Commercial Conflict Management and Dispute Resolution

Peter Fenn

• Publisher: Routledge
• Year: 2012
• Print ISBN: 9780415578264
• eBook ISBN: 9781136974922
• Edition: 1
• Topic: Technology & Engineering
• Subtopic: Civil Engineering
• Index: Technology & Engineering

Commerce is inherently complex and the sums of money involved can be astronomical, so it is no surprise that conflicts and disputes are all too common. There are numerous techniques designed to resolve these problems, and this book summarizes the most important of these, as well as alternative dispute resolution methods. The reader seeking a deeper understanding of these procedures will also find clear explanations of the principles and methods for conflict management, such as negotiation, risk management, mediation and conciliation.

As well as outlining these different techniques, guidance on which approach is appropriate in common situations is also given, helping the reader apply what they have learned to the real world. The significance of cultural issues is explained, before the reader is presented with suggestions for how to take these into account. Throughout, the book is illustrated with case studies from examples as diverse as Mumbai's DabbaWalla, The First World War and Terminal 5 at London Heathrow.

Written with undergraduate students in mind, this book also serves to give a neat and brief overview for professionals. Those studying or working in commerce generally, construction project management, construction management, and construction law will find this to be an invaluable book.

1    Introduction

Pink Ribbon

Each chapter in this book has a pink ribbon; the reason is explained a bit later. The pink ribbon here concerns the central terms to this book: commercial conflict and dispute raise problems of definition. This book differentiates between conflict management and dispute resolution. Frank Sander, a Harvard professor, wrote a famous paper more than 50 years ago and this still frames much of the thinking about dispute resolution.

Introduction

This is a book about commercial conflict management and dispute resolution. That means starting with some definitions: commercial; conflict management and dispute resolution. Commercial is easier and quicker than conflict management and dispute resolution, which will take some time in later sections and chapters, but here goes: Commercial: commercial law (sometimes known as business law) is a number of laws that every business must adhere to.

So Commercial deals with business and commerce – that’s hardly illuminating and might be considered a circular definition. One way of dealing with the circularity problem is to say what it is not – in this book commercial conflict management and dispute resolution are not concerned with consumer disputes or family disputes. This is a fiendishly difficult area and you might want to consider the art of rhetoric, particularly antimetabole and chiasmus.

In rhetoric, which is the art and study of the use of language, to carry an argument as use by persuasive orators, two techniques are used: antimetabole and chiasmus.

Antimetabole is the repetition of words in successive clauses, but in transposed grammatical order, for example: ‘When a dog bites a man that is not news, but when a man bites a dog that is news’ (Charles Anderson Dana, ‘What is News?’ The New York Sun, 1882).

Chiasmus is a figure of speech in which two or more clauses are related to each other through a reversal of structures in order to make a larger point, for example: I’d rather have a bottle in front of me than a frontal lobotomy.

Commercial is very difficult to define but you know what it means: it’s axiomatic. You don’t know what it means? Well, commercial does not include family or consumer law, but there are disputes (aplenty) in family and consumer issues. This definition problem is not unique to commercial issues, or to legal issues, although much debate and literature exists in the law. If you want to test how difficult it is; try and review the definitions of law or the law.

The United Nations Commission on International Trade Law (UNCITRAL) produced a model law: the UNCITRAL Model Law on International Commercial Arbitration. This provides (at the Note to Article 1 (1)) that it should be given wide interpretation so as to cover matters arising from all relationships of a commercial nature whether contractual or not.

Want some more evidence that definition of commercial is difficult? The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) allows countries a reservation, the commercial Reservation. Where a country avails themselves of the commercial Reservation they need only apply the provisions of the convention to disputes regarded as commercial by their own internal system of laws. As of January 2011, UNCITRAL give 145 countries as ratifying the Convention and 47 having taken advantage of the commercial reservation (see Appendix A).

This book makes a fundamental differentiation between conflict management and dispute resolution. You might disagree with it, many do, but the book, for reasons explained in the next chapter, is framed by the differentiation.

Conflict management: here, the emphasis is on the axiom that it must be in all parties’ interests to avoid disputes by managing conflict in such a way that disputes do not arise. This is sometimes described as dispute avoidance.

Dispute resolution: Notwithstanding the emphasis on the desire to avoid dispute, there must be occasions where the parties have legitimate disputes and that the techniques of dispute resolution are employed to bring about the conclusion or resolution of the dispute.

The Pink Ribbon

A long time ago in a galaxy far away, a friend working at a law firm gave me some papers to help with some research. While he was out of the room I found some pink ribbon which I used to parcel all the papers together to take out with me. The senior partner of the law firm saw me in reception and asked what I was doing; I told him that I was taking some papers away. ‘Not wrapped in ribbon like that you are not.’ It transpired that bundling papers in pink ribbon was something only counsel (a barrister) could do. I learned my lesson. There were pink ribbon counterparts in many things I did over the years and I began to use it as an example of specialist knowledge or language that captured some ‘secret’. Each chapter in this book has a pink ribbon. This describes the secret that might be hidden in the chapter.

The References and the Case Law

It is impossible to write any kind of book without providing references; these are a trail that others can pick up. But sometimes the references can be intimidating and overpowering, so this book does not include a comprehensive literature review. There are many such books, please look elsewhere. Similarly, any book about legal issues, at least in the common law, must include a detailed citation of case law. This book does not include a comprehensive citation of case law. Again, there are many such books, please look elsewhere. Of course, there are some references to literature and to cases but this is not a reference book.

Conflict and Dispute

Conflict and dispute are difficult words; they are often interchanged. Some theorists take conflict as the stronger term (i.e. dispute is all around but only occasionally does conflict break out) and some take completely the opposite view (i.e. conflict is all around but only occasionally does dispute break out). This book takes the position that conflict is necessary and inevitable but that disputes are to be avoided. The classification used here is then Conflict Management or Dispute Resolution. Conflict is good; but effective management can avoid disputes. Dispute is bad and disputes need resolving (normally by third party intervention).

Dispute Processing

Conflict management or dispute resolution or dispute processing? Because not all disputes get resolved, and many do not get resolved satisfactorily at all, some commentators use the term dispute processing rather than dispute resolution.

This book differentiates between conflict management and dispute resolution (or dispute processing) but it does NOT use the term dispute processing.

The term dispute processing was coined by a famous academic who wrote a famous paper. That academic is Frank Sander from Harvard University. The famous paper (Perspectives on justice in the future)¹ was first presented at a famous conference, The Pound conference, and is widely acknowledged as a seminal text on dispute resolution.

An Alternative Classification

To avoid the confusion between conflict and dispute it is possible to avoid the use of the term conflict at all and call everything dispute. Instead of conflict management, dispute avoidance. The continuum becomes:

Dispute avoidance –––––––––––––––––––––––––––––– Dispute resolution

Dispute resolution might be split into consensual and adjudicative. Here are some examples:

Dispute avoidance – project definition, risk allocation, procurement and tendering procedures, partnering, relationship contracting, negotiation techniques, dispute resolution adviser, project management.

Consensual dispute resolution – negotiation, dispute resolution adviser, mediation, conciliation neutral fact finding, neutral expert evaluation, mini-trial/executive tribunal, dispute review board.

Adjudicative dispute resolution – adjudication, expert determination, reference to an expert, dispute adjudication board, arbitration, litigation.

Litigation

Litigation is undoubtedly dispute resolution, the ultimate dispute resolution. Beyond this there is no treatment of litigation, other than to use it as a comparator, in this book. Len Shackleton was a famous soccer player and in his classic autobiography he included a chapter entitled ‘What the average director knows about football’ and he left the page blank. A chapter entitled ‘What the author knows about litigation’ and a page left blank was not approved by the publisher; however the author is very definitely not in the camp that blames any or all failings on lawyers: ‘The first thing we do, let’s kill all the lawyers’ (Shakespeare Henry VI, Part 2).

In fact, the only piece of advice offered in the entire book is: the first thing you should do is consult a lawyer.

2 Conflict Management and Dispute Resolution

Pink Ribbon

There does exist a theory of conflict, proposed by Karl Marx and developed by others. There is considerable interest in conflict and disputes from a psychological, through a sociological to a commercial perspective. It used to be thought that all conflict was a bad thing. Among the first to question this was Mary Parker Follett, who developed the concepts of functional and dysfunctional conflict. The generally accepted view now is that conflict and dispute are different. The difference however is less easily explained. The widely held view is that conflict, which is all around in Western dialectic, may develop into dispute (although some argue the complete opposite that dispute is all around and conflict is the stronger term).

This book takes the view that conflict is inevitable, and is an essential part of dynamic capitalism. Dispute may flow from the conflict. If you like: conflict is inevitable, dispute is not. Dispute may emerge from conflict but conflict does not emerge from dispute. Some people talk of functional conflict and dysfunctional conflict or dispute. Therefore, two things are required: conflict management and dispute resolution.

Conflict management is considered in the next chapter. The dispute resolution techniques are considered individually in later chapters, but here the four major dispute resolution techniques are stated as: mediation, arbitration, construction adjudication and litigation. These are compared and contrasted under the headings: formality, speed, flexibility and cost.

The cost of commercial conflict and dispute is not easily quantifiable, but one thing is clear – whatever the cost is, it is something that should be avoided.

Those believing the argument that conflict is inevitable have to consider the example of the dabbawalla of Mumbai, where conflict is almost unheard of and it is estimated that less than one in six million deliveries produce mistakes. A case study of the dabbawalla is made.

Introduction

Both professionals and academics are enormously interested in commercial conflict and disputes. The interest is mostly with the techniques used to resolve disputes; there is little by way of interest into conflict management or dispute avoidance. This chapter considers four areas:

1. An introduction to conflict theory.
2. A discussion of the difference between conflict and dispute.
3. An outline of the myriad of techniques used to resolve disputes. In the UK this reflects the Government’s current approach and that of other interests which seek to make savings by optimising efficiency in dispute resolution.
4. The lack of evidence that is apparent in any discussion of commercial disputes. This chapter discusses the absence of an empirical base to the study of disputes. The UK construction industry is given as an example. The lack of an empirical base means that there has been little consideration of the issues of understanding, explanation or prediction of commercial disputes. A research agenda is proposed where an aetiological approach to commercial disputes is employed; this, it is proposed, may help develop a mature and sophisticated research base, which may help industry performance.

A case study is made of the dabbawalla of Mumbai where 99.99966 per cent of the products manufactured (services delivered in this case) are statistically expected to be free of defects. Or, if you like, one in six million deliveries produce a mistake.

Conflict Theory

A theory of conflict does exist, it was founded by Karl Marx.¹ Marx expresses the theory in terms of a class struggle – the struggle between classes. Others, notably Max Weber, took the theory forward. A glance at the conflict literature shows there is a great diversity of conflict knowledge, from the everyday knowledge we all have to the sophisticated theoretical writings of psychologists and sociologists. The problem is how to present this broad range of knowledge in an understandable manner. One way of dealing with this is to consider that the theories apply to many different conflicts, or even that they apply to all conflicts. Sociological theories apply to commercial conflict. In addition the theories will be presented in a simple way. One famous definition of economics is that it is a study of the allocation of scarce resources which have alternative uses. Conflict theory might be expressed in a similar way: conflict is inevitable as organisations seek to redistribute scarce resources – a classic Marxist view.

Conflict and Dispute: Is there a Difference Between Conflict and Disputes?

Disputes are time consuming, expensive and unpleasant. They can destroy client/supplier relationships which have been painstakingly built up over long periods of time. Disputes can add substantially to the cost o...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright
• Contents
• List of figures and tables
• Preface
• 1. Introduction
• 2. Conflict management and dispute resolution
• 3. Conflict management and dispute avoidance
• 4. Negotiation
• 5. Mediation
• 6. Construction adjudication
• 7. Arbitration
• 8. Other ADR techniques
• 9. Cooperation and collaboration
• 10. Game theory
• 11. The stages of dispute resolution
• 12. The psychology of conflict management and disputes
• Appendix: 1958 – Convention on the recognition and enforcement of foreign arbitral awards
• Notes
• Index