Commercial Dispute Resolution
Starting point of dispute resolution → litigation (right to a fair trial)
>Exceptions:
● Mandatory legislation that dictates how you can proceed (ex. first mediation,
then court litigation)
○ ECJ Alassini/Telecom Italia SpA
■ Conditions for mandatory out-of-court settlement procedure
● Alternative dispute resolutions (such as arbitration, mediation & conciliation)
○ Possible to waive the right by parties consent; common feature of ADR
is consent
■ By contractual obligation → before the dispute arises (i.e.
arbitration agreement)
● Parties include a clause regarding ADR; it is
established in advance
■ By mutual agreement between the parties (i.e. submission
agreement) ad hoc → after the dispute arises parties decide on
ADR
● Risk that parties are unable to enter into submission
agreement once there is a dispute
Choosing a method of dispute resolution
1. Conclusion of contract
a. Parties decide on dispute resolution method
i. Litigation: default (starting point)
ii. Mediation: mediation agreement
iii. Arbitration: ex ante arbitration agreement or ex post submission
agreement
2. Choosing a method of dispute resolution
a. Factors to consider for arbitration
i. Compared to litigation
1. Also rights-based procedure
2. Faster procedure; less discovery
3. Mostly less expensive
4. Confidential if agreed by both parties
5. Less opportunities for appeals; awards are final
6. Neutral forum + neutral laws
7. Adversarial–seeks to find truth, as opposed to recognizing shades
of grey
ii. Compared to mediation
1. Rights-based procedure; more suitable for legal points of
contention
2. Binding, final award
3. Outcome (award) more enforceable
4. Consensus
, b. Factors to consider for mediation
i. Compared to arbitration & litigation
1. Interest-based; good for continuous relationships + cultural
differences
2. Faster + less expensive procedure
3. Confidential
4. More matters covered by mediation i.e. antitrust
5. Can occur at any time of the dispute
6. Outcome NOT enforceable by law
7. Consensus
If no consensus can be reached, then litigation!
3. Dispute arises
a. Mediation
i. Mediation agreement–outline of mediator & expertise if required
1. You can ad hoc agree as parties to mediate the matter
2. Ability to have such a clause depends on legal system in question
ii. Mediation takes place
iii. Settlement reached (or alternative dispute resolution if no settlement)
b. Arbitrator
i. Arbitration agreement–choice of arbitrators, seat, language, substantive
law & ad hoc/institutional arbitration
ii. Claim filed in accordance with procedural rules/law
iii. After response of claimant + written submissions → preliminary meeting
1. Administrative issues + ambiguities in agreement
iv. The hearing
v. Issuing & enforcement of award
c. Litigation
i. Court procedure in accordance with private international law
4. Outcome
a. Mediation: non-enforceable in law (i.e. settlement that needs to be
arbitrated/litigated to be enforceable)
b. Arbitration: New York Convention
c. Litigation: multi/bilateral agreements between states
Comparing litigation, arbitration & mediation
- Different types of dispute
- Commercial/personal relationship
- Continuous relationship
- Legal point of contention
- Confidentiality
- Personal information
- Human mistakes
- Trade secrets/intellectual property
, - Costs
- Own (transaction) costs
- Ex. As an employee preparing a court case and attending court, you are
unable to work—these are transaction costs
- Lawyers?
- Expensive
- Third party (court, arbitrator(s), mediator(s))
- Other costs
- Depends on length of proceedings & level of courts and appeals for
litigation
- Length of the proceedings
- Initial proceedings
- Arbitration: depends on the applicable procedural law (which varies
across jurisdictions)
- In the Netherlands, Book 4 Dutch DCCP
- Procedural law is linked to place of arbitration (where proceedings are
held)
- Arbitration → based on agreement/clause
- Litigation → based on jurisdiction
- Appeal/revision
- Design of the proceedings
- Prescribed by law
- Particularly relevant for litigation
- Model rules (eg. ICC Mediation Rules)
- To be designed by parties
- Expertise of third party
- Is special expertise required?
- Litigation: in form of expert witness
- Arbitration: possible, as you can choose own arbitrators which would be
an expert
- Mediation: can invoke help of third party, as long as they are also bound
by confidentiality clause OR choose mediator that is an expert
- Choose this first as mediator will merely help with their expertise,
without making any binding decisions on parties; allows expert to
talk with parties & facilitate discussions
- Is the third party appointed/chosen?
- Litigation: expert witnesses appointed by court; as parties, can merely
make suggestions
- Arbitration: can choose own expert OR choose expert as arbitrator
- Satisfaction with the outcome
- Win/lose situations: one party may not be satisfied
- Resolution made up by both parties together?
- Particularly in mediation whereas arbitrators & judges make own
decisions
Starting point of dispute resolution → litigation (right to a fair trial)
>Exceptions:
● Mandatory legislation that dictates how you can proceed (ex. first mediation,
then court litigation)
○ ECJ Alassini/Telecom Italia SpA
■ Conditions for mandatory out-of-court settlement procedure
● Alternative dispute resolutions (such as arbitration, mediation & conciliation)
○ Possible to waive the right by parties consent; common feature of ADR
is consent
■ By contractual obligation → before the dispute arises (i.e.
arbitration agreement)
● Parties include a clause regarding ADR; it is
established in advance
■ By mutual agreement between the parties (i.e. submission
agreement) ad hoc → after the dispute arises parties decide on
ADR
● Risk that parties are unable to enter into submission
agreement once there is a dispute
Choosing a method of dispute resolution
1. Conclusion of contract
a. Parties decide on dispute resolution method
i. Litigation: default (starting point)
ii. Mediation: mediation agreement
iii. Arbitration: ex ante arbitration agreement or ex post submission
agreement
2. Choosing a method of dispute resolution
a. Factors to consider for arbitration
i. Compared to litigation
1. Also rights-based procedure
2. Faster procedure; less discovery
3. Mostly less expensive
4. Confidential if agreed by both parties
5. Less opportunities for appeals; awards are final
6. Neutral forum + neutral laws
7. Adversarial–seeks to find truth, as opposed to recognizing shades
of grey
ii. Compared to mediation
1. Rights-based procedure; more suitable for legal points of
contention
2. Binding, final award
3. Outcome (award) more enforceable
4. Consensus
, b. Factors to consider for mediation
i. Compared to arbitration & litigation
1. Interest-based; good for continuous relationships + cultural
differences
2. Faster + less expensive procedure
3. Confidential
4. More matters covered by mediation i.e. antitrust
5. Can occur at any time of the dispute
6. Outcome NOT enforceable by law
7. Consensus
If no consensus can be reached, then litigation!
3. Dispute arises
a. Mediation
i. Mediation agreement–outline of mediator & expertise if required
1. You can ad hoc agree as parties to mediate the matter
2. Ability to have such a clause depends on legal system in question
ii. Mediation takes place
iii. Settlement reached (or alternative dispute resolution if no settlement)
b. Arbitrator
i. Arbitration agreement–choice of arbitrators, seat, language, substantive
law & ad hoc/institutional arbitration
ii. Claim filed in accordance with procedural rules/law
iii. After response of claimant + written submissions → preliminary meeting
1. Administrative issues + ambiguities in agreement
iv. The hearing
v. Issuing & enforcement of award
c. Litigation
i. Court procedure in accordance with private international law
4. Outcome
a. Mediation: non-enforceable in law (i.e. settlement that needs to be
arbitrated/litigated to be enforceable)
b. Arbitration: New York Convention
c. Litigation: multi/bilateral agreements between states
Comparing litigation, arbitration & mediation
- Different types of dispute
- Commercial/personal relationship
- Continuous relationship
- Legal point of contention
- Confidentiality
- Personal information
- Human mistakes
- Trade secrets/intellectual property
, - Costs
- Own (transaction) costs
- Ex. As an employee preparing a court case and attending court, you are
unable to work—these are transaction costs
- Lawyers?
- Expensive
- Third party (court, arbitrator(s), mediator(s))
- Other costs
- Depends on length of proceedings & level of courts and appeals for
litigation
- Length of the proceedings
- Initial proceedings
- Arbitration: depends on the applicable procedural law (which varies
across jurisdictions)
- In the Netherlands, Book 4 Dutch DCCP
- Procedural law is linked to place of arbitration (where proceedings are
held)
- Arbitration → based on agreement/clause
- Litigation → based on jurisdiction
- Appeal/revision
- Design of the proceedings
- Prescribed by law
- Particularly relevant for litigation
- Model rules (eg. ICC Mediation Rules)
- To be designed by parties
- Expertise of third party
- Is special expertise required?
- Litigation: in form of expert witness
- Arbitration: possible, as you can choose own arbitrators which would be
an expert
- Mediation: can invoke help of third party, as long as they are also bound
by confidentiality clause OR choose mediator that is an expert
- Choose this first as mediator will merely help with their expertise,
without making any binding decisions on parties; allows expert to
talk with parties & facilitate discussions
- Is the third party appointed/chosen?
- Litigation: expert witnesses appointed by court; as parties, can merely
make suggestions
- Arbitration: can choose own expert OR choose expert as arbitrator
- Satisfaction with the outcome
- Win/lose situations: one party may not be satisfied
- Resolution made up by both parties together?
- Particularly in mediation whereas arbitrators & judges make own
decisions
