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General Counsel Must Take Charge And Implement A Thoughtful ADR Approach (MCC)


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Thursday, September 18, 2014

The Editor interviews Noah J. Hanft, who became the President and CEO of the International Institute for Conflict Prevention & Resolution (“CPR”), effective May 1, 2014.

Editor: Tell us how your experiences at MasterCard attracted you to ADR and led you to take the helm at CPR.

Hanft: I came to MasterCard in the 1980s with a largely litigation background and more importantly a litigation mindset, meaning that I subscribed to the rather traditional view that business disputes are best resolved through the litigation process.

That mindset evolved over my 13 years as General Counsel of MasterCard. During those years, MasterCard, like so many other companies, faced a multiplicity of legal issues across the usual spectrum, from intellectual property, to antitrust, to employment and so on.

With the passage of time, I saw the risks and scope of litigation increase, driving higher litigation costs resulting in large part from the proliferation of e-discovery. The net result would often leave you between the proverbial rock and a hard place: either absorb the massive costs of litigation and accept the uncertainty of litigation or abandon your rights.

My thinking also evolved because I found that I was able to resolve virtually all of MasterCard’s major litigations by working out an effective settlement, often getting results that would be unavailable even from a win in court. I realized that almost all of these outcomes could have been improved and would have been accomplished earlier if we had focused on achieving a mediated settlement at the beginning of the process. And maybe even more importantly, I came to realize that when it came to preserving important business relationships, a mediated settlement was far superior to a harsh and disruptive litigation.

Editor: CPR has issued a call to action for general counsel to take charge of implementing a thoughtful ADR approach. Why should general counsel buy into this approach?

Hanft: I was attracted to ADR, and in particular to CPR, because I recognized the imperative for all in-house counsel to drive the adoption of alternatives to litigation. Much progress has been made since CPR’s creation at the end of the 1970s, but there’s a long way to go. The time is now for all in-house counsel handling litigation to take charge and implement a thoughtful ADR approach, and work together to create a less adversarial culture. With legal fees mounting and law department budget challenges an unpleasant distraction for general counsel, the need to drive ADR is self-evident.

Business disputes will persist, but positive change depends on understanding that litigation and its attendant costs are not the inevitable – much less, only – method of addressing those disputes. There will always be disputes in which litigation will be the best choice, but that should be a conscious decision. When it is not the best choice, companies need to be far more effective in using other methods of dispute resolution and making litigation the last resort. That’s why I decided to dedicate myself to alternative dispute resolution.

Editor: There are many ADR providers. What makes CPR different?

Hanft: CPR is not just an ADR provider, or a think tank driving thought leadership. CPR is not just a provider of tools, training and resources, or an educational and networking forum. We are all those things and more – the best of all worlds. There are three elements that underlie CPR's distinct nature. First, CPR is unique because it is a mission-driven organization that, from its very inception, has been focused on enabling companies to resolve disputes more effectively, both directly, by enhancing their capabilities, and indirectly, by improving ADR capacity worldwide. For example, over 30 years ago, CPR introduced the original CPR Corporate Policy Statement on Alternatives to Litigation (the CPR Pledge), which encourages signatories to come to the table and discuss alternatives before running to court. Thousands of organizations signed the CPR Pledge, and it worked, enabling parties to invoke the Pledge as the beginning to a more productive process. CPR introduced the 21st Century Corporate ADR Pledge in 2012 to take ADR to the next level, focusing on corporate commitment to systemic ADR programs, supported by the full range of best practices and tools CPR has been in the forefront of developing in the intervening years.

The second unique aspect of CPR is the process by which that full range of best practices and tools is developed – a process that marries intellect and innovation with practicality. From its inception in 1979, CPR has been the only organization where in-house counsel, law firms and leading academic researchers collaborate and spearhead innovation in commercial conflict management. That collaborative and pragmatic thought leadership has produced greater understanding of the needs of commercial parties and of approaches to ADR that are tailored to those needs. When I talk to prospective members of CPR, I tell them that if they join CPR, they are both supporting a mission that is critically important – driving a global culture of dispute resolution – and enhancing their ability to perform within that culture as they gain access to the best practices and tools available. Moreover, CPR membership opens the door to participating in the process of developing the next generation of best-in-class approaches to ADR. We are a participatory organization, and our members encourage their lawyers to participate on our various committees and in other initiatives that shape CPR’s rules and best practices. In turn, we update our members on the latest trends in ADR, whether they relate to particular legal specialties or to arbitration and mediation generally. Ultimately, this process enables everyone to achieve results that would be impossible otherwise.

The third way in which CPR is unique is its ability to leverage the learnings garnered from its thought leadership initiatives in its role as an ADR provider. Every aspect of CPR’s work as an ADR provider is improved by its in-depth understanding of critical issues of concern in the user community. For example, one criticism of arbitration is that the process has become unduly long and costly. CPR’s Administered Arbitration Rules directly address this concern because CPR-administered arbitrations are designed to take no more than one year. Likewise, CPR maintains an extraordinary roster of over 600 highly skilled neutrals worldwide. In addition, their references are checked to assure that they have not only extensive commercial experience, but the ability to manage cases in a manner that is not only efficient, but consistent with best practices. In addition, CPR maintains over 20 specialty panels (organized by subject matter and experience) so that users have access to specialized expertise in order to support quality outcomes.

Editor: How can companies participate in CPR?

Hanft: CPR’s working approach is inherently participatory. Members join in the work of our committees and initiatives focused on identifying best practices and developing protocols, rules and guidelines that address critical process issues of concern to the ADR community. Members also find opportunities to participate by supporting CPR’s public policy mission. For example, CPR is currently working to enhance commercial mediation capacity in the Asia Pacific region and, with the ABA DR Section and UNCITRAL, is co-organizing a Pan-Asia Mediation Summit that will take place in February 2015. In Brazil, CPR has made substantial progress in developing a mediation culture and is currently planning the Third Brazilian Mediation Congress, which is scheduled to take place in São Paulo on April 24, 2015. In Europe, CPR’s work includes creating a framework to assist EU institutions to provide corporate feedback on the implementation of the EU Mediation Directive. In addition, CPR offers unique networking opportunities like our Annual Meeting, which is being held in La Jolla, California on February 19-21, 2015.

Editor: What is the value of becoming a CPR member?

Hanft: There are several dimensions to the value of CPR membership. First, CPR provides a company the ability to achieve excellence in ADR and to do so in a cost-effective way. It would cost a company many orders of magnitude more than the cost of membership to replicate CPR’s work in identifying best practices and developing the tools, protocols, guidelines and related training that enable a company to achieve those best practices. And that would only get the company to a starting point; it would not assure that the work addresses new issues and legal requirements as they emerge. Second, CPR membership provides the environment, through its committee work and otherwise, for in-house counsel to participate in the development of a fascinating, dynamic and critically important area and learn from others in the CPR community. Finally, CPR membership – specifically, support of the CPR mission to enhance a global culture of dispute resolution – enables companies to help to assure that there is a worldwide capacity to enable them to engage in commerce, knowing that there is effective dispute resolution. Companies can only engage in effective ADR if there is institutional support and sufficient understanding in the business community of the processes involved and benefits that can be achieved. No individual company can drive that understanding. Collectively, CPR and its members play a leading role in developing and sustaining an ADR culture.

I’m delighted that in recent months our message has been resonating and many progressive-minded in-house counsel and like-minded law firms have joined CPR. Just in the last few months we’ve added approximately 20 new members, including Becton Dickinson and Company, Bunge Limited, Marsh & McLennan, Starwood, Visa and many leading law firms. I’m very excited about the progress we are making and even more excited about what lies ahead.

Editor: Arbitration is disfavored by some for different reasons. How do CPR’s new Administered Arbitration Rules address concerns with arbitration?

Hanft: In addition to concerns regarding the time and cost involved in arbitration, other criticisms that have been raised include questions regarding the neutrality and quality of the process, the degree of confidentiality, and the lack of a process for substantive appeals of awards that are viewed as having been wrongly decided. CPR’s Administered Arbitration Rules very effectively address these and other criticisms of arbitration, due largely to the fact that we didn’t create rules and contractual clauses in a vacuum. CPR’s rules are developed by experts in the field, including pragmatic in-house counsel experienced with the issues. For example, the CPR Administered Arbitration Rules incorporate best practices, such as addressing concerns regarding neutrality of panels by providing a screened appointment process so that party-appointed neutrals do not know the identity of the appointing party, addressing concerns regarding the quality of awards by requiring reasoned opinions based on governing law, and protecting the confidentiality of the process by expanding the duty of confidentiality beyond neutrals to include the parties. In addition, for parties concerned about the risk that an award will be wrongly decided, the CPR rules enable the parties to provide for an appellate arbitral procedure. CPR’s Arbitration Committee will soon be releasing the CPR Rules for Administered Arbitration of International Disputes, which, once again, were developed by a multinational team of users and neutrals and reflect their combined experience and expertise.

Editor: Each year CPR honors a corporation for its leadership in ADR at a gala event in New York City. Tell us about this event and your annual meeting.

Hanft: Our annual Corporate Leadership Award Dinner will be held in New York City on November 11, 2014. As it has done for the last eleven years, CPR will honor a company that has embedded ADR into its corporate and legal structure. This year’s honoree is United Technologies and Charlie Gill, its general counsel. We will no doubt be joined by many of our members and friends as we recognize Charlie and his United Technologies team for the fabulous work they’ve done in achieving excellence in alternative dispute resolution.

Our next annual meeting will be at The Lodge at Torrey Pines in La Jolla, CA from February 19 to 21, 2015. We’re really excited about this event because it is highly substantive and gets rave reviews from attendees. We were fortunate to have Sandra Day O’Connor as one of our keynote speakers last year, and I know that we will have very strong and exciting keynote speakers this year. The meeting brings together an internationally diverse group of executives and legal counsel from the corporate world as well as law firm partners and highly experienced leading mediators and arbitrators, academics, and government representatives. It’s a fabulous meeting that offers a high-level format and informal interchanges that all attendees can participate in. Our theme this year will be - Forging the Future: Redefining Winning and Adapting to Change.

Editor: What are your top priorities during your first six months as the President and CEO of CPR and out into the future?

Hanft: Since I joined back in May, one of my top priorities has been meeting with members, mediators, arbitrators and academics to better understand the needs of our current and potential members, as well as the value that CPR can bring to them. On that basis, I will look for ways that CPR can play an even stronger role in promoting dispute resolution, and I will continue to expand the benefits of CPR membership.

CPR has a strong value proposition for all its stakeholders. I have every intention to not only strengthen that proposition, but to enhance it on an ongoing basis. To that end, we are focusing on providing practical sessions for members on dispute resolution skills, including customized training for advocates in conjunction with the College of Commercial Arbitrators. I also want to ensure that our resources and tools are practical and function as they are applied to operations in both developed markets and in developing economies. By so doing, CPR assures that it can assist members and users regardless of where they do business.

Finally, I look to CPR leading the way in driving change in corporate culture and making a thoughtful approach to dispute resolution the norm, not an “alternative.” At CPR, the mission has always been to find approaches to dispute resolution that benefit companies, the entire legal community, and society as a whole. That mission continues.