The purpose of this website is to inform the business world about the use of pre-dispute and pre-escalation processes in business dealings, not only to prevent disputes but because they strengthen relationships. In this website we collect the very best writing in this field, report on significant developments, and encourage further research and experimentation to advance the field.
To Begin with Some Basics:
Pre-Dispute and Pre-Escalation Techniques to Improve New Business Relationships
Among the dozens of dispute resolution processes that exist today, there are a number of relatively new pre-dispute and pre-escalation processes that can be used to prevent disputes before they become so intractable that they have to be dealt with through traditional “resolution” processes. These processes are most effective when instituted proactively, at or near the beginning of a relationship.
The philosophy behind these processes can be illustrated by the following expressions: “It usually costs less to avoid getting into trouble than to pay for getting out of trouble” (Professor Lewis Brown, 1950). “An ounce of prevention is worth a pound of cure,” “A stitch in time saves nine.” “Fortune favors the prepared mind.” “Fix the problem, not the blame.” “Be prepared.” “be proactive, not reactive,” “The highest and best form of dispute resolution is dispute prevention.”
These processes are all practical, common-sense practices and techniques, invented by users of dispute resolution services. They acknowledge that problems and unexpected events are likely to occur in any relationship, and they are based on such principles as mutual cooperation, collaboration, early attention to problems as soon as they develop, prompt action to deal with problems on a “real time” basis, avoidance of adversarial attitudes, reliance on pre-selected experts, participation in reaching solutions to problems and disputes, and direct party control over the outcome of a dispute.
Categories of pre-dispute and prevention processes:
Pre-dispute and pre-escalation processes can be grouped under the following two broad categories:
- Prevention and cooperation techniques that help to avoid problems and disputes.
- Dispute de-escalation, control, and “real time” resolution techniques to prevent disputes.
Descriptions of Individual Processes:
1. Prevention and cooperation techniques that help to avoid problems and disputes:
- Realistic Allocation of Risks Realistic allocation of risks is the practice of balancing the obligations of parties to a relationship by assigning each risk to the party who is best able to manage, control or insure against the risk. If a party to a relationship is saddled with a risk that it cannot handle, this creates resentment and adversarial relationships, and sows the seeds of countless potential disputes. Therefore many problems can be avoided by following this practice.
- Providing Incentives to Encourage Cooperation The practice of providing incentives to encourage cooperation among parties to a relationship helps to prevent disputes from arising. If a party to a relationship has a financial incentive to act cooperatively it is more likely to work in a collaborative way. An example of such an incentive is a “bonus pool” which will be divided among all the participants in a business venture provided they all meet certain defined goals of cooperation and teamwork. The bonus is payable either to everyone or to no one, thus encouraging the participants to support and assist each other by focusing on legitimate joint goals, and subordinating selfish interests for the ultimate benefit of all participants.
- Analysis of Potential Sources of Disputes A joint effort by parties who are about to enter into a relationship to identify likely sources of potential disputes can motivate the parties to develop ways of preventing and controlling disputes. The process involves investigating the kinds of disputes that have been shown to arise typically in similar relationships, analyzing the prospective relationship to identify sources of disputes, and considering ways in which to prevent and control those potential disputes. The construction industry has developed a computerized analysis tool called the “Disputes Potential Index” to facilitate this process.
- Partnering Partnering is a team-building effort in which the parties, with the assistance of an expert facilitator, commit to achieve mutual goals and objectives and resolve potential problems by establishing cooperative working relationships. It is customarily implemented at the beginning of the relationship by holding a retreat among the key stakeholders in the relationship, establishing a “partnering charter,” and periodically renewing the partnering effort with further refresher retreats.
2. Dispute de-escalation, control, and “real time” resolution techniques to prevent disputes
- Negotiation Negotiation is a voluntary and usually informal process in which parties identify issues of concern, explore options for the resolution of the issues, and search for a mutually acceptable agreement to resolve the issues raised. Negotiation is different from mediation in that there is no neutral individual to assist the parties negotiate. Negotiation can be a useful adjunct to any other dispute resolution process
- Step Negotiations/Issue Elevation Step Negotiations, sometimes called “Issue Elevation” is a variation of traditional negotiation, using successive levels of negotiation to encourage agreement. The negotiation process is structured so that if the individuals from each party who are most directly involved in a dispute are not able to resolve a problem promptly at their level, their immediate superiors, who are not as closely identified with the problem, are asked to resolve the problem. If they fail, the problem will be passed up to higher management of both parties. Because of an intermediate manager’s interest in keeping messy problems from reaching the desks of upper level managers, and interest in demonstrating to higher management the intermediate manager’s ability to solve problems, there is a built-in incentive to resolve disputes before they reach the highest level.
- Ombuds An ombuds is a third party individual selected by an institution – for example, a university, hospital or governmental agency – to investigate complaints by employees, clients or constituents. The ombuds works within the institution to investigate the complaints independently and impartially. The process is voluntary, private and non-binding.
- Standing Neutrals and Dispute Review Boards A Standing Neutral is a trusted neutral person or group of individuals appointed by the parties to a relationship, at the beginning of their relationship, to be available to assist the parties throughout their relationship in the “real time” resolution of any problems that occur during the relationship. The neutral should be known to and respected by the parties, and be in a position to be available on reasonable short notice to provide prompt objective advice to the parties whenever they cannot agree among themselves how to solve a problem. The availability of a respected expert who can administer a “dose of reality” when needed can have a therapeutic effect upon the relationship between the parties.
- The mere existence of such a respected person encourages the parties to deal realistically with each other and resolve problems themselves without referring them to the neutral. Experience has shown that when the neutral is required to give advice, the parties, guided by that advice, are usually able to reach a consensual solution to the problem without having to resort to any formal dispute resolution process. Standing neutrals are known by various names, such as “wise person,” “mutual friend,” “referee,” or “interim dispute resolver,” and can come in different forms, such as a “dispute review board” consisting of three neutrals, an “initial decision maker” who closely monitors a relationship,” or a “standing mediator,” or “standing arbitrator,” depending upon the needs of the parties.
Further Resources: Further detailed information about pre-dispute and pre-escalation processes can be found in publications of the Construction Industry Institute (CII), the International Institute for Conflict Prevention and Resolution (CPR), The Dispute Review Board Foundation (DRBF), and World Commerce & Contracting (WCC) (formerly the International Association for Commercial and Contract Management (IACCM).
Chart of Dispute Resolution Stages and Steps
Today, because of the flexibility, adaptability and versatility of ADR, Users of dispute resolution processes have available to them a wide variety of techniques that can be used to prevent, control and resolve disputes. New techniques are constantly being developed to deal with the wide variety of potential disputes that can occur in any kind of relationship, and at any stage in the development or escalation of a problem or dispute.
It has become increasingly common for parties about to enter into a relationship to combine a series of dispute prevention, control and resolution processes into a ‘system’ or series of ‘steps’ that are designed to deal with different kinds of problems or disputes that might occur, at successive stages in the development and escalation of a dispute. These processes can be grouped for convenience into four broad categories or stages:
The Prevention and Cooperation Stage, where parties can use prevention and cooperation techniques, tailored to encourage alignment of interests, improve cooperation, prevent or minimise the adverse impact of problems, and curb adversarial attitudes.
The Dispute De-Escalation, Control and ‘Real Time’ Resolution Stage, where parties can use techniques that are designed to deal promptly and realistically with problems, differences of opinion or disagreements at the time they arise, to de-escalate tensions, resolve problems, or achieve instant resolution of disputes.
The Facilitated Resolution Stage, where parties, assisted and guided by mediators and other dispute resolution professionals, can use any of a wide variety of techniques, or combinations of techniques, to achieve a mutually-acceptable resolution of a dispute.
The Binding Resolution Stage, where, after all other efforts at resolution have failed, parties can have a ‘back stop’ adjudication process in which the dispute will be finally resolved by a neutral third party — either in a privately-agreed process such as arbitration, or, by default, in a court of law.
These stages are graphically illustrated in the attached Chart of Dispute Resolution Stages and Steps, which lists various techniques in the order in which they would normally be employed in the life of a dispute, and demonstrates, in dramatic ‘stair step’ fashion, escalating degrees of hostility, cost, and time for achieving resolution, from stage to stage, as an unresolved dispute progresses.
Sources:
Preventing and Resolving Construction Disputes, CPR 1991
Dispute Avoidance and Resolution Task Force (DART) 1991
Dispute Prevention and Resolution Research Team of the Construction Industry Institute, 1993
CPR Dispute Prevention Initiative and Prevention Practice Materials, 2010
Updated for the Global Pound Conference 2016, by James P. Groton
Three Articles that Explore Pre-dispute Techniques in Depth
Now that the basic principles of the dispute prevention and resolution field have been described, it’s useful to flesh out more details about the art and practice of using prevention techniques to create and strengthen business relationships.
Three articles linked below provide much food for thought:
First, “Thinking Ahead,” a chapter from the “Negotiator’s Desk Reference,” explores the new “anticipatory/preventive/proactive concept” which provides a philosophical frame for a different way of thinking about conflict in advance, which it calls “a new Anticipation and Prevention Movement.” It urges dispute professionals and business advisors to adapt their skills to this new movement, and provides a “flow chart” to illustrate the differences between this new way of thinking and currently-typical conflict handling practices. The article also contains a list of some of the best research and writing in the prevention field.
Next is “Pre-dispute and Pre-escalation Techniques to Improve New Business Relationships,” a chapter from the recent ABA book “Negotiation Essentials for Lawyers,” written especially for busy lawyers. It summarizes the lessons from the “Thinking Ahead” chapter, and makes an additional point addressed specifically to the transactional lawyers who are called on to advise on and document new business relationships:
It noted that since ADR processes have now moved “upstream” from traditional “resolution” to the modern “prevention” of disputes, the role of the transactional lawyer who is involved in advising and documenting business deals and relational contracts has been vastly expanded.
Among other things, it makes the point that since dispute prevention techniques have now been developed to the point where they should by now be a part of the tool kit of all competent transactional lawyers, the failure of such a lawyer to advise the client about the availability of these techniques could amount to a breach of the lawyer’s duty to the client.
That concept was enunciated by the Georgia Supreme Court in the late 1980s, at the dawn of the ADR era, in an Ethical Standard (EC 7-5), incorporated into the Georgia Bar’s Rules of Professional Conduct, which read in part:
For lawyers involved in transactions and counseling: ”A lawyer as advisor has a duty to advise the client as to various forms of dispute resolution.”
Today’s transactional lawyers can now be expected to put to full use the pre-dispute and pre-escalation techniques that are articulated in these articles.
The last of these three articles, “Why Businesses Should Use Dispute Prevention and De-escalation Clauses in Their Agreements,” reminds us that every relationship carries with it the potential for disputes, which can occur at any time, even in the best of families and businesses. It makes the point that when parties are first entering into a business relationship they have a unique opportunity to exercise control over future problems and disputes by including prevention clauses in their agreements.
This third article was first written in 1995 as the Introductory chapter to the Manual for Using Private Dispute Resolution Clauses in Business Disputes published by the law firm of Sutherland, Asbill & Brennan LLP (now Eversheds Sutherland LLP). Further material excerpted from that Manual will appear in the next Section of this website, below.
Using Prevention Tools in a Written Dispute Prevention and Resolution System
The techniques and tools that parties select for implementing their prevention and relationship-strengthening strategy need, of course, to be expressed in writing.
The article “Designing a Contractual Dispute Prevention, De-escalation and Real-Time Resolution System” is a helpful guide to the kinds of contract clauses that can be adapted to for this purpose in their governing documents.
That article offers illustrative clauses and descriptions of a variety of prevention and de-escalation tools, along with suggestions for their use. It presents clauses in the order in which they would normally be employed in the life of a developing dispute, beginning first with the techniques that have the greatest potential for saving money and preserving relationships.