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Abstract
Provision for appropriate dispute resolution clauses in international commercial contracts has evolved to become an essential ingredient in contemporary competitive markets. They also serve as a pre‐emptive remedy, necessitating further demands for cheaper remedies in dispute management, specifically alternative dispute resolutionFootnote2 processes such as arbitration, conciliation and mediation. Further, there is the question whether the business community could sustain the average commercial fees for dispute settlement without becoming a source of resentment or revolt in the long term. This essay examines the economic cost of dispute settlement with a bias towards mediation, as well as other issues concerning creative management of disputes. This informs a more compelling need to reconsider the costs of disputes in economic terms: analysing comparative merits/utilities of mediation and determining what the opportunity cost of mediation in international commercial contracts is and whether it is cost efficient in comparison with other forms of dispute resolution process.
‘For the rational study of the law the black letter man may be the man of the present, but the man of the future is the man of statistics and master of economics. We learn that of everything we have, we have to give up something else, and we are taught to set the advantage we gain against the other advantage we lose, and to know what we are doing when we elect’ Footnote3
Notes
1. PhD student University of Glasgow, LLM. Energy Law and Policy, University of Dundee,([email protected]) I am grateful to Kerra Bazzey and Alan Glazer for their valuable comments on the earlier draft of this article
2. Hereinafter referred to as ‘ADR’.
3. Oliver Wendell Holmes, ‘The path of law’, 10 Harvard Law Review (1897), 474. NB. This quotation is brought in as a prelude, setting the foundation for the necessary nexus between Law, Dispute and Economics, considered in this paper as the essence of legal management of dispute. The assertion that ‘a lawyer without any knowledge of mathematics would soon become an enemy of the public’ has become a popular cliché. However, the position of this paper is anchored on the premise that a pragmatic application of mathematics through economics occupies a position of importance in business management and therefore the paper argues that this position impacts and will continue to impact on dispute management.
4. J. Collier and V. Lowe, The Settlement of Disputes in International Law: Institutions And Procedures (Oxford: Oxford University Press, 2000), 1.
5. Ibid.
6. E. Carroll & K. Mackie. International Mediation – The Art Of Business Diplomacy, 1st edn. (The Hague, The Netherlands: Kluwer Law International, 2001), 5.
7. Paul Newman. ‘Commercial alternative dispute resolution’. In: Marian Liebmann (Ed.). Mediation In Context, (2000), 189.
8. J. Collier & V. Lowe, The Settlement of Disputes in International Law, 10.
9. J.G. Merrill, International Dispute Settlement (Cambridge: Cambridge University Press, 2002), 27.
10. A. Bevan, Alternative Dispute Resolution (London: Sweet & Maxwell, 1992), 1.
11. F.E.A. Sander. ‘Alternative method of dispute resolution: an overview’ . In: M. Freeman (Ed.).Alternative Dispute Resolution, (Hants: Dartmouth Publishing Company Limited,1997),97.
12. This is not without merit, because human beings are psychological and we are often persuaded by the wrappings or package of a product before any the decision to buy the product.
13. Ibid.
14. A.Bevan, Alternative Dispute Resolution, 18.
15. Collier and Lowe, The Settlement of Disputes in International Law,27.
16. R. Cooter & T. Ulen, Law and Economics (2nd edn) (Reading: Addison‐Wesley Longman, Inc., 1996) 3.
17. Ibid.
18. R.G.Lipsey & K.A.Chrystal, Principles Of Economics, 10th edn. (Oxford: Oxford University Press, 2004), 4.
19. Ibid.
20. Available resources are not limited to cash at hand or available capital, rather it includes probable credit facilities and expected revenues.
21. Resources here include possible loans from banks, existing capital, debts and equity contributions by the parties to the transaction involved.
22. ‘Because of the pervasive prevalence of conflict and its physical, emotional and resources costs, the solutions people seek to solve it with are those that allow them to satisfy their interests and minimize costs’‐Christopher Moore, The Mediation Process (1986)
23. T. Walde, Mediation/Alternative Dispute Resolution in oil and Gas and Energy Transactions: Superior to Arbitration /Litigation from a Commercial and Management Perspective, OGEL, Vol. 1, Issue No 2 (March 2003).
24. Collier &Lowe, The Settlement of Disputes in International Law, 27.
25. Paul Newman, Commercial Alternative Dispute Resolution, 180.
26. Carroll& Mackie, International Mediation, 1.
27. W.F. Fox Jr., ‘How to think about international commercial dispute resolution’. In: International Trade For Non‐Specialists (Ed.). P.H. Vishny (1st edn.) 1997, 923.
28. Ibid.
29. Walde, Mediation /alternative dispute resolution in oil and gas and energy transactions, 3.
30. Paul Newman, Commercial alternative dispute resolution, 181.
31. Walde, Mediation /alternative dispute resolution in oil and gas and energy transactions, 3.
32. Carroll & Mackie, 37. The mediator would be the go‐between who ‘wears a thousand sandals’ according to a Japanese saying.
33. T.Walde, Mediation /alternative dispute resolution in oil and gas and energy transactions, 5
34. Ibid.
35. Ibid.
36. Ibid., his estimate for a large investment arbitration before the ISCID was $3–5 million and that estimate has been criticized as far below the likely cost.
37. For a more detailed information and analysis on game theories: Eric Rasmusen, Games and Information: An Introduction to Game Theory (2nd edn. 1995)
38. T Walde, Mediation /alternative dispute resolution in oil and gas and energy transactions,6
39. Carroll & Mackie, International Mediation 19.
40. T. Walde, Mediation /alternative dispute resolution in oil and gas and energy transactions, 4.
41. Cooter and Ulen, Law and Economics, 335
42. Christopher, C. Moore, The Mediation Process: Practical Strategy for Resolving Disputes (2nd edn.) (San Fransisco: Jossey‐Bass Inc.1996),19.
43. Carroll & Mackie, International Mediation, 93.
44. For a more detailed reading on the issue of cultural perspectives ‘influence on mediation’, see article by Donahny, M.S,‘Seeking harmony’, Journal Of The Chartered Institute of Arbitrators, 61,4
45. Cross, J., The Economics of Bargaining. 1st edn.1969.
46. 2WLR 262{House of Lords} (1993) referred to by Anthony Connerty in, Dispute resolution in the oil and gas industries, JENR Law Vol 20 No 2 (2002) p. 156.
47. D.B. Lipsky and R.L. Seeber, Pattern of ADR. In: Corporate Disputes, 54, Feb DRJ.
48. Carroll & Mackie, International Mediation, 106.
49. Centre for Dispute Resolution.
50. Ibid., 181.
51. Ibid., 106.