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    Dispute Resolution: Bridge-building in a New World


    © International Trade Centre, International Trade Forum - Issue 4/2004 

    Photo: ITC Women on the arbitration front line: In the past ten years, more women have taken over the management of arbitration institutions. In the photo, the managers of arbitration centres of Costa Rica, Palestine, Geneva (Switzerland), Bolivia, Mongolia and Serbia at ITC's Chamonix symposium.

    Competition means conflict, but the courts are rarely the best way to settle disputes in business. Trials can be expensive, lengthy and sometimes embarrassingly public. Hence the rise in arbitration and mediation centres. ITC sees that by operating as a catalyst and bridge-builder, it can help these centres to help each other.

    Mediation and arbitration are more in demand in the commercial world of developing and transition countries than a superficial glance might suggest. For example:

    • Croatia, with a population of about 4 million, has a backlog of court cases estimated at anywhere between 2 and 3 million after the war in ex-Yugoslavia.
    • Cambodia's textile industry, the main national export, has been repeatedly paralysed by strikes and labour disputes, as the country struggles to establish itself as a market economy.
    • South Africa's Commission for Conciliation, Mediation and Arbitration (CCMA) handles an average of 509 referrals every working day.
    Another example shows how, globally, the commercial world is changing: sportsmen
    and women increasingly find themselves in dispute with their clubs, event organizers or management bodies as sport becomes more professionalized.

    For big international disputes and large companies, there's already the Paris-based International Chamber of Commerce (ICC), which wrote the global rulebook in its International Court of Arbitration. The UN Commission on International Trade Law (UNCITRAL), founded more recently, has produced a model law on arbitration, which forms the basis of national legislation in more than 40 countries. Commercial arbitration institutions today have their own international federation (IFCAI) and an International Council for Commercial Arbitration (ICCA) with members in 31 countries.

    Relaxed settings to defuse disputes: The Kuala Lumpur Regional Centre for Arbitration offers facilities including session rooms, a coffee corner and a law library. (Photo:Kuala Lumpur Regional Centre for Arbitration) 

    The challenge: Moving beyond argument

    The challenge is to develop means to address smaller claims in developing and transition economies as effectively as bodies such as ICC handle large disputes. Foreign arbitration awards are recognized by 130 countries. But international arbitration rules are often ill adapted to cases involving less than US$ 100,000.

    Arbitration, as practised in many industrialized countries, still relies on adversarial case-making and argumentation, often by lawyers representing the two sides. This may be culturally unappealing for a society that emphasizes consensus in dispute resolution. It may also be more complicated than a small business can contemplate. For sports disputes, the decision often has to be taken in one day to make any sense.

    "How can arbitration and mediation techniques become realistic alternatives to state court proceedings for SMEs [small and medium-sized enterprises] in developing economies? The answer is certainly not in imitating the adversarial approach or the advocacy principle which inform conflict management in our courts," points out Jean-François Bourque, ITC Senior Legal Adviser. "Such approaches, which are progressively infusing commercial arbitration procedures, are often described as the 'least worst' solution. They simply do not offer genuine satisfaction."

    Mr Bourque came to ITC after serving as a manager of the ICC's International Centre for Expertise and special counsel, as well as several years of academic work in Africa.
    ITC's projects on legal aspects of trade are financed by the French government.

    A "first" for developing and transition economies

    As a first for arbitration and mediation centres, ITC brought together in September 2004 more than 60 directors of arbitration, mediation and conciliation centres from 50 developing and developed countries at a symposium on how to strengthen their services.

    The meeting, held in Chamonix, France, looked particularly at the managerial and operational challenges of running a centre. In newly created centres, the lack of skilled staff and a pool of specialist arbitrators is a pressing concern. "Informal systems for alternative dispute resolution are deeply rooted in the community, but there is a lack of specifically trained senior and junior professional staff," reports Lubnah Katbeh of the Tahkeem Center for Settlement of Commercial Disputes, which serves Palestinian businesses.

    Catalyst and bridge-builder

    To survive, centres must engage in training themselves - they can't rely just on providing arbitration or mediation services. ITC sees that it can be a catalyst and bridge for centres to exchange experiences and technical support.

    As a result of this meeting, ITC is helping centres establish an open network for technical assistance between them, flowing South-South and North-South in both directions. Sue King, National Registrar of South Africa's Commission, emphasizes: "The CCMA would be very happy to provide assistance to young arbitration and mediation centres, mostly in the form of technical advice and sharing of experiences." The CCMA has a wealth of experience; it has settled some 340,000 cases since January 2000.

    "The benefits of this new approach are clear," Mr Bourque indicates. "An international dispute over a desalination plant built by a European contractor in the Gulf was settled in 20 days instead of the 2,000 days required for a court hearing, and that included the on-site visit by a technical expert."

    The symposium, too, had immediate results. Several arbitration centres have decided to investigate setting up conciliation and mediation services, along with their existing arbitration services. Debbie-Trin Nappits, Counsel at the Arbitration Court of the Estonian Chamber of Commerce and Industry, notes: "Since my contacts at the symposium, I'm reading as much as I can about mediation and trying to find an opportunity to use it in Estonia. It's fascinating. I talked to few judges and it seems they support the idea. So maybe we will have mediation centre in Estonia, too..."

    Surprising shift

    At the meeting in Chamonix, the managers of these centres realized a basic shift is taking place, away from adversarial ways of working toward conciliation. "I often find that this is a surprise to people from Western economies," Mr Bourque observes. "But China, which practises international arbitration, settles some 30% of its cases through conciliation rather than arbitration."

    Finding a non-adversarial way to settle disputes can yield great benefits. An arbitration centre set up to resolve labour disputes in the Cambodian textile sector, for example, has helped reduce the number of strikes almost by half.

    What does this mean for an SME exporter in a developing or transition economy? "Agreeing to the arbitration of disputes is the condition for doing international business for most companies these days," Mr Bourque points out. "If you don't agree to dispute settlement through arbitration, then you probably won't get the contract as a supplier or you will have to pay substantially more as a client. Mauritius is just one of many countries that require you to accept international arbitration rules if you want to invest there."

    Gaining "street credentials"

    In this newly emerging world, managers of centres need more than legal expertise. "The manager is the face of the centre," stresses Marcela Filloy of the Centre for Conciliation and Arbitration of Costa Rica's Chamber of Commerce. "It's crucial to appoint someone who has the ability to handle relations with staff and the judiciary, and not just legal skills." The "new kids on the block" also have to prove their street credentials with those already entrenched on the scene. "We had to convince the judiciary and lawyers that we weren't competing with them but on the contrary, that magistrates can also be arbitrators," recalls Babacar Diouf of the five-year-old Arbitration and Mediation Centre in Dakar, Senegal. Mark Appel of the American Arbitration Association suggests centres "have to network with legislators, link up with courts and propose their services to the judiciary".

    Creative approaches

    "ITC's Symposium on Strengthening Commercial Arbitration and Mediation Services is becoming a focal point for innovation and consolidation in the field of dispute resolution management," notes Mr Bourque. "Our emphasis is on the creative and operational aspects of dispute resolution services in various areas (sales, consumer services, employer-employee disputes, sports, domain names, etc.).

    "The percentage of women managing arbitration and mediation centres came as an eye-opener to many at the meeting," he adds. "Perhaps their success is a result of their bringing a fresh view to the problems of conflict resolution. It also suggests we are on the right path in our approach."

    Dispute resolution centres are springing up by the dozen. Argentina has set up 24. Switzerland is using the same system. "This means there is a demand for hundreds of managers who have to be trained - and they face common problems," Mr Bourque points out. "ITC is creating a fulcrum for cooperation and creative ideas for managers in this new world."

    When bad things happen to good businesses…

    …alternative dispute resolution procedures can help:
    • Arbitration and conciliation can reduce the time taken for a settlement by 90%.
    • Dispute settlement procedures have halved strikes in Cambodia's export-vital textile industry.
    • Accepting arbitration may be the price of getting a contract in the globalized economy.
    • Many countries in Asia find the adversarial system of judgement offensive to their cultural standards of harmony, so they favour conciliation to argument.

    Writer: Peter Hulm