Facilitating Caribbean Trade And Commerce, And Enhancing Economic Development, By Improving Dispute Resolution: Mediation And Court-Facilitated Arbitration

Currently, it is not.

Improving dispute resolution in the Caribbean is one of the keys to facilitating trade, investment, and commerce, and in turn enhancing economic development.

2022 Aid4Trade Global Review And Aid For Trade Monitoring And Evaluation

At the opening plenary of Aid4Trade Global Review 2022, Caribbean Development Bank President Dr. Gene Leon highlighted that for small developing states, support for trade is critical for addressing food and energy security, facilitating resilience, and propelling sustainable development.

Trade objectives feature prominently in the development strategies of developing countries. This is the strong message emerging from the 2022 Aid for Trade Monitoring and Evaluation exercise, conducted with the Organisation for Economic Co-operation and Development (OECD). Developing countries and their financing partners are looking to the multilateral trading system to deliver development outcomes.

For effective and efficient trade by and among Caribbean countries, it is important that those countries develop more effective and efficient means by which trading and transacting companies can resolve, if not avoid, disputes.

The availability of effective and efficient dispute resolution creates confidence for trading parties and reduces risk. As a result, it reduces the real costs of transacting cross-border. Lengthy delays in resolving disputes do not align with the dispute resolution needs of businesses in 2022 and beyond.

Small And Medium Sized Enterprises

Small and medium sized enterprises (SMEs) are important to the global economy and to the economies of all countries. They have an even greater importance to the economies of small countries, such as in the Caribbean, where they are a relatively greater part of national economies.

Though small, SMEs play an important role in the economy of a country because they employ large numbers of people, outnumber large firms considerably, generally are entrepreneurial in nature, and help shape innovation.

Yet SMEs are forgotten consumers of dispute avoidance and resolution. They have a different knowledge of, experience with, and demand for dispute avoidance and dispute resolution than larger enterprises. Often SMEs lack knowledge and resources to effectively engage in cross-border disputes.

The uncertainty of effective resolution for cross-border disputes is a major trade barrier for businesses engaged in international trade and commerce. An effective cross-border commercial dispute resolution regime is needed to encourage Caribbean SMEs to engage more in international trade and commerce.

SMEs’ dispute avoidance and resolution needs are different than larger enterprises. Also, there is a difference in their dispute resolution behaviour and preference from large businesses.

Importantly, often SMEs build their business relationship on trust more than contractual protections. Usually, negotiation is their preferred method of dispute resolution.

SMEs need dispute resolution mechanisms that are accessible, timely, affordable, and where possible, capable of maintaining business relationships. In a small country, a business needs to continue to transact with the same counterparties. There are only a limited number of players, so writing off one of them because of a single dispute can significantly limit with whom the business can transact.

These were findings of the Study of International Commercial Arbitration in The Commonwealth commission by the Commonwealth Secretariat a few years ago. The Study focused on how international commercial arbitration can facilitate enhanced cross-border trade and commerce, and in turn, economic growth and development.[i] 

Improving Caribbean Commercial Dispute Resolution

When negotiation fails to bring about the resolution of a Caribbean business’ dispute, usually either the aggrieved party walks away, or turns to the courts. Neither is an optimal approach. Walking away may be a practical solution to get on with business, without spending disproportionate money and time seeking an elusive better resolution, but it leaves the aggrieved party without the better resolution.

Courts in the Caribbean, and in many parts of the world are backlogged. The COVID-19 pandemic increased the backlogs. Courts have criminal and family law matters with which they need to deal. Court procedures and processes are relatively standardised – they are not readily adapted for expeditious and cost-effective dispute resolution.

Even before the pandemic, which forced courts to significantly curtail operations and then move their limited proceedings to virtual hearings, there were significant – and many would say, unacceptable – backlogs in the processing and determination of disputes in Caribbean courts (and courts in many other parts of the world).

But there are ways in which commercial dispute resolution can be improved. It will take efforts by Caribbean courts and litigation counsel, governments, businesses, business associations (such as chambers of commerce), and dispute resolution organisations.

More Use Of Voluntary Mediation

One way to improve commercial dispute resolution is through mediation. Mediation is assisted negotiation, in which an independent neutral person assists the disputing parties to reach their own resolution. Nobody imposes the resolution.

Unfortunately, mediation is not used frequently as a first or second resort. The Caribbean has not yet developed a mediation culture. Initiatives for mediation are to a significant degree being led by courts, which often means disputing parties are ensconced in slow and expensive court litigation before a mediation occurs.

Commercial Arbitration

A means for a faster and often less expensive adjudicated resolution of a commercial dispute can be arbitration, in which an arbitral tribunal (often chosen by the parties) determines the dispute, using less formal, customised and often expeditious procedures that fit both the parties’ needs and the dispute.

If arbitration can deliver dispute determination in less time – and it can – why are disputing businesses that are stalled in courts not turning to arbitration with a greater frequency?

Now more than ever, Caribbean courts need to encourage and assist disputing parties to move appropriate cases to arbitration.

Litigants do not have to wait the time which currently they must wait for an adjudication of their disputes.

Well-qualified arbitral tribunals are readily available.

Yet, so far as I am aware, moving to arbitration has not been happening to any meaningful extent.

The advantages of arbitration are reasonably well-known. Commercial arbitration is growing in many parts of the Caribbean. Litigation lawyers are becoming increasingly familiar and comfortable with it.

Yet even when litigating parties see lengthy delays ahead, not just in getting to trial but even in having procedural motions determined – and even when they should appreciate that those delays have significant monetary and other costs – they and their counsel consider appointing an arbitral tribunal only rarely.

Is The Problem Defendants?

Are defendants the reason disputes are not being moved to arbitration?

Overall, I do not believe that is the case.

Of course, there are those disputes in which a defendant is working under a belief that “justice delayed is justice”. Delaying the process of getting to trial is perceived to have some advantage, usually simply by putting off the day of reckoning (whether by judgment or settlement on the courthouse steps).

Not all defendants have that mindset. Some defendants realise that each time their lawyer picks up the file and ‘gets back into it’, legal expenses increase.

Other defendants – and many plaintiffs – would prefer not to have their dispute hanging over their heads, distracting them from their businesses and even their lives, and being a constant nagging worry in the back of their minds.

Importantly, many defendants believe that they have a good defence. So why not get tried sooner and obtain a favourable result, and likely at least a partial recovery of legal expenses?

Is The Problem An Inability To Communicate?

It is not uncommon that if one disputing party suggests something (e.g. discussing settlement, mediation, a procedural agreement, or moving to arbitration), the other side thinks the party is suggesting it has something “up his/her/its sleeve” and is trying to secure some advantage. Even if it cannot figure out what the advantage would be, it assumes there must be one.

‘Court-Facilitated Arbitration’

The critical challenge is to get parties to consider moving to arbitration.

Courts need an effective and efficient mechanism to encourage and assist litigating parties to consider seriously moving to arbitration.

Without proactive and thoughtful judicial encouragement, disputes will languish because one party worries a suggested move to arbitration is to secure a tactical or other advantage, and does not understand or appreciate the benefits of arbitration.

Often parties in court litigation would benefit from independent encouragement and assistance to consider moving to arbitration. Through ‘court-facilitated arbitration’, courts can get parties to consider arbitration, and assist them to plan their arbitration and implement the move.

How ‘Court-Facilitated Arbitration’ Works

While the decision to arbitrate must be voluntary, the process to get parties to consider arbitration need not be entirely voluntary.

‘Court-facilitated arbitration’ does not offend party autonomy, one of the hallmarks of arbitration, nor any fundamental aspect of arbitration. Arbitration occurs only if parties agree.

Courts can identify potentially suitable cases and invite the parties and their counsel to a case conference to consider moving the dispute to arbitration. The case conference needs to be conducted by an experienced judge who understands arbitration, has good facilitation skills, and is committed to making court-facilitated arbitration work.

When parties are receptive, the judge then assists counsel to develop a protocol for the move, conduct of the arbitration, and consequential matters. 

If parties want certain – or even all – features of court litigation, those features can be preserved in arbitration.

Topics to be considered include the extent to which the arbitration will be private and confidential; whether a court judgment is needed, rather than an arbitration award; whether the parties want a publicly available precedent (usually they do not); the procedural and evidentiary rules to be used (if the parties want to use court rules, they can do so in the arbitration, although with an appreciation that they are giving up the benefits of a more customised and efficient approach); the case’s costs up to the move (could be left to the arbitral tribunal), and the manner of awarding costs, which could be the court’s approach to costs); the size (one or three arbitrators) and process for selection of the arbitral tribunal; whether the parties wish to preserve appeal rights as they would exist following a trial; and other topics such as the use of mediation and other forms of ADR — to take place before or during the arbitration. 

Caribbean courts should begin now to implement ‘court-facilitated arbitration’ procedures, even if as pilot projects. ‘Court-facilitated arbitration’ should be able to be implemented under most existing court rules and practices.

The main cost of implementation would be some judicial time devoted to cases that otherwise will have lengthy waits for trial and ultimately consume many days, if not weeks, of court time and resources. 

To succeed, ‘court-facilitated arbitration’ will need appropriate judicial awareness and commitment. The key will be proactive judicial involvement to encourage litigating parties to move their dispute to an arbitral tribunal.

Also, litigation lawyers will need to seriously consider the advantages that can accrue to their clients, and to explain those advantages to their clients.

The time to begin is now.

 

Footnotes:

[i] https://library.commonwealth.int/Library/Catalogues/Controls/Download.aspx?id=8023