was asked to consider was the date the shares were to be valued. Nine million shares hung in the balance based on the alternative dates each of the parties contended for.

The Court first dealt with principles of contract interpretation and concluded that as most contracts involved a consideration of mixed fact and the law, the right to appeal under S. 31 of the Arbitration Act, SBC 2004, which is limited to questions of law, would rarely be able to be resorted to. The result of this is that in arbitrations involving an interpretation of a contract, which is most often the case, the arbitrator’s decision is likely to be final.

 

Additionally, the Court weighed in on the test to be applied by a court reviewing an arbitral decision, if it has the jurisdiction to do so. The Court’s approach was to re-iterate the importance it places on giving great latitude or deference to the arbitrator in his decision making process. This stems from recognition of the importance of maintaining the integrity of the arbitral process. As the Court noted at paragraph 89 of Sattva, arbitration often is chosen “…to obtain a fast and final resolution…” Later at paragraph 105, the Court observed that “… it may be presumed that [because the parties choose their decision maker] such decision makers are either chosen based upon their expertise in their area which is the subject matter of the dispute or are otherwise qualified in a manner acceptable to the parties.” For these reasons, the Court identified that the test for overturning an arbitral decision should be akin to that of overturning a decision by an administrative tribunal-reasonableness. This presents a high bar to overturn an arbitral decision.

The Sattva case represents, in my opinion, a high water mark in the promotion of an efficient and cost effective process that the parties can look to if they choose to have any disputes that may arise in their commercial relationship governed by arbitration.

Tags: , ,

Posted by Herb Silber (posts) | Filed under Litigation and ADR | ....
Herb Silber
Tuesday, March 18th, 2014    Posted by Herb Silber (posts)
Herb Silber
Herb Silber brings a strong combination of experience, knowledge and empathy to the arbitration process as Arbitrator or Counsel. Herb’s approach creates the positive, respectful atmosphere critical to a successful arbitration process.

This is the third and final installment in the series on the topic of how arbitrations can be made more cost effective and efficient. The previous two articles considered strategies that could be deployed at the time the arbitration clause is negotiated and inserted in an agreement and at the time the dispute arises.

The biggest difference in the strategies during the arbitration itself is that this is the forum in which the Arbitration Panel has the most active role. At this stage the parties will have agreed, or will have been guided by the Arbitration Panel, as to the shape of the process and rules that will inform the Arbitration, so it leaves the greatest scope for the Arbitration Panel to exercise their discretion to assist in making the arbitration both cost effective and efficient. The Panel can, by their skill and creativity be part of a solution, or conversely, be part of the problem. The overarching principle that arbitrations are governed by can be found in Rule 19 (or a variation thereof) of the Rules of the BC International Domestic Arbitration Centre (BCICAC) which states:

  1. Subject to these Rules, the arbitration tribunal may conduct the arbitration in the manner it considers appropriate but each party shall be treated fairly and shall be given full opportunity to present its case.
  2. The arbitration tribunal shall strive to achieve a just, speedy and economical determination of the proceeding on its merits.

 

It is important for both Counsel and the Arbitration Panel to always be mindful of this rule when they are considering how the Arbitration will be conducted, both prior to the Hearing and at the Hearing. Rule 19 provides a balance between equity and efficiency, so that while each party must be treated fairly, they must also recognize that the arbitration process does not guarantee perfect justice.

Rule 19 gives the Arbitration Panel the discretion in the procedure to use in adopting its decisions. As an example, there is Authority to support the proposition that the Courts should not review an interlocutory ruling (not being an “award”). However, given that Arbitration is built on a consensual process, the experienced Arbitration Panel, should always try to encourage the parties to come to or build a consensus as to how the arbitration should proceed. The ability to do this separates the good arbitrators, who will be sought out, from others who do not have this mindset or skill.

Some ideas that should be considered by the Arbitration Panel, with the participation of the parties, would include the use of written submissions wherever possible, including having the Hearing done by way of a written hearing. This could be particularly useful if the facts are really not in dispute and could certainly result in a saving of time and costs. Other ways to make the Arbitration more cost effective may be to carefully consider, what if any cross examination may be needed and should there be time limits on it. Where expert witnesses are retained by both parties, should they meet and try to provide a “joint report identifying those matters which are not in dispute and those which are in dispute.”[1]

The ideas presented in the previous paragraphs are but a few that could be considered by the Arbitration Panel, working in conjunction with the parties to ensure that the Arbitration is cost effective and efficient, while still maintaining the important touchstone of “fairness”.

[1] Rule 27(3) BCICAC Rules

Tags: , ,

Posted by Herb Silber (posts) | Filed under Litigation and ADR | ....
Herb Silber
Thursday, January 2nd, 2014    Posted by Herb Silber (posts)
Herb Silber
Herb Silber brings a strong combination of experience, knowledge and empathy to the arbitration process as Arbitrator or Counsel. Herb’s approach creates the positive, respectful atmosphere critical to a successful arbitration process.

In my last article I looked at what could be done at the time the arbitration clause is negotiated to advance the efficiency and cost effectiveness of the Arbitration. How that process ends up will be a harbinger as to what can or cannot be done at the next stage, when the dispute arises.

Regardless, what is first necessary for one to do is to carefully read the Arbitration Clause and the Agreement it is found in to ensure that there are no false steps. One of the surest ways to protract the arbitration is to give fodder to the other side, should the party seeking to invoke arbitration makes a misstep. Some points to consider, therefore, to avoid this occurring are to identify if there are any limitations to be found in the agreement to permit the arbitration of the specific dispute. If there are, have “they passed” or do they need to be addressed? Has the dispute that has arisen such that it can be arbitrated? It may be for instance that the dispute is not yet “ripe.” Absent a” dispute” as contemplated by the Agreement containing the Arbitration Clause, there is nothing to arbitrate.

One consideration in British Columbia is whether to engage the BC International Domestic Commercial Arbitration Centre (BCICAC) to administer the Dispute, assuming they are not designated to do so in the Agreement under scrutiny. In the context of the objective that this article is addressing the benefit of having the BCICAC administer the Arbitration is to put time limits on the process as a starting point. As an example, Section 12 of the BCICAC Rules set out a time table for the appointment of an arbitrator after the Arbitration is deemed to have commenced (the filing of the Submission to Arbitrate with BCICAC along with the commencement fee). If the parties cannot agree on the appointment of an arbitrator within the time limits, one of the parties may request that the BCICAC appoint the arbitrator. There are similar default provisions in favour of the BCICAC if it is a three person arbitration panel to be appointed.

In my earlier articles I have written about the consideration of proceeding to mediation of a dispute before an arbitration could be sought. The challenge with that, as I have noted, is that if a provision to force the parties to choose that route is absent from the arbitration clause in the Agreement, then there is no mechanism to force the recalcitrant party to follow this path. That said, one option that might be considered to encourage the recalcitrant party to accept mediation is to hold over them the spectre of being penalized in costs. Rule 30 of the BCICAC Rules permits a party to make a Settlement Offer that the Arbitrator can consider, if it is rejected by the other side, when it comes to deciding issues of costs. I see no reason why a “settlement offer” by one party asking that the other refer the dispute to mediation before arbitration, once rejected, could not be a consideration by an arbitrator when it comes to deciding costs of the Arbitration. The BCICAC Rules gives the Arbitration Panel a wide discretion in deciding costs at the conclusion of the Arbitration.

Posted by Herb Silber (posts) | Filed under Litigation and ADR | ....
Herb Silber
Thursday, December 5th, 2013    Posted by Herb Silber (posts)
Herb Silber
Herb Silber brings a strong combination of experience, knowledge and empathy to the arbitration process as Arbitrator or Counsel. Herb’s approach creates the positive, respectful atmosphere critical to a successful arbitration process.

Perhaps the most important stage of the process to try to ensure the efficiency and cost effectiveness of an arbitration occurs when an arbitration clause is negotiated. Too often one sees an arbitration clause that merely refers the matter to arbitration in accordance with Commercial Arbitration Act [in B.C. now called the Arbitration Act]. That may lead to a convoluted process of negotiation between counsel as to how to best navigate the dispute. In B.C. the Domestic Arbitration Rules, which by virtue of Section 22 of the Arbitration Act are incorporated in every arbitration governed by that Act, provides most significantly that the Rules apply, except where the parties otherwise agree. This provides a baseline, at least, for the process. I have seen arbitration clauses that specifically exclude the Domestic Arbitration Rules. My view is that would be a mistake as it gives the parties the ability to try to take strategic advantage of one another, which will undoubtedly increase the cost and protract the time required to have the Arbitration heard.

There are a number of considerations that a party should reflect upon as to the wording of the arbitration clause, besides the nature of the process, that, depending on the nature of the underlying transaction, may advance the process and thereby reduce the cost and avoid delay. In this article I will take the opportunity to mention two that, in my experience, should always be part of the calculation. They are the following:

  1. Should the parties be required to go to mediation before they can resort to arbitration?
  2. The number of arbitrators

There is value, as I have indicated in the past, to giving serious consideration to requiring the parties to first seek a mediated resolution. As then noted, there is no mechanism, apart from agreement, to force the parties to mediate, as there is in under the Mediation Regulation accompanying an Action in the Supreme Court of British Columbia. My experience has indicated that mediation in advance of resorting to arbitration may be a useful tool, particularly in matters such as rent renewals under a commercial lease, where there is generally objective evidence to resolve matters and all that may be needed is the presence of an experienced mediator to get the parties to bridge the gap.

The selection of the number of arbitrators is also a key to conducting a cost effective and expeditious arbitration. I believe that the “default position” should be a single arbitrator. By that I mean there must be a cogent reason present before a three person panel is justified. Consideration could also be given to limiting the number of arbitrators based upon the amount of the claim; as an example, if one were dealing with an arbitration clause in connection with a dispute arising out of a sale of a business or a valuation issue. In this way, claims that are genuinely valued above a certain threshold (as spelled out in the Agreement itself) could, if insisted upon by one of the parties, result in a three person arbitration panel; and those below that value would be determined by a single arbitrator.

Tags: ,

Posted by Herb Silber (posts) | Filed under Litigation and ADR | ....
Herb Silber
Wednesday, October 23rd, 2013    Posted by Herb Silber (posts)
Herb Silber
Herb Silber brings a strong combination of experience, knowledge and empathy to the arbitration process as Arbitrator or Counsel. Herb’s approach creates the positive, respectful atmosphere critical to a successful arbitration process.

Introduction

One of the reasons often given as to why parties to an agreement build in a reference to Arbitration is because doing so will result in a more timely and less costly process then they would face if they went to Court. They are prepared to give up certain levers available in a Court process because they crave efficiency and cost savings. But as more and more parties resort to Arbitration, they are often surprised and disappointed to find that their “craving” is not only unsatisfied, but arguably the opposite occurs.

 

Some experienced commentators have offered the opinion that resorting to arbitration to achieve speed of resolution or cost savings can be a fool’s errand. Rather, the appeal of an arbitration should be seen in such benefits as its confidentiality, the ability to secure a person with expertise to evaluate the case and the preservation of ongoing relationships.

 

While these are all noble objectives, I do not believe that it is a hopeless task to expect efficiency and cost savings by resorting to Arbitration, but the path needs to be carefully thought out to achieve that result at the following stages:

  1. At the time the arbitration clause is inserted in an agreement
  2. Once the dispute arises
  3. At the stage the dispute is being arbitrated.

In successive articles I will examine in turn strategies to consider at each of these three stages to try to achieve the desired result of efficiency of process and the cost savings accompanying those efficiencies.

 

 

 

 

Tags: ,

Posted by Herb Silber (posts) | Filed under Litigation and ADR | ....