Drafting ADR and Arbitration Clauses for Commercial Contracts

AuthorWendy Earle
chapter two
Drafting ADR and Arbitration Clauses
for Commercial Contracts
WEndy EArlE
Litigation has changed in the last thirty years. We have moved
from a time when many, if not most, disputes were tried to a time
when 98 percent of disputes are settled without a trial.1 The On-
tario Rules of Civil Procedure2 were designed to provide a fair process
to parties going to trial on any type of issue, regardless of its com-
plexity, size, or nature. While there have been signicant changes
to the Ontario Rules over the years and while there are new court
directions and initiatives designed to promote dispute resolution
outside of a trial, too many cases, if not most, grind through the
various litigation steps prescribed by the Ontario Rules — plead-
ing, documentary production, oral discoveries, motions about the
documentary production and oral discoveries, pretrial hearings,
etc. until the parties, worn down by the accumulated legal fees,
worn out by the drain on their time and emotional resources, and
terried by the ever-present risk of losing and having to pay costs,
settle. The process is unsatisfying, costly, emotionally draining,
1 See Julie Macfarlane, The New Lawyer: How Settlement Is Transforming the
Practice of Law (Vancouver: UBC Press, 2008) at 7–9.
2 RRO 1990, Reg 194 [Ontario Rules].
WEndy EArlE
and not particularly just. Real people, as opposed to wealthy cor-
porations and very wealthy people, cannot aord it anymore and
are eectively denied access to justice.
The focus of this chapter is on whether arbitration can do
better and whether arbitration clauses (both pre- and postdis-
pute) can be designed to (1) avoid time-consuming disputes about
the arbitration clause and process and (2) foster “fair, quick and
cost-eective”3 dispute resolution by empowering the arbitrator
to customize the process to enable the parties to obtain the in-
formation that they require to resolve their dispute (whether by
hearing or settlement) in an ecient manner.
My starting point will be to examine three common errors
made in drafting arbitration clauses that complicate and delay dis-
pute resolution, frequently causing the parties to argue endlessly
and at great expense about matters that have virtually nothing to
do with the actual dispute itself. Next I will explore the role that
procedure plays in promoting fair, quick, and cost-eective dis-
pute resolution and how procedure can promote or obstruct this
goal. I will explore how the traditional approach to procedure in
pre- and postarbitration clauses poses challenges to counsel, par-
ties, and arbitrators and how modifying the traditional approach
so as to impose more responsibility on the arbitrator for design-
ing and managing the arbitration process increases the chances
of achieving fair, quick, and cost-eective dispute resolution.
Pre- and postarbitration clauses are complex provisions that re-
quire the consideration of many dierent issues. It is beyond the
3 The phrase “fair, quick and cost-eective” is taken from the decision of
Brown J in Farrell v Kavanagh, 2014 ONSC 905, Schedule A at para 1 (Com-
mercial List). This case, together with Brown J’s decision in George Weston
Ltd v Domtar Inc, 2012 ONSC 5001 [George Weston], should be read as oering a
wealth of ideas on how parties can work creatively with the judiciary in litiga-
tion to customize procedure to meet the needs of a particular case at all stages.

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