Can we talk? Overcoming barriers to mediating private transborder commercial disputes in the Americas.

• Author: Peters, Don

ABSTRACT

This Article examines cognitive and cultural barriers creating the relatively infrequent use of mediation to resolve private, transborder commercial disputes in the Americas. It begins by analyzing the challenges presented by transborder commercial litigation. It then presents and supports the claim that international arbitration, the most frequently used transborder commercial dispute resolution method, suffers from many of litigation's disadvantages including excessive expense and delay, loss of outcome control, damaging or ending rather than preserving and improving commercial relationships, and using legalistic, rights-based perspectives that obscure business interest-based solutions.

This Article next examines several cognitive biases that impair rational decision making regarding dispute resolution method selection in transborder commercial disagreements. Analyzing selective and partisan perception, egocentric and optimistic overconfidence biases, and fixed pie and win-lose assumptions, the Article integrates empirical research and anecdotal data to support the claim that these cognitive biases encourage arbitration and discourage mediation. This Article also analyzes ways that American business and legal culture encourages cognitive biases, which leads disputants toward adjudication and away from mediation, and how other cultural differences generate misunderstandings that contribute to the frequent choice to arbitrate rather than mediate private transborder commercial disputes.

This Article then suggests several strategies for overcoming these cognitive and cultural biases and analyzes how these proposals mirror techniques mediators commonly use to help disputants negotiate effectively. The Article concludes by explaining the currently minimal role in consensual dispute resolution played by formal trade regimes in the Americas and suggests how these provisions could encourage mediation and the effective outcomes this process often produces.

TABLE OF CONTENTS I. INTRODUCTION II. COMMON BARRIERS TO MEDIATING PRIVATE TRANSBORDER DISPUTES A. Cognitive Barriers B. Cultural Barriers III. YES, WE CAN OVERCOME COGNITIVE AND CULTURAL BARRIERS TO MEDIATING A. Overcoming Cognitive Barriers 1281 B. Overcoming Cultural Barriers IV. YES, WE CAN TALK, AND TWO IMPORTANT CONVERSATIONS WE SHOULD HAVE V. CONCLUSION I. INTRODUCTION

The phrase "Let's talk" captures mediation's approach to dispute resolution and deal making. Best understood as assisted and enhanced negotiation, (1) mediation permits confidential discussion directed toward constructive communication. (2) Practiced for centuries and found in most of the world's cultures, (3) mediation provides a simple, relatively flexible process that allows people to talk and negotiate in the presence, and with the assistance, of third persons. (4) Mediators help participants better understand each other, frame problems in ways that transcend partisan perceptions, explore independent and shared interests, and develop solutions that promote mutual gain. (5) Unlike arbitrators and judges, mediators do not make binding decisions. (6) Instead, they help participants develop solutions and stimulate disputants to make better and more mutually rewarding agreements. (7) Mediation often produces outcomes that exceed the narrower, win-lose legal remedies available with arbitrators and judges. (8)

For these and other reasons, many commercial lawyers and scholars encourage more extensive use of mediation to resolve private transborder commercial disputes. (9) Successful businesses increasingly expand beyond national boundaries and create transnational networks of customers, distributors, and suppliers. Many of the resulting transactions generate ongoing commercial relationships such as alliances, joint ventures, and other collaborative arrangements. (10) Businesses make substantial investments to create these commercial associations and then often experience the uncertainties that interdependent relationships inevitably produce. (11) Commercial expansion across national boundaries brings conflict as economic and political circumstances change, personality tensions emerge and sharpen, and differing contractual interpretations and other performance related perceptions arise. (12) Disagreements over responsibilities, obligations, performances, and entitlements commonly result. (13)

Efficient methods to resolve transborder disagreements contribute substantially to the growth and success of international trade. (14) Risks stemming from different cultural practices, expectations, and behaviors compound in transborder commercial relationships, and they make appropriate conflict resolution processes essential. (15) Workable systems of transborder dispute resolution are required for resolving private problems and protecting commercial legal rights. (16) The limited nonviolent dispute resolution menu of avoidance, consensual agreements, and letting outsiders decide through adjudication, litigation, or arbitration (17) has produced an odd result where transborder commercial disputes are frequently resolved through arbitration, while litigation and meditation are seldom used. No mysteries surround why companies involved in private transborder commercial disputes avoid litigation. Transborder litigation of private commercial disputes adds difficulties, complexities, and inefficiencies to the process, (18) while most businesses value flexible, quick, and inexpensive resolutions. (19) The absence of a regional judicial system in the Americas with power to adjudicate private commercial disputes means that some disputants must litigate under a foreign country's legal and procedural rules. (20) This creates enormous opportunities for lawyers to quarrel over whether the courts selected have jurisdiction over disputes and nonresident disputants. (21)

Once jurisdictional issues are resolved, lawyers turn their argumentative talents to quarreling over what substantive law should be applied (22) and how evidence can be identified, gathered, and presented at trial. (23) Private transborder litigation in the United States, for example, presents enormous challenges for non-U.S. litigants, because it requires them to comprehend and manipulate fifty separate sets of state civil procedure rules, the additional overlay of federal rules, and the impact of local rules in both state and federal trial courts. (24) Substantial differences in trial procedures among adversarial and inquisitorial systems create more complexities stemming from different roles for judges and experts, methods of establishing records, values accorded oral testimony, and appellate options. (25) Parties fear "home town justice" from xenophobic tribunals and worry about judicial independence and impartiality. (26) After running this gauntlet, business disputants and their lawyers face substantial challenges in enforcing foreign judgments, often replaying initial jurisdictional disputes. (27) These time-consuming and expensive aspects of commercial litigation flow directly from the fact that dispute-creating events, transactions, and differences cross state borders. (28)

Faced with these daunting realities, lawyers and business decision makers usually turn elsewhere to resolve differences that cannot be resolved through private negotiation. (29) The dispute resolution option most frequently chosen is arbitration--the adjudicatory alternative that, like litigation, relies on outsiders to decide. (30)

Arbitration has emerged as the preferred dispute resolution method in contemporary transborder border disputes, (31) even though its use has diminished in U.S. domestic commercial disagreements. (32) International commercial arbitration seeks to provide a fair and neutral forum to assess and decide transborder commercial disputes. (33) Compared to private transborder litigation, arbitration may be faster and less expensive, require less involvement by business personnel, afford participants control over the selection of the arbitrator or arbitral panel, and involve less discovery and appellate review. (34)

As an adjudicative remedy, however, arbitration shares many of litigation's disadvantages. Unless it produces a settlement while unfolding, (35) arbitration generates winners and losers. (36) Despite attempts to use decision making processes that respect ongoing business associations (37) and arbitrators' oft-criticized tendency to render compromise decisions, (38) arbitration more often ends--rather than repairs--commercial relationships. (39) Losers usually do not want to do further business with companies that defeat them in adjudicatory battles.

Arbitration also presents general adjudication disadvantages, including sacrificing outcome control by delegating it to external decision makers. (40) Resolution by arbitration focuses on backward-looking facts, evidence, and arguments asserting and defending legal rights rather than on present and future development of beneficial business solutions. (41) It adopts formal, legalistic frames that require the expertise of lawyers, and it often diverts time, money, and energy to ancillary procedural quarrels. (42) Unlike litigation, arbitration seldom produces outcomes that establish precedent or articulate influential business policy. (43)

In addition, oftentimes arbitration is neither less expensive nor faster than litigation. (44) Absent custom-designed arbitration processes tailored to specific disputant needs and dispute characteristics, (45) substantial time and money is often spent selecting arbitrators (46) and wrangling about information gathering. (47) For example, several transborder investment arbitrations conducted pursuant to NAFTA and bilateral investment treaties required four years to conclude and cost millions of U.S. dollars. (48)

International commercial lawyers tend to view arbitration the way attorneys view courts for domestic disputes. (49) Consequently...