ADR Chambers

Toronto Star - Toronto, Ont.
Author: Nicki Thomas Date:
Jul 28, 2011

Democrats and Republicans are dead locked over how to raise the country’s $14.3 trillion (U.S.) debt ceiling before an Aug. 2 deadline. With both sides at an impasse, the Toronto Star asked Allan Stitt, a Toronto-based mediator and arbitrator who lectures on conflict resolution, for some insight into high-stakes negotiations.

Q. Is this one of the worst examples of a stalemate that you’ve ever seen?
A. “It’s one of the worst because the impact is so severe,” Stitt said. The gridlock has caused the U.S. dollar to fall and threatens to damage the country’s credit rating. But, Stitt said, stalemates like this happen all the time. “They are very common because both sides are trying to out-think the other side in terms of what they’ll be willing to do and when they’ll be willing to cave.”

Q. What drives a situation like this?
A. Stitt said it often gets to the point where both sides could theoretically say Yes to what the other side is offering but each thinks they can cause the other side more pain by holding out. “They believe that if (they) holdout a bit longer, the other side is going to cave,” he said, adding that in moments of honesty, they might admit they would be better off accepting what the other side has to offer.

Q. So how do you break through that?
A. Mediators always look for ways their clients can save face while getting what they really want -rather than what they say they want - without forcing them to go to the other side’s position. That’s the best-case scenario and a solution that’s so often open to people and they don’t explore it,” Stitt said. More commonly, both sides end up making concessions until they hit middle ground. “People start to realize that they’re hurting everybody and in this case, they’re hurting an entire country by continuing to be obstinate.”

Q. Is there any way for the two sides in the U.S. to save face?
A. “Definitely,” Stitt said, but they have to get creative. If both sides could get together privately, with a promise that discussions would not be leaked to the media, they could talk honestly about what they really want and need.

Q. Do you think it’s more likely they’ll start making concessions instead?
A. “Unfortunately, the practical reality is they just start giving on issues,” he said, adding that the real problem is posturing from both sides. “Nobody really knows which issues are really important to either side because they’re all pretending that every issue is extremely important.”

Q. What are some of the other classic mistakes made in negotiations?
A. “They get caught up in their own rhetoric” Stitt said.” Over time, they become so entrenched in their positions that it becomes a matter of principle and they’re unwilling to budge, he said. “That’s really what’s happening here”.

Q. This is a pretty juicy negotiation. Would you like to be stuck in the middle of this?
A. “The truth is, I would,” Stitt said. “Maybe it’s the eternal optimist in me but I do believe that there are creative ways to overcome some of these difficulties. Sometimes you need someone in the middle to take the pressure on them instead of on the parties.”

Published on www.mississauganews24.com on July 21, 2011

BRAMPTON - The City of Brampton has stepped ahead of the curve, being one of the few Ontario municipalities to retain an Integrity Commissioner. ADR Chambers will serve in this role for a one-year period. ADR Chambers will act as a key advisor to Council on a range of important issues by providing education and advice to Council Members. The Office of the Integrity Commissioner will also preside over complaints investigations and perform functions related to the application of the Council Code of Conduct, and City legislation, rules, procedures and policies governing the ethical behaviour of the Mayor and Councillors.

The Office of the Integrity Commissioner will only pursue questions and complaints relating to Council Members. A Public Complaints Process is in place for complaints on alleged City of Brampton staff misconduct. Details on both the Office of the Integrity Commissioner and the Public Complaints Process can be found online at www.brampton.ca.

The Office of the Integrity Commissioner operates independently of City Council and City staff.

Read on (Mississauga 24 website).

by John G. Davies B.Arch., C.Arb.
“Claims should not be regarded as either inevitable or unpalatable, and complying with claims procedures should not be regarded as being an aggressive act.”
(The FIDIC Contracts Guide)

Stepped Alternative Dispute Resolution (ADR) provisions have been progressively incorporated into Canadian standard construction contracts (and the standard subcontract) since the concept was first introduced in 1994.
Typically these provisions exist to permit an aggrieved party to challenge:

1. an interpretation, application or administration of the contract or a failure to agree where the contract requires such agreement, which has not been resolved by a finding of the consultant (or, in the subcontract agreement, the contractor) … or

2. a matter in which the consultant has no authority to make a finding.

Such challenges are formally called disputes under the terms of each contract. Disputes are to be resolved in the first instance by way of amicable negotiation, followed, in the event of failure, by mediation and finally by way of binding arbitration. This is the process known as stepped ADR.

Although the Canadian Construction Document Committee’s (CCDC) original intent was to expedite the timely and cost-effective resolution of construction disputes, ADR provisions have not always accomplished these goals in practice.

Although the wording of the ADR provisions in this context was intended to function as a Scott Avery clause (condition precedent to further action) there remains some doubt as to whether it achieves this status with regard to the negotiation and mediation components.

Typically, stepped ADR provisions are found in the “PART 8 - DISPUTE RESOLUTION” general conditions contained in each of the standard forms. They incorporate, by reference, the standard Rules.

The burden of invoking these provisions in a timely manner resides in the aggrieved party issuing a timely notice in writing to the other party(ies) to the contract (and to the contract administrator).

A timely response from the other party(ies) is required to preserve the disputed status and to advance the dispute to the next stage for resolution.

Failure by the other party(ies) to respond within the time limits set out in the Rules will result in the aggrieved party securing a favourable default finding and in the irretrievable abandonment of the dispute by the non-responsive party to the benefit of the aggrieved party.

If the provisions are strictly followed, the parties are bound to settle their collective disputes without further recourse. The matters at issue, if subjected to the full path set out in the Rules and within the appropriate time limitations, will eventually be settled by final and binding arbitration with no opportunity to appeal such awards.
If, on the other hand, neither party exercises the binding arbitration option, the condition precedent of employing the dispute resolution mechanisms enshrined in the contract evaporates, and resolution can be sought in any forum available to the parties, such as litigation or even a form of arbitration that does not necessarily need to be conducted under the CCDC 40 Rules.

Both the Design-Build and the CCDC forms of contract provide for the parties to appoint a project mediator.
Since it is the parties who appoint the project mediator, it is reasonable to conclude that the mediator’s appointment will be paid for by both parties; that the mediator will be unconflicted; and that he/she will be impartial when performing its duties.

While the potential for such appointments has been enshrined in these contracts since their introduction, it is rare that they actually take place. This is unfortunate, since the appointment of a project mediator is much easier to achieve before the commencement of a dispute(s), than when animosity and acrimony have replaced the spirit of cooperation on a project.

While the standard provisions permit the appointment of the project mediator within 20 working days after the award of contract, it is, in fact, not only possible, but also quite feasible for an owner to include a list of pre-qualified/conflict-evaluated project mediators in its call for proposals/tenders. Such an approach permits a proponent/bidder to select a mutually acceptable project mediator from a pre-approved list for inclusion in its tender/proposal submissions. Employing such an approach, the project mediator could be appointed as early as the date of award of contract, before any disagreements arise between the parties and before time runs short to reach agreement on, and to appoint, (or to have the court appoint) the project mediator in the more traditional manner.
While many mediators in Canada are lawyers (who may have taken special training in the process of mediation), there is nothing to prevent architects and engineers from fulfilling this role. In fact, A/Es, with the right sort of training in mediation, have additional qualifications that may be especially helpful in this context. They are also free of the more traditional yokes of conflict of interest and perceptions of bias (ever present in the traditional contractual relationship structures) and can perform an independent, impartial, arms-length and constructive expert professional duty.

The problem with the early introduction of negotiation-based dispute resolution methods into the construction dispute resolution process is that these methods become, by way of the express wording of the contract, the only option available to the parties at a time when there has been no serious attempt to solve the dispute within the context of the wording of the contract. If a dispute arises, for example, as a result of a flawed consultant’s finding or worse, a self-serving, biased or partial consultant’s finding, there is no available path within the wording of the standard forms to secure a resolution within the four corners of the contract. Instead, techniques are immediately imposed on the parties to seek ‘outside the box’ negotiated (or assisted negotiated) solutions.
Only when these techniques fail to arrive at a resolution do the Rules permit reverting to the wording of the contract to secure a final and binding arbitral resolution. There is, for example, no opportunity to test the credibility of the consultant’s findings before embarking on mandatory stepped ADR.

A unique feature of the CCDC Rules is that when the mediator has exhausted all available avenues of resolution within the allotted time, he is required to terminate the mediation in writing. This approach is unique because traditionally, the mediator’s role is to assist the parties in reaching a resolution - not to act in an arbitral capacity. In a traditional mediation each party is normally seen to be in control of its own contribution and is free to withdraw from negotiations or mediations at any time it chooses. However in this instance a decision to terminate mediation by the mediator is beyond the control of the parties. It is the mediator who makes the decision and thereby controls the outcome. On the one hand, this is a powerful incentive to the parties to reach a settlement early in the mediation proceedings, on the other, this approach is unorthodox and contrary to what one normally expects of a mediator. The effect of this extrinsic decision will automatically result in the escalation of the dispute towards the only other remaining method of resolution available within the wording of the contract - binding arbitration.

Although the stepped ADR process set out in the standard contracts offers a potentially less expensive and more expedient solution to construction disputes than the more conventional route of pursuing litigation through the courts, the process of arbitration is, in many ways, becoming just as expensive and time consuming as litigation, with the added impediment of an inability to appeal the final and binding award, except under very narrow circumstances. The current stepped ADR method promulgated by CCDC in Canada, by its very structure, also eliminates opportunities to consider other tried effective and equally appropriate, methods of dispute resolution. However, these other alternatives are worthy of consideration.

Partnering:

Partnering involves a method of dispute resolution based on the principle that the best persons to resolve a dispute are those persons most closely involved in the matter on a day-to-day basis. A set period of time is allowed for these parties to resolve the dispute. Failure to do so within the allotted time requires that the dispute be escalated up the parallel ladders of authority (pre-determined by both the owner and contractor at the outset of the contract) to the next level. Again, a period of time is established for resolution at this parallel higher level of authority. Further failure requires further time limited escalations until either a resolution is achieved, a stalemate ensues at the highest level of authority or the allotted time expires. Failure at this level usually requires recourse to an alternate method of dispute resolution (e.g. mediation, arbitration or litigation).

Partnering relies on the psychological effect of a person striving to resolve a dispute at the lowest level in the quickest possible time. It could be perceived as failure on the part of the lower levels of authority not to quickly resolve a dispute before the dispute is escalated up the parallel ladders of authority. Accordingly, disputes usually get settled within established time frames by the lowest levels of authority possible on a project – just as a matter of individual pride. (In a testosterone ridden culture such as that present in the construction industry, values such as status, respect and pride are powerful motivators).

Cooperation at the lower levels of authority is encouraged and persons responsible for resolving disputes at each level are encouraged to bond with one another and sign undertakings to adhere to pre-negotiated partnering manifestos - usually following attendance at a pre-construction retreat seminar on the Partnering Method of resolution.

The benefits of this method are threefold:

1. It encourages dispute resolution in a cooperative, rather than an adversarial, manner;
2. It is inexpensive; and
3. It is quick, final and binding.

Third Party Neutral Evaluation:

An independent third party, with experience in the subject matter, called a “neutral”, is engaged by the parties to evaluate the relative merits of their dispute. The neutral’s fees and expenses are payable by all parties in advance of the delivery of the services. The neutral is required to not have any conflicts of interest or, in the alternative, to declare such conflicts and to have the parties expressly waive any concerns they may have in this regard in writing. Both parties are permitted to present their arguments to the neutral. The neutral then offers a non-binding evaluation and opinion as to the potential outcome of the dispute based upon its assessment of the relative strengths and weaknesses of each party’s case. Each party can then assess its own position with regard to pursuing the matter further or to settling the matter by negotiation.

Benefits include:

1. The service is performed by a totally independent third party free of those ongoing business pressures arising during the course of a project that tend to influence and impact on the timely resolution of disputes;
2. It permits the parties to evaluate their various positions and to make an informed decision as to whether to advance the dispute to the next level of resolution; and
3. It establishes the first opportunity for the parties to settle before the dispute takes on a life of its own.

Expert Determination:

An independent third party who is an expert in the subject matter is engaged by the parties in much the same manner as the third party neutral evaluator described above. The expert is given free reign to investigate all aspects of an individual dispute, and is able to assemble information gained from being permitted free access to all files and conducting one-on-one interviews with anyone who has a background in the dispute, with or without the other party to the dispute being present.

The expert is permitted to visit the site at will, accompanied or unaccompanied as he/she sees fit. The purpose is to gain full knowledge of all information that is available, from whatever source, without interference, to the extent needed to arrive at an expert determination of the facts. A report is prepared based on the expert’s findings and the expert’s determination based on these findings is presented. The parties agree to be bound by the expert’s determination and there is no appeal.

Unlike most forms of third party intervention, in which the provider cannot be held liable for the outcome of its findings or awards (much like a judge), a person who offers expert determination services is performing a technical professional service and is bound to bear the consequences of any negligent error, inconsistency or omission that may arise as a consequence of the performance of such services. It is wise, therefore, for the expert to include in any contracts for service appropriate wording addressing indemnification and immunity from prosecution or, at a minimum, to limit any exposure to liability arising from the performance of such services to a maximum financial limit (usually the maximum coverage of the E&O insurance coverage).

Benefits include:

1. The introduction of an expert in the subject matter of the dispute to take an informed look at the dispute, again free from the ongoing pressures of a project in progress;
2. Having an independent third party decide the matter in an expert and defensible manner thereby allowing the project to continue before the burden of adversity and acrimony destroy the project morale; and
3. The service is a professional service that, if flawed by negligent errors and omissions, can be the subject of further action to recover damages from the expert.

“Hot Tubbing”:

Each party to a dispute engages, pays for, and briefs an expert in the subject matter. The experts are then encouraged to engage one another at a peer-to-peer level and to collectively negotiate a solution independent of, and beyond the influence of, the aggrieved parties. The parties to the dispute agree to be bound by the joint resolution offered by the experts.

Benefits include:

1. The technical problems are abstracted from the day-to-day progress of the work;
2. Collective expert minds are brought to bear in dealing with complex matters, free of commercial interests;
3. Findings are usually consensual and in many cases unanimous; and
4. The process is quick, final and binding.

Dispute Adjudication Boards:

The International Federation of Consulting Engineers (FIDIC) approaches the role of the consultant in a different manner from that anticipated by the Canadian standard forms. While the Canadian standards include content addressing the role of the consultant (project engineer) as an impartial administrator and arbiter in the first instance, the international suite of standard form contracts expressly denies the impartial character of the role of the engineer who is engaged by the owner (or “employer”, in the international, rather than the Canadian, meaning of the word) and limits it to performing only pre-arbitral and express duties while exercising specified authority. Under this international model, the engineer has no authority to amend the contract, and:

(a) whenever carrying out the duties or exercising authority, specified in or implied by the Contract, the Engineer shall be deemed to act for the Employer;

The role of the engineer is thus not conceptualized as that of a wholly impartial intermediary, as it is in Canadian contracts.

Of particular note is the FIDIC’s use of an independent dispute resolution process employing a Dispute Adjudication Board (DAB). While the engineer, when acting for the employer, can make pre-arbitral ‘determinations’ in response to claims (but not disputes) raised by the contractor , these determinations (and re-determinations) are always subject to challenge and dispute by the contractor. In the interim, and unless disputed, these determinations become binding on the parties in much the same manner as interpretations and findings made by the consultant in the Canadian context, except that there is no requirement that these determinations have to be made in a strictly impartial manner. Instead, they only need to be made in a professional manner and certainly not in the capacity of arbiter in the first instance.

Should the contractor consider itself entitled to an extension of time, to additional payment, or both; suffer delays, or incur additional costs; or dispute pre-arbitral determinations made by the engineer, then it must give timely notice to the engineer, employer and to the dispute adjudication board (DAB) in order to preserve its alleged entitlement.

A DAB is appointed contemporaneously with the awarding of the contract, before the contractor commences the works. It comprises either one or three (or more) suitably qualified persons who are empowered by way of a collateral contract between the employer and the contractor on the one side and the DAB on the other.
FIDIC and other Dispute Board professional organizations offer lists of independent pre-qualified professional Dispute Board Members to employers for use in determining the make-up of DABs when procuring work from contractors. Short-listed selections are customarily listed by the employers in their tender forms for selection by successful tenderers when submitting their tenders. The terms of remuneration of the DAB are mutually agreed upon by the parties when agreeing the terms of the appointment. Each party is responsible for paying one-half of the required remuneration.

In order to maximize the DAB’s performance, its member(s) must be suitably qualified, impartial, and accepted and trusted by both parties. Equally important, they must be free from any prior relationships that could be seen to lead to bias or a conflict of interest — limitations of a minimum of two years free from prior involvement with either party are imposed on potential board members in order to further reduce the perception of bias or conflict. Therefore, although the employer usually prepares the tender documents and may prescribe the number of members of a proposed dispute adjudication board, it is essential that the adjudication arrangements and the membership of the DAB are all mutually agreed upon by the parties, and not imposed on one another by either party.

The DAB members are required to periodically visit the construction to such an extent that they are current, familiar with, and fully informed as to, the progress of the works. They are permitted access to all documentation and are allowed to attend such meetings as may be necessary to become and remain informed. They are prohibited from performing any sort of advocacy for either of the parties (unless the delivery of such advocacy is agreed to by both parties) and they remain under a constant duty to disclose any potential conflicts of interest that may arise during their term of office. The parties are jointly and severally liable to pay the DAB and any default by the contractor to do so will result in the employer paying the full amount due and deducting the defaulted half from any amounts owing by the employer to the contractor. (Conversely the delinquent amount may be added to a progress draw when the employer is in default.)

The DAB issues written ‘decisions’ with ‘reasons’ in much the same manner as an arbitrator would and these ‘decisions’ become binding on the parties unless one of the parties issues a formal notice of dissatisfaction within a strictly enforced contractual time limit.

The issuance of such a formal notice gives rise to the requirement to achieve an ‘amicable settlement’ and, failing that, binding arbitration.

Benefits include:

1. A more structured and formal method of dispute management for an entire project;
2. Support from established organizations whose members are pre-qualified for the roles of board members;
3. Established standard forms of contract for the engagement of board members;
4. Established payment structures for board members that have been tested over time internationally and have been accepted as being reasonable;
5. Established codes of ethical behaviour are in place governing the activities of board members; and
6. Procedures have been tested in the courts and there is considerable precedent enshrined in the jurisprudence of many countries both in the common law and civil code jurisdictions regarding disputes arising out of processes employed by these boards.

Other Forms of Dispute Boards:

Various other forms of dispute boards are employed on construction and engineering projects throughout the world. The International Chamber of Commerce (ICC) based in Paris, France, for example, promulgates three distinct applications based on the dispute board principle:

1. Dispute Review Boards (DRBs): Issue non-binding recommendations for consideration by the parties. If neither party objects, then the determination becomes binding on the parties. Failure to agree leaves the parties free to select any appropriate method of resolution (litigation, arbitration, expert determination, etc.)
2. Dispute Adjudication Boards (DABs): Issue enforceable provisionally binding decisions. These decisions may be reversed or modified by an arbitral panel or the court should one or other of the parties succeed in securing such a hearing. In the interim these decisions remain binding on the parties.
3. Combined Dispute Boards (CDBs): Issue non-binding recommendations that may be upgraded to provisionally binding decisions.

Dispute boards have been successfully employed in North America on the Washington D.C. Metropolitan Transit Authority project ($3B), the Boston MA “Big Dig” ($14.6B), the Toronto TTC Twin Tunnels Sheppard Subway Line ($1B), and the Niagara Water Diversion Tunnel Project ($1B) (currently under construction). Internationally, they have been successfully employed in the construction of the UK/France Channel Tunnel ($21B), the China Yellow River Diversion Project ($1.5B), the Hong Kong Airport ($15B), and the Docklands Railway Project in UK ($0.5B).
While these examples are all related to mega-projects, the governing principles still apply to smaller projects. All of the above projects possessed the common denominator of decision makers that were totally independent of the parties, highly skilled in their respective roles, paid for equally by both parties, all of whom had passed the conflict of interest and perception of bias tests and who were eminently qualified to act in the capacity of a dispute board. These are all qualities that could well be deployed on smaller projects as a viable alternative to the arbiter in the first instance method currently favoured by the Canadian construction contracts. While there may be more costs associated with the dispute board method, there is less likelihood that projects will become mired in disputes involving flawed interpretations and findings offered by conflicted and biased consultant/arbiters in the first instance. Although money is required to be spent on resolving contract disputes, with the dispute board method it is spent strategically, with a focus on expediting informed and unbiased resolutions, as opposed to arguing many and diverse points of law.

Legislated Adjudication:

Adjudication is a method of binding resolution distinct from arbitration or litigation. It is unsupported by arbitration laws and conventions, and the adjudicator decides based on its own skills and enquiries rather than the submissions of the parties, in much the same manner as the expert determination approach described above. Decisions are frequently interim and subject to appeal within time limitations, but otherwise binding on the parties.
In North America, all construction adjudication is founded in contract law, but there is a growing movement overseas to legislate adjudication as a method of dispute resolution for construction contracts. Laws requiring adjudication of construction disputes have been enacted in the UK , Australia, and Singapore. While the UK legislation addresses all types of construction disputes, the others mainly govern the outcome of payment disputes arising out of construction contracts at all levels, whether they are supplier or subcontractor-generated disputes, or top-down disputes generated by owners or general contractors.

Statutory adjudication has been in place in these jurisdictions for several years now, particularly in the UK. To a large extent, although considered ‘rough and quick justice’, these regimes appear to be working in most cases. The strongest criticisms relate to the time limitations imposed on the appointed adjudicators to reach their binding conclusions, and much ‘justice’ is sacrificed on the altar of expediency.

Adjudicators under these statutes are almost always appointed by independent organizations who keep lists of appropriately qualified individuals who they assign to resolve disputes. Adjudicators are paid by the parties on a joint and several basis and their awards are enforceable through the Courts.

The process of adjudication can be focused on single disputes or, more recently, has been performed by multi-member dispute adjudication boards promulgated by such organizations as FIDIC, the ICC, or the Dispute Board Federation.

At this time there is a movement afoot in the jurisdiction of Ontario to introduce a form of statutory adjudication in the construction industry based on the UK model, but adapted in a manner that recognizes and complements the existing lien legislation.

While the current CCDC contracts and Rules signal a structured approach to dispute resolution they, by their very structure, exclude the many and varied alternative methods of dispute resolution that are otherwise available, and in some cases more appropriate to the type of dispute involved. Unless and until the CCDC rules are adapted to permit other equally appropriate methods of dispute resolution, the attraction of stepped ADR, as being the only solution to problem solving, will remain unpopular and underutilized in the construction Industry in Canada.

Believe it or not, the Italian Bar Association is calling on its members to strike in opposition to a mandatory mediation law. According to the website for the Organismo Unitario dell’Avvocatura Italiana (the Italian bar association- www.oua.it, lawyers are being asked to participate in a strike from March 16-22, and a public protest demonstration on March 16th. The strike is aimed at a new law commencing March 21st, requiring mandatory mediation in certain cases. Lawyers are being asked to attend the protest and to cease work on all cases during that period.

Interestingly, the timing of the strike blankets a national holiday (March 17-18) and a weekend (March 19-20), effectively extending what is already a four day weekend.

Now that mediation is an accepted part of the civil litigation process, we forget that in other parts of the world, lawyers are still fighting against measures that may settle cases and reduce legal fees. Even though there is a significant backlog of cases in Italy, lawyers are obviously not taking this new law lying down.

That said, it is interesting that the Government passed the law notwithstanding such strong opposition from the Bar.

Written by Paul Godin, LL.B., C.Med

Having mediated a number of trust disputes, I have noticed several challenges specific to mediating trust cases. One is that the involved parties can be quite varied, including the beneficiaries (who ironically may have no legal standing to make decisions), the trustees (who may have no personal stake in the real dispute), the settlor (who may or may not have any standing, but has a large moral investment in the issues), a protector (if any), and perhaps others. Beneficiaries themselves may often have conflicting interests in regard to the trust property. More parties generally means agreement is harder to achieve.

The architecture of parties can easily complicate the decision-making process, which requires extra work on the front end clarifying who the “parties” are and the nature of their respective roles to avoid future roadblocks.

In one case, a trust company was the trustee and was the technical “party” to the litigation. On a practical level, however, the beneficiaries were the ones truly impacted, but were not litigation “parties”. Unfortunately, the trustee could not simply do what the beneficiaries wanted since the trust contemplated potential (as yet unborn) beneficiaries. That class of potential beneficiaries also had to be protected by the trustee, even if it meant going against the very living beneficiaries who were the primary focus of the trust. As a result, a mini-negotiation between the beneficiaries and trustee became necessary.

A second challenge is lack of flexibility. Various (often sensible) options may be precluded by the terms of the trust. For example, in the case of the Barnes art collection, the Barnes trust document precluded any sale or loan of the art in the trust, even if it was to earn money to protect the remaining assets. Many trusts do allow for flexibility in the trust to be created by certain acts (e.g., replacement of trustees, amendment of terms), which may create flexibility in option generation, but the extra step involved is a significant hurdle in getting parties to consider viable options. When parties take positions because the trust document limits their flexibility, remember that the trust itself may be negotiable.

Written by Paul Godin, LL.B., C.Med

Originally published in Lawyers Weekly Magazine
Written by Luigi Benetton
Link to Luigi Benetton’s website with article

Face-to-face mediations won’t go away, but for cost reasons, they sometimes give way to videoconferencing.

Some professional mediators are banking on this trend. “It’s a great time to do online mediation,” Petra Maxwell says. The founder and CEO of New York-based MediationLine LLC, a “veteran” of about 15 video mediations (plus portions of others) gives several reasons why online mediation should take off. For starters, legal bills can quickly add up, and as the current economic climate continues to take a toll, people’s interest in saving money rises. Meanwhile, divorces, business disputes and other events calling for conflict resolution continue to occur.

There’s also an increasingly techno-comfortable market segment that expects such services. “In a divorce I recently mediated, the male was in New York, while the wife had already moved to California,” Maxwell explains. “They heard I handled mediation online and called me, asking to use Skype.”

Mark Shapiro is a newbie compared to Maxwell, having only participated in one commercial mediation so far. While with his former firm, the Toronto-based partner at Dickenson Wright LLP found himself in the offices of dispute resolution service provider ADR Chambers with the mediator (live) and the other party (via video feed from Ottawa).

“Sometimes you get cases in which dollar values aren’t huge, and this makes mediation cost-effective,” Shapiro says. “To mediate otherwise, lawyers and clients would have to travel.”

Allan Stitt, president of ADR Chambers, admits cost savings may be the only reason to use what his company calls eVideo mediation. “People can be in different cities and can cost-effectively participate in mediation,” he explains. “If somebody has a three-hour mediation, they’re only there for three hours.”

Driving home the cost savings point, he openly states that ADR Chambers charges $250 per remote location, “so lawyers ask whether they would rather pay the $250 or fly to another location for face-to-face meetings.” (Maxwell’s home page states that her services start at $249.)

Joan Kessler is another newcomer to video mediation. “I conducted a mediation where one party was in Korea,” says the Los Angeles-based expert on intercultural communications, and mediator and arbitrator for ADR Services Inc. “He did not want to fly to LA, so we arranged with attorneys to use Skype.”

“It lasted all day for us and well into the night for him. I could see he grew weary, but I had him in the loop.”

Shapiro figures the typical mediation process supports the logic behind video mediation. “After the opening caucus, the mediator shuffles between parties sitting in different rooms. The parties are not in the same room 90 per cent of the time. Do they even need to be in the same city?”

The end-to-end service from ADR Chambers impressed Shapiro. “The settlement documents were prepared, PDFed, signed and returned as if a mediator was there,” he says. “We left that mediation with a signed settlement agreement.”

Stitt claims the concept isn’t new. “At a conference in the States, I attended a session on online dispute resolution and I wanted to figure out how to create an online mediation system, to create the same feeling you get in a live mediation,” he recalls.

The system at ADR Chambers differs from generic videoconferencing. “The mediator controls the process,” Stitt explains. “People can be all on together, and the mediator can ‘drag’ people (the mediator included) into caucus and other ‘rooms.’ The mediator can ‘knock’ on the ‘door’ of a caucus, asking if the party is ready to speak.”

“The mediator can pull up drawing tools to illustrate situations, fill in settlement agreements right on screen.”

Maxwell and Kessler won’t get such tailored features from services like Skype or Google Talk, but these services do have advantages: they’re easy to install, easy to use, and free.

Nobody claims video mediation is anything but a second-best option to live, face-to-face meetings, especially given the ease with which mediators can perceive non-verbal communication from people in the same room.

“In one mediation, the couple sat together in a room and I was in another location,” Maxwell says of one Google Talk session. “I couldn’t see them both onscreen, so they had to shift the camera. I could not see all the cues, the rolling eyes, the fidgeting.”

“It helps to do a face-to-face meeting first,” Maxwell continues. “I need to see how parties interact with one another.”

Skype reliability hasn’t been perfect either, as Maxwell claims she has had to switch parties to conference calls several times.

Technical sophistication doesn’t seem to be necessary. Kessler claims she isn’t the most tech-savvy person, while Maxwell says she’s comfortable with technology, and both quickly figured out Skype.

Maxwell plans to do follow-up coaching post-mediation using online video. “It will probably take me a few months to build this out,” she says.

Paul Godin, LL.B., C.Med

As mediators, the first step to helping people engage more productively in their challenging conversations is to understand what makes them challenging in the first place. Once we understand the cause, we can develop a communication plan in the mediation to maximize the likelihood of productive discussion. In their book, Difficult Conversations, Stone et al. suggest that difficult conversations have their roots in three sources- the What Happened conversation, the Feelings Conversation, and the Identity Conversation. The What Happened conversation creates tension because people disagree on factual issues. Their stories differ, or appear to differ. The Feelings conversation involves tensions caused by strong emotions. Many people are uncomfortable dealing with strong emotions, either their own emotions, those of others, or both. The Identity conversation involves difficulties arising when people have their pride and sense of self challenged (like in a performance review). Most people get upset and/or defensive when their sense of self is challenged, directly or indirectly. When these tensions erupt, conversations are far more challenging for all concerned.

My surveys of students over the years have identified three other general challenges in conversations- Past History, Conflicting Goals, and Challenging Communication Processes. When people have a Negative Past History (personally or organizationally), it creates a negative filter through which any current conversation is seen, and that makes productive conversation much harder. When people perceive the other party to have Conflicting goals or to be a barrier to achieving their goals, the competitive element of conversations is ratcheted up significantly, and the other side may be seen (and treated) as the enemy. Finally, if there are Communication Process Challenges, productive conversation can be very hard to achieve even with good intentions. Put a conversation in front of an audience, for example, and it is not the same conversation anymore. A rushed conversation is rarely as effective as a planned one.

As mediators, if we can identify or anticipate challenges like these, we can plan our mediation process to minimize their negative impact. If negative history is an issue for example, it may help to explore why people did things that upset the other side. Explanations can often start healing even old wounds. If strong emotions are a concern, it may be possible to manage them by allowing them to be aired in caucus, where no damage will be done to the parties’ relationship.

Paul Godin, LL.B., C.Med

With the recent passing of Bill 68 (C. 16, S.O. 2010), Ontario now has a new Act governing mediation in the commercial setting, the Commercial Mediation Act, 2010.
The Act applies to commercial disputes, unless the parties opt out of the Act, but does not apply to,
(a) a mediation under or relating to the formation of a collective agreement;
(b) a computerized or other form of mediation in which the mediation is not conducted with an individual as the mediator;
(c) actions taken by a judge or arbitrator to promote settlement of a commercial dispute during the proceedings; or
(d) Ontario Mandatory Mediation Program mediations.

There was concern that the new Act not conflict with existing mediation programs. The Act now sets out guidelines defining the commencement and termination of mediation and addresses such topics as:

Appointment of a Mediator and Conflict of Interest- Mediators have a duty to disclose a current or potential conflict of interest or circumstances raising a reasonable apprehension of bias. A mediator who discloses a conflict may subsequently act or continue to act as the mediator only with the consent of all parties given after full disclosure of the facts and circumstances. A person is deemed to have a conflict of interest with respect to a mediation if,
(a) the person has a financial or personal interest in the outcome; or
(b) the person has an existing or previous relationship with a party related to a party to the mediation.

Conduct of the Mediation- The parties and mediator may agree on process, and the mediator controls the conduct to the extent the parties haven’t agreed otherwise, in a manner that treats the parties fairly. Mediators may make settlement proposals.

Disclosure of Information- A mediator may disclose to a party any information relating to the mediation that the mediator receives from another party unless that other party expressly asks the mediator not to disclose the information. Information relating to the mediation must be kept confidential by the parties, the mediator and any other persons involved in the conduct of the mediation unless,
(a) all the parties agree to the disclosure and, if the information relates to the mediator, the mediator agrees to the disclosure;
(b) the disclosure is required by law;
(c) the disclosure is required for the purposes of carrying out or enforcing a settlement agreement;
(d) the disclosure is required for a mediator to respond to a claim of misconduct; or
(e) the disclosure is required to protect the health or safety of any person.

The requirement to keep mediation information confidential does not apply to information,
(a) that is publicly available;
(b) that the parties, by their conduct, do not treat as confidential; or
(c) that is relevant in determining if the mediator has failed to make a disclosure required under subsection 6 (3).

Admissibility of information- The following information is not discoverable or admissible in evidence in arbitral, judicial or administrative proceedings:
1. An invitation by a party to mediate, a party’s willingness or refusal to mediate the dispute, information exchanged between the parties before the mediation commences and any agreement to mediate the dispute.
2. A document prepared solely for the purposes of the mediation.
3. Views expressed or suggestions made by a party during the mediation concerning possible settlement of the dispute.
4. Statements or admissions made by a party during the mediation.
5. Statements or proposals for settlement made by the mediator.
6. The fact that a party indicated a willingness to accept a proposal for settlement made by the mediator.
7. The fact that a party or the mediator terminated the mediation.

The information referred to above may be admitted in evidence to the extent required by law, to carry out or enforce a settlement agreement, to respond to a claim of mediator misconduct, or if all of the parties to the mediation consent (and, if the information relates to the mediator, the mediator consents). Information about the conduct of a party to the mediation or the conduct of the mediator may be disclosed after the final resolution of the dispute to which the mediation relates for the purpose of determining costs of the mediation or of proceedings taken because the mediation did not succeed. Information created for purposes other than a mediation does not become inadmissible only because it was used in the mediation.

The provision that conduct can be disclosed in relation to costs claims is a concern, but mediators and parties can contract out of that exception to confidentiality in the mediation agreement.

Med-Arb - The default in the Act is that med-arb is not permitted, but parties may agree otherwise.

Settlement Agreements and Enforcement - A settlement agreement or minutes of settlement are binding on the parties to the mediation who sign them. If a party fails to comply with the terms of a settlement agreement, another party wishing to enforce the agreement may, on notice to all other parties who signed the agreement, apply to a judge of the Superior Court of Justice for judgment in the terms of the agreement; or apply to the Superior Court of Justice for an order authorizing the registration of the agreement with the court. No judgment or order shall be granted if it is shown that a) the defaulting party did not sign the agreement or otherwise consent to its terms; b) the settlement agreement was obtained by fraud; or c) the settlement agreement does not accurately reflect the terms agreed. Filing a copy of the settlement agreement with the registrar pursuant to an order authorizing the registration gives the settlement agreement the same force and effect as if it were a judgment obtained and entered in the Court. The costs associated with the registration of the settlement agreement are recoverable as if they were sums payable under a judgment.

Enforcement of mediator’s fees – If a written agreement signed by one or more parties contains a clear undertaking by one or more of the parties to pay the fees of the mediator and sets out the amount of fees and expenses payable or the manner of calculating the fees and expenses, the mediator’s fees are subject to the same enforcement rights described above. While giving a simplified legal route for enforcement issues, the reality is that few mediators are likely to actually use it to chase clients for fees.

The Commercial Mediation Act, 2010 is now in force. A copy of the full Act is set out below.

SCHEDULE 3 COMMERCIAL MEDIATION ACT, 2010

Purpose 1. The purpose of this Act is to facilitate the use of
mediation to resolve commercial disputes.

Application 2. (1) Subject to subsections (2), (4) and (5), this Act
applies to a mediation of a commercial dispute if the mediation commences on or after the day this Act comes into force.

Agreement to opt out of or modify application of Act
(2) The parties to a mediation of a commercial dispute may,
(a) agree not to have this Act apply to the mediation; or
(b) subject to subsections 4 (4) and 7 (5), apply this Act with such modifications as the parties have agreed on.

Binds the Crown
(3) This Act binds Her Majesty in right of Ontario.

Exceptions
(4) This Act does not apply to,
(a) a mediation under or relating to the formation of a collective agreement;
(b) a computerized or other form of mediation in which the mediation is not conducted with an individual as the mediator;
(c) actions taken by a judge or arbitrator in the course of judicial or arbitral proceedings to promote settlement of a commercial dispute that is the subject of the proceedings; or
(d) mediations for which procedures are prescribed in the Rules of Civil Procedure made under the Courts of Justice Act.

Same, conflict of law, etc.
(5) This Act does not apply to the mediation of a commercial dispute to the extent that,
(a) this Act conflicts or is inconsistent with the requirements of another Act or a regulation made under another Act; or
(b) the application of this Act is excluded or modified by the regulations.
Definitions 3. In this Act,
“commercial dispute” means a dispute between parties relating to matters of a commercial nature, whether contractual or not, such as trade transactions for the supply or exchange of goods or services, distribution agreements, commercial representation or agency, factoring, leasing, construction of works, consulting, engineering, licensing, investment, financing, banking, insurance, exploitation agreements and concessions, joint ventures, other forms of industrial or business cooperation or the carriage of goods or passengers; (“différend commercial”)

“mediation” means a collaborative process in which,
(a) the parties to a commercial dispute agree to request a neutral person, referred to as a mediator, to assist them in their attempt to reach a settlement in their dispute, and
(b) the mediator does not have authority to impose a solution to the dispute on the parties. (“médiation”)

Interpretation
4. (1) This Act is based on the United Nations Commission on International Trade Law, (UNCITRAL) Model Law on International Commercial Conciliation (2002) and, in interpreting this Act, consideration must be given to its international origin, the need to promote uniformity in its application and the observance of good faith.

Same
(2) In interpreting this Act, recourse may be had to,
(a) the Report of the United Nations Commission on International Trade Law on its 35th session; and
(b) the UNCITRAL Model Law on International Commercial Conciliation with Guide to Enactment and Use 2002.

Same
(3) If a question arises during a mediation that no provisions of this Act or the regulations expressly cover, the question is to be settled in conformity with the general principles on which the Model Law on International Conciliation is based.

Parties may not opt out of this section
(4) The parties to a mediation to which this Act applies may not exclude or modify the application of this section.

Mediation Commencement
5. (1) A mediation commences on the day on which the parties to a commercial dispute agree to submit the dispute to mediation.

When invitation to mediate may be considered rejected
(2) A party who invites another party to mediate may consider its invitation rejected if the party does not receive acceptance within 30 days after the day on which the party sent its invitation, or within the period specified in the invitation.

Termination
(3) The mediation terminates on the earliest of,
(a) the day on which the parties reach a settlement agreement;
(b) the day on which the parties jointly declare to the mediator that the mediation is terminated;
(c) the day on which the mediator, after consultation with the parties, declares that further efforts at mediation are no longer justified and that the mediation is terminated; and
(d) the first day that a party whose participation is necessary for the mediation to continue declares to the mediator and to the other party or parties that the mediation is terminated.

Termination of party’s participation
(4) A mediation may continue after the termination of a party’s participation in the mediation if the party’s participation is not necessary in order for the other parties to continue the mediation with respect to issues that are still in dispute.

Appointment of mediator
6. (1) Subject to subsection (2), the mediation is to be conducted by a mediator appointed by agreement of the parties.

Same
(2) The parties may ask another person or entity to recommend or appoint a mediator and, if the person or entity agrees to do so, the person or entity shall make every effort to recommend or appoint a person who is impartial and independent.

Duty to disclose
(3) A person who is approached to be a mediator shall,
(a) make sufficient inquiries to determine if he or she may have a current or potential conflict of interest or if any circumstances exist that may give rise to a reasonable apprehension of bias; and
(b) without delay, disclose to the parties any such conflict of interest or circumstances.

Same, duty continues during mediation
(4) The mediator’s duty to disclose under clause (3) (b) continues until the termination of the mediation.

Same
(5) A person who makes a disclosure under clause (3) (b) before or while acting as a mediator may subsequently act or continue to act as the mediator only with the consent of all parties given after full disclosure of the facts and circumstances.

(6) For the purposes of this section, a person is deemed to have a conflict of interest with respect to a mediation if,
(a) the person has a financial or personal interest in the outcome of the mediation; or
(b) the person has an existing or previous relationship with a party or a person related to a party to the mediation.

Conduct of mediation, by agreement
7. (1) The parties and the mediator may agree on the manner in which the mediation is to be conducted and may agree to follow a set of existing rules or procedures unless prohibited from doing so under another Act or any regulations under this or another Act.

Same, as determined by mediator
(2) To the extent that the parties have not agreed on the manner in which the mediation is to be conducted, the mediator may conduct the mediation in the manner the mediator considers appropriate, taking into account any requests by the parties and the circumstances of the dispute, including any need for speedy settlement.

Mediator’s authority
(3) The mediator may,
(a) meet or communicate with the parties together, separately or in any combination; and
(b) make proposals for settlement of the dispute at any stage of the mediation.

Obligation of fair treatment
(4) The mediator shall maintain fair treatment of the parties throughout the mediation, taking into account the circumstances of the dispute.

Parties may not opt out of subs. (4)
(5) The parties shall not modify the obligation of the mediator in subsection (4) nor relieve the mediator from the duty to comply with that subsection.

Disclosure of information between parties
8. (1) A mediator may disclose to a party any information relating to the mediation that the mediator receives from another party unless that other party expressly asks the mediator not to disclose the information.

Duty to keep confidential
(2) Information relating to the mediation must be kept confidential by the parties, the mediator and any other persons involved in the conduct of the mediation unless,
(a) all the parties agree to the disclosure and, if the information relates to the mediator, the mediator agrees to the disclosure;
(b) the disclosure is required by law;
(c) the disclosure is required for the purposes of carrying out or enforcing a settlement agreement;
(d) the disclosure is required for a mediator to respond to a claim of misconduct; or
(e) the disclosure is required to protect the health or safety of any person.

Exception
(3) The requirement to keep information relating to the mediation confidential does not apply to information,
(a) that is publicly available;
(b) that the parties, by their conduct, do not treat as confidential; or
(c) that is relevant in determining if the mediator has failed to make a disclosure required under subsection 6 (3).

Admissibility of information
9. (1) Subject to subsections (2) and (3), none of the following information, in any form, is discoverable or admissible in evidence in arbitral, judicial or administrative proceedings:
1. An invitation by a party to mediate a commercial dispute, a party’s willingness or refusal to mediate the dispute, information exchanged between the parties before the mediation commences and any agreement to mediate the dispute.
2. A document prepared solely for the purposes of the mediation.
3. Views expressed or suggestions made by a party during the mediation concerning a possible settlement of the dispute.
4. Statements or admissions made by a party during the mediation.
5. Statements or proposals for settlement made by the mediator.
6. The fact that a party indicated a willingness to accept a proposal for settlement made by the mediator.
7. The fact that a party or the mediator terminated the mediation.

Exceptions
(2) The information referred to in subsection (1) may be admitted in evidence to the extent required,
(a) by law;
(b) for the purposes of carrying out or enforcing a settlement agreement;
(c) by a mediator to respond to a claim of misconduct; or
(d) if all of the parties to the mediation consent and, if the information relates to the mediator, the mediator consents.

Same, to determine costs
(3) Information about the conduct of a party to the mediation or the conduct of the mediator may be disclosed after the final resolution of the dispute to which the mediation relates for the purpose of determining costs of the mediation or of proceedings taken because the mediation did not succeed.

Other information used in a mediation
(4) Except for the limitations set out in subsection (1), information created for purposes other than a mediation does not become inadmissible only because it was used in the mediation.

Application of subss. (1) and (2)
(5) Subsections (1) and (2) apply whether or not the arbitral, judicial or administrative proceedings relate to a dispute that is or was the subject of the mediation.

Acting as mediator and arbitrator
10. Unless all parties to a mediation otherwise agree, a mediator shall not act as both a mediator and an arbitrator or as an arbitrator after acting as the mediator with respect to,
(a) the commercial dispute that is the subject of the mediation; or
(b) another dispute that arises from the same contract or legal relationship or from a related contract or legal relationship between the parties.

Agreements respecting arbitral or judicial proceedings
11. (1) The parties may agree not to proceed with arbitral or judicial proceedings before the mediation is terminated.

Exception
(2) Despite subsection (1), an arbitrator or court may permit the proceedings to proceed and may make any order necessary if the arbitrator or court considers,
(a) that proceedings are necessary to preserve the rights of any party; or
(b) that proceedings are necessary in the interests of justice.

Mediation not terminated by commencement of arbitral proceedings, etc.
(3) The commencement of any arbitral or judicial proceedings is not of itself to be regarded as a termination of the agreement to mediate the commercial dispute or as the termination of the mediation.

Settlement agreement binding
12. A settlement agreement or minutes of settlement are binding on the parties to the mediation who sign them.

Enforcement of settlement
Definitions
13. (1) In this section, “registrar” means the registrar of the Superior Court of
Justice; (“greffier”)

“settlement agreement” means an agreement signed by more than one party to the mediation, or minutes of settlement signed by more than one of the parties, that disposes of one or more issues in dispute in the mediation. (“accord issu d’un règlement amiable”)

Application to judge or court
(2) If a party to a settlement agreement fails to comply with the terms of a settlement agreement, another party wishing to enforce the agreement may, on notice to all other parties who signed the agreement,
(a) apply to a judge of the Superior Court of Justice for judgment in the terms of the agreement; or
(b) apply to the Superior Court of Justice for an order authorizing the registration of the agreement with the court.

Application of the Rules of Civil Procedure
(3) The Rules of Civil Procedure made under the Courts of Justice Act apply with respect to an application under this section.
Judgment
(4) On an application under clause (2) (a), the judge may grant judgment in accordance with the terms of the agreement.

Order
(5) On an application under clause (2) (b), the registrar shall, subject to subsection (6), make an order authorizing the registration of the settlement agreement.

Same
(6) No judgment or order shall be granted or made if it is shown to the court that,
(a) a party to the mediation against whom the applicant is seeking to enforce the settlement agreement did not sign the agreement or otherwise consent to the terms of the agreement that the applicant is seeking to enforce;
(b) the settlement agreement was obtained by fraud; or
(c) the settlement agreement does not accurately reflect the terms agreed to by the parties in settlement of the dispute to which the agreement relates.

Effect of filing agreement
(7) On the filing of a true copy of the settlement agreement with the registrar pursuant to an order authorizing the registration of the agreement,
(a) the settlement agreement is registered with the court and has the same force and effect as if it were a judgment obtained and entered in the Superior Court of Justice on the date of the registration; and
(b) the costs of and incidental to the registration of the settlement agreement and the application for registration are recoverable as if they were sums payable under a judgment.

Costs
(8) The costs referred to in clause (7) (b) shall be in the amount,
(a) that is prescribed by the regulations or determined by the registrar in accordance with the regulations; or
(b) that is determined by the registrar, in his or her discretion, if no regulation under clause 15 (b) is in force at the time the settlement agreement is filed with the registrar.

Enforcement of mediator’s fees, etc.
14. (1) This section applies if a settlement agreement, minutes of settlement or other written agreement or document signed by one or more parties to a mediation of a commercial dispute,
(a) contains an undertaking by one or more of the parties to pay the fees and expenses of the mediator for performing the functions of a mediator in the mediation; and
(b) sets out the amount of fees and expenses payable or the manner of calculating the fees and expenses, all the rates and other variables of which have been agreed to in the agreement, minutes or other document.

Application of s. 13
(2) Section 13 applies with necessary modifications if a mediator is not paid his or her fees and expenses in accordance with the settlement agreement, minutes of settlement or other written agreement or document and wishes to enforce payment.

Regulations
15. The Lieutenant Governor in Council may make
regulations,
(a) excluding or modifying the application of all or part of this Act;
(b) prescribing the amount of costs recoverable by a party under clause 13 (7) (b) or principles to be applied by the registrar to determine the amount of those costs;
(c) defining any word or expression used but not defined in this Act;
(d) respecting any matter that the Lieutenant Governor in Council considers necessary or advisable to carry out effectively the intent and purpose of this Act.

Commencement
16. The Act set out in this Schedule comes into force
on the day the Open for Business Act, 2010 receives Royal Assent.
Short title

17. The short title of the Act set out in this Schedule is the Commercial Mediation Act, 2010.

ADR Chambers and DRS Dispute Resolution Services are extremely pleased to announce that they have joined forces to produce the new Canadian leader in ADR. The new firm will offer the profession’s most complete set of Alternative Dispute Resolution processes including mediation, arbitration and ADR training services, with a commitment to serving clients with the highest level of service.

The new firm will be continuing under the name of ADR Chambers and will bring leadership and innovation to the ADR world. Allan Stitt will continue as President of the company and Cliff Hendler will assist in the growth of ADR Chambers on both national and international fronts. “Together we will shape the industry for years to come” says Allan Stitt. “We are very excited to have Cliff and his team join ours”. Cliff Hendler noted that “this new structure allows us to continue to be visionaries in the field and improve the quality of service to our clients worldwide”.

Clients will benefit from the fact that ADR Chambers will now have both a downtown location and a North York location, and will have a wider range of dispute resolution professionals. In addition to offering mediation, arbitration and neutral evaluation, the new ADR Chambers will offer Expedited Arbitration, eVideo mediation, and in-person and online training through the Stitt Feld Handy Group.

Any questions about the new firm should be sent to Allan Stitt at allan@adr.ca.

- 30 -

Key investment, banking, and securities organizations are realigning their internal procedures to satisfy new complaint-handling rules designed to give investors and customers access to straightforward and expeditious dispute resolution.

Likewise, service providers are offering revamped programs and considering higher award limits in order to meet the requirements of the new regimes.

As of Feb. 1 of this year, clients of the investment industry must comply with new complaint-handling rules issued jointly by the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA) and echoed in the new terms of reference issued by the Ombudsman for Banking Services and Investments (OBSI).

In an attempt to ensure consistency between dealer members, those organizations have implemented a common complaint-handling framework that imposes standards and time lines.

IIROC-regulated firms — including investment dealers and those engaged in trading activity in Canada’s debt and equity marketplaces — must now have a written complaint handling process and a designated complaints officer. They have five days to acknowledge a complaint and 90 days to investigate and provide a response.

They must give clear information to their clients about the process, including their options if they’re unhappy with the final result. They include taking their complaint to the OBSI or to private arbitration through an IIROC-sponsored program administered by ADR Chambers.

Doug Melville, OBSI’s ombudsman and CEO, explains its function by comparing it to a court of appeal. “If you’re a customer with a complaint, you have to go through the firm’s internal process first. If you’re not successful, then you come to us.

If the client is still not happy, they can still go to court, but at what threshold is it economic to litigate when you’re up against a big financial institution? We have 14,000 contacts a year, and most of those would not be economic or time-efficient to go through the courts.”

In response to the new rules, Melville and his staff are preparing to receive an increased number of complaints once the first 90 days have elapsed since their inception, adding a further challenge after what he calls the “wild times” of recent years.

“With the market downturn on the investment side and the economic downturn on the banking side, complaints have been up 300 per cent in the last three years,” he says. “The growth rate has now leveled off at a new normal — higher than the historic level, and it may now accelerate again.”

Melville’s office keeps close ties with the dealer firms to see how busy they are. “It’s like an early warning system,” he notes. “It’s always within a firm’s control to try to resolve a dispute within the 90 days. I expect everything to be busier but I remain to be proven wrong.”

An alternative venue is ADR Chambers via IIROC’s voluntary arbitration program. It’s currently undergoing a review after a sharp decline in use in recent years. Although it’s opened more than 500 cases since its inception in 1996, last year it opened only eight cases across the country.

IIROC’s preliminary report speculates the program’s award limit of $100,000, the expansion of the OBSI’s mandate in 2002 to deal with investment industry complaints, and its ability to award compensation of up to $350,000 are the main factors in the decline. A period for comments on the report expired on March 16.

ADR Chambers also provides an ombuds service for complaints by customers of the Royal Bank of Canada as Canadian banks must make an external third-party dispute resolution mechanism available to their clients.

“There is no government-funded ombuds organization for banking and investment disputes, and unless and until there is, the banks have to fund it themselves,” says Bette Shifman, ADR Chambers’ banking ombudsperson.

The ADR Chambers ombuds group contains six investigators, who are all lawyers with extensive mediation, arbitration, and negotiation training. “We try to deal with the complaint at several levels without holding any kind of formal proceeding,” says Shifman. “We try to settle and if we can’t, we investigate.”

The group operates under circumscribed terms of reference. “If people are complaining that they didn’t get the best interest rate, we can’t help them,” says Shifman. “We can’t interfere with the commercial decisions of the bank.”

Like OBSI, the ADR Chambers Ombuds makes a non-binding recommendation but publishes any refusal to comply with it.

Another new regulation on the block is pushing players in the securities industry towards third-party dispute resolution.

Unlike the United States and other developed markets, Canada has no federal securities regulator, so the Canadian Securities Administrators passed new rules imposing a national registration regime that includes enhanced processes for handling customer complaints.

They give portfolio managers and investment counsel firms two years to develop a third-party dispute system.

“They are not required to use us but could if they want to,” Melville says. “The rule leaves it open to them to choose. At present, these firms are using OBSI as part of the Investment Funds Institute of Canada group, which helped found OBSI in 2002. The new arrangement throws the door open.”

ADR Chambers intends to offer these firms an alternative to OBSI. Portfolio management and investment counsel registrants have the two years to be in compliance, but Shifman hopes to have something to offer them soon.

“Right now, we are thinking of mediation followed by an investigation similar to the ombuds program with a non-binding recommendation. We are listening to the industry as to what will meet their needs.”

By Judy van Rhijn | Publication Date: Monday, 19 April 2010 | Law Times