Response (Date: 2013-May-24)
There has been significant public discussion, in the media and elsewhere, regarding theongoing commercial arbitration between the City of Ottawa and Orgaworld. In order toaddress some of the questions that have arisen in the context of this litigation, a morecomprehensive explanation of the rationale underlying the selection of arbitration as thepreferred dispute-resolution mechanism in commercial dealings may be helpful.Commercial Arbitration ProcessUpon entering into a commercial relationship, parties to a contract must try to foreseeand address the wide variety of matters that might affect their relationship. In light of thecomplexity of some commercial relationships, the possibility that some disagreementwill arise over the interpretation or administration of the contract cannot be overlooked.Therefore, the parties will often seek to put in place some mechanism to resolve thesedisagreements, recognizing both the likely ongoing and long term relationship betweenthe parties and the fact that terminating the relationship in its entirety may not be in theinterests of either party to the contract. Therefore, the parties are left either with thetraditional recourse to the courts, or to the alternative of commercial arbitration. Thereasons why commercial arbitration is frequently seen as the preferred option, as wellas the advantages and disadvantages of arbitration, are outlined in further detail below.Why Do Parties to a Contract Select Arbitration?In general, the decision to use arbitration to resolve disputes, rather than the courts, ismade at the time the parties enter into a contract. In the event that arbitration is selectedas the preferred dispute resolution method, an arbitration clause is inserted into thecontract requiring recourse to arbitration rather than civil proceedings in the event of adispute.The preference for arbitration can be based on a number of factors, including thefollowing:
The parties are able to define their own dispute-resolution process.In many commercial contracts, this process includes forms of Alternative DisputeResolution (ADR), such as informal or formal mediation, that can be used to resolvedisagreements before they get to arbitration. The result, in many cases, is amutually-agreeable dispute resolution mechanism that is arguably more flexible andmore efficient than having to resort to the courts where the parties in a commercialrelationship need the intervention of a third party to resolve an issue that has arisen.
The parties can select who will hear their dispute.The parties involved in a dispute over a commercial contract can select an arbitrator