Arbitration is a slightly more formal and structured mode of ADR. It is a substitute for litigation which occurs in a parallel dispute process. The first and most obvious difference between an arbitration and a mediation is that once a party has agreed to be subject it they cannot take advantage of normal Court process.
Arbitration is largely governed by the Arbitration Act of 1996. The dispute under consideration is referred to an independent arbitrator who assumes responsibility for resolving it. Much like mediation, the advantage to the client is that it is likely to be quicker and possibly cheaper to take a case to an arbitrator rather than through the Courts. The procedures of an arbitration are less formal. The proceedings take place in private, meaning that sensitive information can be more effectively safeguarded than in a hearing in public.
A second important distinction between arbitration and mediation is that the outcome is binding on the parties. The Arbitration Act allows for decisions of the arbitrator to be enforced as though they were a Court judgment. It is also recognised that Arbitration can give rise to more practical solutions than litigation. The Arbitrator may be able to be flexible with what is ordered. This may be useful if the parties want a particularly nuanced order which reflects the specific commercial circumstances of their dispute.
A useful guide on the practice of arbitration can be found here.
Questions
You are instructed for Maple Leaf Syrups limited. Maple Leaf Syrups have identified that a rival, Yummy Syrups, has adapted one of their logos in a way which infringes their patent rights. Maple Leaf Syrups attend your offices. They identify the issue with the patents. You believe they have a case. You write to the lawyers of Yummy Syrups. They indicate their willingness to engage in a mediation in order to resolve the proceedings. You indicate this to Maple Leaf Syrups. One of the directors says ‘nah there’s no way that piece of work at Yummy is going to back down on this. It would just be a big waste of time’. Which of the following is correct:
- Maple Leaf Syrups are under a legal obligation to mediate. You cannot continue to act for them if they continue to refuse mediation.
- Maple Leaf Syrups cannot be compelled to mediate. A first step would be to take further instructions on what the director means. There may be a justification for bypassing mediation, but there is insufficient information here to judge.
- Maple Leaf Syrups are under a legal obligation to mediate. They should be told that costs consequences will follow the failure to mediate and that the Judge could rule against them on the basis of their failing to mediate.
- Maple Leaf Syrups cannot be compelled to mediate. But you must explain that given the potential costs consequences of failing to mediate, you may not be able to continue to act if they fail to do so.
Answer: (b) is the best answer. Maple Leaf Syrups cannot be compelled to mediate. There is no ‘legal obligation’ to mediate, although there is clear caselaw as to the consequences of failing to do so. So (a) and (c) are incorrect. (d) is incorrect because failing to mediate is not a reason to cease acting. You only need to make an attendance note of your advice. Ultimately it is a matter for the client. Here, there may be a good reason for Maple Leaf Syrups not wanting to mediate which you should investigate further.