Deals Making And Breaking Them (May 2011)

McCarthy Tétrault LLP / mccarthy.ca / 18 May 2011

DEALS: MAKING & BREAKING THEM

18 May 2011

McCarthy Tétrault Advance™Building Capabilities for Growth


2

WHEN DO YOU HAVE A DEAL AND HOW SHOULD IT BE DOCUMENTED?

LOIs and Definitive Agreements

David Crane


3What is the purpose of a Letter of Intent (LOI)?¬ Common precursor to a business transaction¬ Outlines the intent of the parties to engage in some form of

business relationship and anticipates, either expressly or impliedly, continued negotiations to reach a definitive agreement¬ Expression of common intent to enter into negotiations in view to

conclude a business transaction¬ Also called a memorandum of understanding or term sheet¬ Avoid wasting time and money required to try to negotiate a full

deal (i.e. definitive contract) only to have the deal fall apartbecause of a lack of agreement with respect to a fundamental term (e.g. price)

¬ Builds deal confidence - allows for efficient evaluation of the likelihood of success or failure of a transaction


4When should LOIs be used?

¬ When it isn’t clear that a deal will be made¬ Allows parties to work out the essential terms of the deal in a more

informal process without incurring the time and expense of trying to negotiate a complete definitive agreement

¬ To record and track the main deal terms so that they can be communicated to others (e.g. the lawyers drafting the definitiveagreement(s))

¬ Even if non-binding, can provide moral suasion¬ Consider impact to negotiating leverage¬ When the timing allows for an LOI as an initial step¬ Costs of two rounds of negotiation are worthwhile¬ If a public company, consider disclosure requirements


5Binding or non-binding?

¬ An LOI can be binding or non-binding, in whole or in part¬ Problems arise when parties fail to specify in their LOI

whether they intend it or some parts of it to be legally enforceable

¬ Typically, LOIs are not intended to bind either party to finally complete the contemplated transaction but are meant to include some binding terms

¬ Binding parts/provisions typically address:¬ Exclusive dealing / no shop clauses¬ Break or topping fees¬ Access for due diligence¬ Confidentiality¬ Allocation of transaction costs¬ Conduct of business prior to close¬ Termination of the LOI


6Has a binding commitment/contract been formed?¬ Common law requirements of contract formation:

¬ Offer¬ Acceptance¬ Consideration¬ KEY FACTOR: Intent of the parties to create legal relations

¬ Intent of the parties as determined objectively based on the words used

¬ Meeting of the minds and reasonable degree of certainty of terms

¬ Not easy to determine whether intent is sufficient clear¬ Extrinsic evidence (e.g. conduct, conversations, emails

etc.) can be considered if:¬ Intent is unclear¬ Rectification is sought


7Other factors for determining binding/ non-binding¬ Presence of essential open terms¬ Definiteness and completeness of language¬ Express LOI term or expiration date¬ Reference to need for further negotiation or agreements¬ Industry custom, complexity of the transaction and prior

course of conduct¬ Use of condition precedent¬ Performance, promissory estoppel or detrimental reliance¬ Bad faith on the part of a party


8Precontractual negotiations

¬ As a general rule, a party to precontractual negotiations has traditionally been able to break off negotiations for any reason without liability¬ Unenforceable agreement to agree¬ Only costs are the loss of the party’s own investment

in negotiations in terms of time, effort and expense¬ However, there have been some recent cases

involving the duty of good faith that have conflicted with this rule


9Duty of good faith – What is it?

¬ What is good faith?¬ Little judicial consistency in its definition

¬ Something more than pure selfish behaviour¬ “Candour, honesty and forthrightness”¬ Less than a fiduciary duty (can act in own best interests)¬ Absence of bad faith

¬ What is its purpose?¬ Common concern for fair dealings and protection of

parties’ reasonable expectations¬ What would it mean in the context of negotiations?

¬ Sincere efforts to negotiate¬ Not a sham process


10Duty of good faith – Status in law¬ Law in respect of the duty of good faith is unclear¬ Pre-contractual obligation of good faith

¬ The common law rule is that contracts to negotiate are inherently uncertain and therefore incapable of creating binding and enforceable obligations

¬ Too difficult to estimate the damages¬ Inherently repugnant to the adversarial position of the parties when

involved in negotiations¬ Each party to the negotiations is entitled to pursue his (or her) own

interest, so long as he avoids making misrepresentations¬ May not matter whether obligation is express or implied¬ Confirmed by most case law in Canada, but some exceptions in

context of an existing contractual relationship¬ Exception in Quebec – principle is codified in Civil Code of

Quebec¬ Be aware of unconscionability, deceit, misrepresentations,

fiduciary duties, public policy etc.


11Duty of good faith – Status in law (con’t)¬ Contractual duty of good faith

¬ Not clear whether implied duty of good faith arises in respect of every contract or in certain circumstances only (e.g. with respect to certain contractual provisions or in certain fact situations)

¬ One line of authority that suggests that there is a general duty of good faith performance arising in respect of all contracts

¬ However, strongest line of authority suggests that the duty onlyarises in the presence of particular relationships or particularconduct on the part of a contracting party

¬ Circumstances where duty of good faith performance has been recognized by the courts:

¬ exercise of discretionary power; complying with a condition precedent; invoking a rescission clause; complying with a right of first refusal; performance of franchise agreements

¬ More likely to arise in a relationship involving dependency, influence, vulnerability, trust and/or confidence

¬ Implied so as to prevent parties from defeating the objectives of the very agreements they have entered into

¬ But not to create new, unbargained-for rights and obligations or to alter express terms of a contract


12Implications of duty of good faith¬ Conclusion:

¬ Likely not applicable to pre-contractual negotiations¬ However, remember that other legal doctrines, such as undue

influence, unconscionability, negligent misrepresentation and deceit, may provide a cause of action

¬ Once in a contractual relationship, may be implied (but likely only in special circumstances)

¬ Even if an entire agreement clause is present¬ If implied into a contract, may:

¬ Create obligation to cooperate in achieving the objectives of the agreement

¬ May lead to other covenants being implied (e.g. precluding conduct not strictly prohibited by the express terms of the agreement)

¬ Restrain the exercise of discretion


13LOI practice tips¬ Consider whether an LOI, with its attendant uncertainties, is

appropriate in the circumstances¬ Risk of implied obligation to act in good faith

¬ Carefully consider what terms should be addressed at the LOI stage¬ Explicitly address what is intended to be binding/non-binding¬ If not intending to be bound, avoid words such as “offers”, “accepts”,

“shall”, “must”, “promise”, “agreement”, “contract” and “undertaking”¬ Include “sunset” provisions – time to definitive agreements; time to

fulfill or waive conditions precedent; time for disclosure¬ Include termination provisions – explicitly describe how and when the

LOI can be terminated¬ Be aware of the risks of entire agreement clauses - consider

amending LOIs to document changes to deal that are only reflected in the final agreement

¬ If you are in a special relationship, take extra care in negotiations


14Definitive agreements¬ The detailed and complete deal terms should be reflected

in an agreement in a form appropriate for the type of deal¬ Include an entire agreement clause

¬ Override all preliminary agreements, understandings and representations, whether oral or written, so that the definitiveagreement reflects the entire deal

¬ As previously discussed, be aware of potential problems with respect to entire agreement clauses

¬ Consider exit strategies upfront¬ When should you be able to terminate the agreement?

¬ Termination for cause¬ Termination for convenience¬ Reductions in scope and volume

¬ For service relationships, consider whether termination/transition assistance is needed


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NON-DISCLOSURE/CONFIDENTIALITY AGREEMENTS

AND DUTIES OF CONFIDENTIALITY

Michael Feder


16Duties of Confidentiality

¬ The exchange of confidential information is an essential part of deal-making.

¬ Duties of confidentiality ensure that disclosed information is not misused.

¬ Duties of confidentiality can arise at common law or under a non-disclosure/confidentiality agreement (“CA”).


17Common Law

¬ At common law, a duty of confidentiality exists where (1) information with a “confidential character” is (2) imparted “in confidence”.


18Common Law

¬ Whether information has a “confidential character” depends on a number of factors:¬ Cost¬ Value¬ Secrecy

¬ “Imparted in confidence” means a reasonable person would conclude that the information was given only for a limited purpose.

¬ Where a duty of confidentiality exists, the recipient must use the information only for the limited purpose for which it was conferred.


19Negotiating Confidentiality Agreements

¬ If carefully drafted, CAs can provide the parties with certainty concerning duties of confidentiality.

¬ Particular attention must, however, be paid to:1. the scope of information defined as confidential;2. the entire agreement clause;3. the permitted use of confidential information; and4. standstill or area of interest clauses.


20Defining Confidential Information

¬ The disclosing party will seek a broad definition, while the receiving party will seek a narrow one.

¬ Beware of uncertain definitions that include oral communications or that capture all information that “relates to” or “concerns” something.


21Ousting the Common Law: Entire Agreement Clauses¬ A carefully drafted entire agreement clause can prevent a

common law duty from applying to information not covered by the CA.

¬ The entire agreement clause must “expressly or by necessary implication” deal with confidentiality.

¬ Cadbury Schweppes Inc. v. FBI Foods Ltd., [1999] 1 S.C.R. 142, at para. 36.

¬ The entire agreement clause must not restrict itself to the subject matter of the CA.

¬ Minera Aquiline Argentina SA v. IMA Exploration Inc., 2006 BCSC 1102, at para. 113.


22Restrictions: Permitted Uses Of Confidential Information¬ The disclosing party will seek a narrow permitted

use clause, while the receiving party will seek a broad one.

¬ The receiving party bears the onus of proving that it was expressly permitted to use confidential information as it did.

¬ Novawest Resources Inc. v. Anglo American Exploration (Canada) Ltd., 2006 BCSC 769, at para. 63.


23Restrictions: Permitted Uses Of Confidential Information¬ Permitted use clauses must be drafted precisely.

¬ A CA permitting the confidential information to be used for the purpose of “assessing … some form of business combination between the Parties” precluded a hostile takeover bid by the receiving party. Although a hostile takeover bid is a “business combination”, it is not “between the Parties”.

¬ Certicom Corp. v. Research in Motion Ltd. (2009), 94 O.R. (3d) 511 (Ont. Sup. Ct.), at paras. 41 and 53.


24Restrictions: Standstill Clauses

¬ CAs often contain standstill clauses prohibiting the recipients from acquiring shares of the disclosing party. The purpose is to provide a “cone of safety” for negotiations.

¬ Aurizon Mines Ltd. v. Northgate Minerals Corp., 2006 BCSC 1022, at para. 54.


25Restrictions: Standstill Clauses

¬ Absent an express indication to the contrary, standstill clauses are independent: the standstill clause will be enforceable notwithstanding that no confidential information has been used or even exchanged.

¬ Aurizon Mines Ltd. v. Northgate Minerals Corp., 2006 BCCA340, at para. 49.

¬ In this way, a standstill clause provides “better protection”for the disclosing party than confidentiality provisions: it removes the need to prove that confidential information was relied on.

¬ Certicom Corp. v. Research in Motion Ltd. (2009), 94 O.R. (3d) 511 (Ont. Sup. Ct.), at para 56.


26Restrictions: Area Of Interest Clauses

¬ An area of interest clause prohibits the recipient from staking within a defined geographical area.

¬ Like a standstill clause, an area of interest clause typically does not require proof that the receiving party relied on confidential information.

¬ Minera Aquiline Argentina SA v. IMA Exploration Inc., 2006 BCSC 1102, at paras. 95-97.


27Restrictions: Area Of Interest Clauses

¬ A badly drafted area of interest clause can negate all other restrictions on the use of confidential information:

“[N]othing contained herein will restrict or prevent [the receiving party] from acquiring any property through option, joint venture or staking of new mineral claims, except within a one kilometre area of influence from the current property boundary”

¬ Novawest Resources Inc. v. Anglo American Exploration (Canada) Ltd., 2006 BCSC 769.


28Confidentiality Agreement Paralysis


29Ethical Walls: A Solution?

¬ An ethical wall attempts to foreclose any suggestion that confidential information has been used by a receiving party in breach of a CA.

¬ Since duties of confidentiality may be breached if confidential information is relied on even inadvertently, merely instituting an ethical wall is insufficient. The receiving party must be able to prove that the ethical wall was effective.


30An Effective Ethical Wall: Dataco¬ Olameter entered into a CA with Dataco then received

information in connection with a possible purchase of Dataco’sbusiness.

¬ Olameter became interested in bidding on a contract for which Dataco was competing.

¬ Olameter then instituted an ethical wall with the following features:¬ The confidential information received from Dataco was kept

in a locked cabinet, to which only one Olameter employee had access.

¬ The confidential information and the bid were handled by Olameter offices in two different cities.

¬ “Ethical wall procedures” were circulated to Olameteremployees.

¬ Dataco Utility Services Ltd. v. Olameter Inc., 2009 ABQB 116 .


31Other Practical Tips

¬ Consider implementing an ethical wall whenever a CA is made.

¬ Beware of unsolicited proposals or information.¬ Avoid boilerplate.


32

PUBLIC COMPANYCONSIDERATIONS

Robin Mahood


33Public Companies – Disclosure Obligations

¬ Basic Requirement¬ If a “material change” occurs in the affairs of a reporting

issuer, the reporting issuer must (a) immediately issue and file a news release describing the change and (b) within 10 days, issue a material change report

¬ A “material change” is:¬ a change in the business, operations or capital of the

reporting issuer that would reasonably be expected to have a significant effect on the market price

¬ a decision to implement a change referred to above made by the board of directors or senior management who believe that confirmation by the board of directors is probable


34Disclosure Obligations – AiT Advanced Technologies¬ OSC Decision (2008)

¬ provides guidance with respect to the appropriate timing of disclosure

¬ Chronology of EventsFeb 27 CEO of AiT discusses transaction with 3M managementMar 12 Non-disclosure agreementMar/Apr Due diligenceApr 25 Non-binding letter of intent

AiT board approval (subject to fairness opinion and definitive documents)

May 9 Market Regulation Services contacts AiT AiT announces that it is exploring “strategic alternatives” toenhance shareholder value but has no further announcements to make at that time

May 14 3M board approval (subject to completion of due diligence)May 22 Execution of merger agreement and public announcement


35AiT Advanced Technologies – OSC Decision¬ Decision

¬ No material change occurred until definitive documents had been signed (consistent with general practice)

¬ Key Findings¬ a material change can occur in advance of the execution of definitive

documents¬ no “bright line” test¬ determination of whether a material change has occurred will depend on

the facts and circumstances of each case¬ discussions and negotiations may constitute a “material fact” even if

they do not constitute a material change that requires disclosure¬ trading prohibited ¬ disclosure of negotiations to a third party prohibited (tipping)

¬ board approval may not constitute a material change¬ in the context of arm’s length negotiations, board approval will generally

not be considered a material change unless there is a sufficient commitment from the counterparty and a substantial likelihood that the transaction will be completed


36AiT Advanced Technologies – Practice Points¬ Negotiations do not need to be disclosed until the parties are committed

to proceed and there is a substantial likelihood of completion – generally speaking, a non-binding letter of intent will not need to be disclosed

¬ Ensure that board minutes accurately reflect the company’s level of commitment to a transaction (i.e. if approval is subject to due diligence or resolution of key business points, make sure this is reflected in resolutions or minutes)

¬ In determining whether to disclose an agreement at any point in negotiations consider:¬ whether all material terms have been agreed¬ whether each party to the agreement has obtained required approvals¬ whether key conditions (i.e. due diligence) have been satisfied

¬ Insider Trading¬ ensure that directors and office are aware of restrictions on trading¬ ensure that negotiations are disclosed to employees and advisors on

a “need to know” basis only


37Filing of Material Contracts

¬ Subject to exceptions for certain contracts entered into in the ordinary course of business, material contracts must be filed onSEDAR

¬ although information may be redacted if disclosure would be seriously prejudicial or would violate a confidentiality obligation, certain information may not be redacted in any event (i.e. events of default, termination rights or any term necessary to understand the impact of the deal on the issuer)

¬ ensure that confidentiality provisions permit disclosure to the extent required by law

¬ if the material contract constitutes a material change, it must be filed concurrently with the material change report – if material must be redacted, plan in advance


38Change of Control Transactions¬ Directors and officers must:

¬ act honestly and in good faith with a view to the best interests of the corporation (“Duty of Loyalty”)

¬ exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances (“Duty of Care”)

¬ Courts will generally defer to the business judgment of the board provided that they have acted prudently and on a reasonably informed basis

¬ In a change of control situation, a board’s decision will often be subject to closer than usual scrutiny and, as a consequence, it is particularly important in this context to avoid potential traps


39Management Conflicts of Interest¬ Potential conflicts of interest in connection with a change of control

transaction prospects of ongoing employment¬ change of control payments

¬ Two recent cases in the U.S. demonstrate potential concerns that the interests of senior management may not be aligned with the interests of shareholders in the context of a change of control transaction

¬ In re: Topps¬ sale of Topps to a private equity group led by Michael Eisner¬ Eisner assured management that their employment would continue

post-closing¬ competing offer (Upper Deck) did not provide the same assurances¬ Delaware Court of Chancery found that the board had likely

breached its fiduciary obligations – enjoined Topps from seeking shareholder approval until it amended its proxy circular to include full disclosure regarding employment


40Management Conflicts of Interest (cont.)Lear Corporation

¬ Board did not perceive a conflict of interest and allowed CEO tospearhead negotiations

¬ CEO negotiated an agreement that would permit him to accelerate $10.4 million in retirement benefits and retain employment

¬ Although the court ultimately determined that neither the board nor the CEO breached its duties, it was highly critical of the process followed:

¬ Because the CEO might rationally have expected a going-private transaction to provide him with the unique means to achieve his personal objectives, and because the merger with Icahn in fact secured for the CEO the joint benefits of immediate liquidity and continued employment that he sought just before the negotiating of that merger, the Lear stockholders are entitled to know that the CEO harbored material economic motivations that differed from their own that could have influenced his negotiating posture with Icahn. Given that the special committee delegated to the CEO the sole authority to conduct the merger negotiations, this concern is magnified


41Management Conflicts of Interest (cont.)¬ If senior management has an interest in a

transaction, adopt procedures or safeguards to manage this conflict ¬ special committee

¬ oversight and recommendation to the board¬ active role in negotiation

¬ fairness opinions¬ independent valuation

¬ Maintain minutes and records which demonstrate all steps to mitigate the impact of any conflicts


42Change of Control Transactions¬ General obligation to act in the best interests of the company

¬ this will not always involve a singular focus on obtaining the best price possible

¬ Supreme Court of Canada has clearly indicated that other factors may be relevant (BCE v. 1976 Debentureholders)

¬ Nonetheless, the obligation to act “in the best interests of the company” will generally include an obligation to ensure that the company adopts a sales process which enables to the company the best offer available

¬ No “blueprint” or “one size fits all” approach – provided that directors act honestly and in good faith and exercise reasonable care, diligence and skill, Canadians courts will generally defer to the judgment of a board


43Market Checks¬ Two general approaches

¬ pre-agreement market check¬ post-agreement market check

¬ Pre-agreement auction widely regarded as one of the most effective ways for a board to discharge its fiduciary duties¬ limited auctions¬ unrestricted auctions¬ agreement typically includes “no-shop” provisions –

company may not actively solicit competing offers, but may terminate the agreement to accept a superior proposal

¬ deal protection (break fee/matching rights)


44Go-Shop Provisions¬ In certain circumstances, an auction may not be practical

¬ potential buyer may require exclusivity¬ “damaged goods” concerns¬ disclosure of confidential information¬ open auction process may jeopardize employee, customer or

supplier relations (and drive down price)¬ potential buyer may realize that it has overvalued the company

¬ “Go-shop” clauses have emerged as an alternative approach in recent years¬ target negotiates an agreement with a single buyer and then

actively solicits competing bids for 30 to 60 days¬ most frequently used in U.S. deals with private equity funds


45Advantages of Go-Shop Provisions¬ Intended benefits of go-shop provisions include the

following¬ allows seller to establish a “floor price”¬ existence of a firm offer may make the company appear

more valuable¬ enables targets to canvas the market without the risk of

being tainted by a failed auction¬ more efficient to deal with one buyer only¬ may increase willingness of a potential buyer to

complete required diligence (break fees ensure the initial bidder will be compensated for expenses)


46Criticism of Go-Shop Provisions¬ Several commentators have criticized go-shop

clauses as “window-dressing” during the past year ¬ deal protection provisions (break fees/matching

rights) deter competing offers¬ go-shop period provides insufficient time for a third

party to prepare a competitive proposal¬ enables board to satisfy fiduciary obligations

without legitimately canvassing the market


47Effective Use of Go-Shop Provisions¬ Studies have shown that go-shop clauses can increase return

to shareholders, particularly when drafted to ensure that they serve their intended purpose ¬ length of go-shop period¬ no limits on universe of potential buyers ¬ bifurcated termination fees¬ no formal matching rights during go-shop period¬ diligent exercise of go-shop right

¬ Appropriate process depends on the circumstances¬ do not employ a “cookie cutter” approach¬ carefully consider alternatives and adopt an approach best

suited to the circumstances


48

WHEN DEALS ARE BROKENMiranda Lam


49OVERVIEW

¬ Mechanisms for Dispute Resolution¬ Common Forms of Dispute Resolution¬ Comparative Strategic Advantages and

Disadvantages¬ Choosing between Litigation or Arbitration¬ Drafting an Arbitration Provision


50


51Mechanisms For Dispute

Partnering Negotiating Collaboration Cybersettle.com

Confidential Listening

Conciliation/Mediation

Early Neutral

Evaluation

Neutral Case

EvaluationMediation/Arbitration

Arbitration/Mediation

Pre-Trial Conference

Judicial Settlement Conference

Litigation

SummaryTrial Trial

Increasing Outside Control

1 2 3 4 5 6 7 8 9 10 11 12 13 14

Adapted from the Alternative Dispute Resolution Practice Manual from CCH Canadian Limited. Original form of chart prepared by Genevieve Chornenki, published by and copyright CCH Canadian Limited, North York, Ontario. Chornenki, Dispute Resolution Spectrum from A. Stitt (ed.), Alternative Dispute Practice Manual (North York: CCH Canadian, 1996) at 1303.

Dispute Resolution Spectrum


52Common Mechanisms For Dispute Resolutions¬ Alternative Dispute Resolution

¬ Mediation¬ Arbitration

¬ Litigation


53Alternative Dispute Resolution

¬ Mediation¬ Process by which two or more parties to a dispute

attempt to resolve the dispute by reaching an agreement amongst themselves by utilizing the services of a mediator

¬ Rights based mediation¬ Interest based mediation


54Alternative Dispute Resolution

¬ Arbitration¬ Process of resolving disputes between two or

more parties whereby a third party (an arbitrator) hears or reviews evidence and renders a binding decision based on the parties’ legal rights.

¬ The arbitrator may be a single person or a panel of three whose appointment is agreed to by the parties or pursuant to the rules of arbitration that the parties have chosen.

¬ Process is consensual and consent cannot be withdrawn once the process is commenced.


55Litigation

¬ Litigation¬ A claim is commenced by an aggrieved party in

the court against another.¬ The dispute is resolved by a judge (or judge and

jury).¬ Process is governed by civil litigation rules of the

jurisdiction in which the action is commenced.


56Advantages of Alternative Dispute Resolution ¬ Expert decision-maker¬ Control over procedure ¬ Relationship preservation¬ Confidential¬ Cost effective¬ Efficient¬ Finality


57Challenges with Alternative Dispute Resolution Methods¬ Lack of procedural certainty¬ Difficulties with enforcement¬ Appeals¬ Inefficient


58Litigation Process ¬ Advantages

¬ Certainty¬ Enforceability¬ Availability of options for recourse and relief¬ Public

¬ Challenges¬ Decision-maker unfamiliar with subject matter¬ Inefficient¬ Not cost-effective¬ Relationships challenged¬ Public


59To Litigate or Arbitrate?

Considerations:

¬ Nature of the dispute anticipated to arise¬ History and relationship between the parties¬ David or Goliath¬ Process v. outcome¬ Interim relief¬ Enforcement


60If you arbitrate:

Considerations when drafting an arbitration clause:

¬ Choice of law and forum or place of arbitration¬ Governing rules of arbitration/use of a neutral

administrative service provider¬ Sole mechanism for dispute resolution¬ Scope or subject matter for dispute resolution¬ Mechanism to agree and/or appoint arbitration panel

¬ panel nomination and composition¬ allocation of panel fees & costs


61If you arbitrate:

¬ British Columbia International Commercial Arbitration Centre (BCICAC) Model Arbitration Clause

All disputes arising out of or in connection with this contract, or in respect of any legal relationship associated therewith or derived therefrom, shall be referred to and finally resolved by arbitration administered by the British Columbia International Commercial Arbitration Centre pursuant to its Rules.


62Arbitral Procedure

¬ Ad hoc v. institutional rules or procedure¬ Ad hoc

¬ Specific, tailor-made for specific circumstances¬ Negotiated beforehand

¬ Institutional¬ Neutral administrative service provider¬ Defined body of rules¬ Available to suit most situations¬ Administrative fees


63British Columbia International Commercial Arbitration Centre Model Clauses

¬ Mediation ClauseThe parties agree to attempt to resolve all disputes arising out of or in connection with this contract, or in respect of any legal relationship associated with it or from it, by mediated negotiation with the assistance of a neutral person appointed by the British Columbia International Commercial Arbitration Centre administered under its Mediation Rules.

¬ To combine mediation with arbitration and therefore ensure a binding resolution, add the following additional paragraph to the mediation clause set out above:

If the dispute cannot be settled within 30 days after the mediator has been appointed, or such other period agreed to in writing by the parties, the dispute shall be referred to and finally resolved by arbitration administered by the British Columbia International Commercial Arbitration Centre, pursuant to its Rules. In the absence of any written agreement otherwise, the place of arbitration shall be Vancouver, British Columbia. ADR Clause Encompassing Negotiation, Mediation and Binding Arbitrations

¬ All Inclusive Clause¬ Amicable Negotiation

The parties agree that, both during and after the performance of their responsibilities under this Agreement, each of them shall make bona fide efforts to resolve any disputes arising between them by amicable negotiations and provide frank, candid and timely disclosure of all relevant facts, information and documents to facilitate those negotiations.

¬ Efficient Process The parties further agree to use their best efforts to conduct any dispute resolution procedures herein as efficiently and cost effectively as possible.

¬ MediationThe parties agree to attempt to resolve all disputes arising out of or in connection with this contract, or in respect of any legal relationship associated with it or from it, by mediated negotiation with the assistance of a neutral person appointed by the British Columbia International Commercial Arbitration Centre administered under its Commercial Mediation Rules.

¬ ArbitrationIf the dispute cannot be settled within 30 days after the mediator has been appointed, or such other period agreed to in writing by the parties, the dispute shall be referred to and finally resolved by arbitration administered by the British Columbia International Commercial Arbitration Centre, pursuant to its Rules. In the absence of any written agreement otherwise, the place of arbitration shall be Vancouver, British Columbia.

Source:http://www.bcicac.com/bcicac_adr_model_arbmed.php

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Deals Making And Breaking Them (May 2011)