EDITORIAL PAGE — Cutting court costs

Going to court is expensive. The parties involved have to pay the direct fees, which add substantially to the cost of doing business for the mining industry. There is no reliable estimate of the amount, but a research paper by the Construction Industry Development Council of Canada suggests that during the 1980s, litigation ran up the actual cost of a building by 20%.

“The need to recognize real cost, both direct and indirect, are pointing toward the incremental awareness of alternatives to courts and litigation,” says Roger Marentette, a lawyer and professional negotiator. Apart from the direct litigation costs, companies suffer from the bad publicity, damaged business relations and the waste of senior management’s time. And the end result often is more a reflection on who presented the stronger case, not what makes the most economic sense.

There is a better way of settling many disputes than simply going to court, but it takes the willingness of the players involved to agree to abide by what is called the alternative dispute resolution system.

Arbitration, already widely recognized and used in labor disputes by the federal and provincial governments, is the most commonly known option. It is flexible and relatively simple. If all labor disputes were handled by the courts, the legal system would quickly become unworkable.

Alternatives to the courts, however, are not so readily available when it comes to commercial disputes. Arbitration is accepted in Canadian law, but it is still little known. In Ontario, it is governed by the Arbitration Act of 1991 and in Canada by the Commercial Arbitration Act of 1986. Litigation will always be a necessary option for business dealings, but there’s no reason why questions concerning, for example, the present value of assumed cash flow or the definition of operating costs in a royalty agreement can’t be handled in a less formal way.

Arbitration is only one of the alternatives available. Confidential listening is a method where parties submit their settlement position to a neutral third party who then determines whether their positions are within a negotiable range without revealing either position. In private trials, parties may agree on their own, without court involvement, to select a private “judge.” Or a neutral third party with solid technical knowledge examines and evaluates disputed facts. Even “mini-trials” are possible — a confidential, non-binding 1-day or 2-day boardroom-type hearing adjudicated by an accredited mediator representing each party and by a third neutral adviser. In short, there are ways to avoid the high cost of going to court. The key is for the parties involved to agree to alternative methods of resolution. The majority of contracts in Canada do not contain a clause permitting alternatives because the system does not have the backing of the legal profession.

According to a report by the Canadian Bar Association, the Canadian legal profession has mixed views of the alternative dispute resolution system largely because most lawyers aren’t sure of what it means to them and their professional role. In other words, lawyers fear that using alternatives to the courts would threaten their jobs.

But arbitration and other techniques would still require the role of lawyers. They simply provide a choice of ways, not alternatives to legal representation.

The courts will never be replaced as the ultimate means of settling commercial disputes, but by accepting alternatives, the cost could be dramatically reduced to everyone’s benefit.