Click Here to read original article on Lexology
This chapter is taken from Lexology GTDT's Practice Guide to Franchise, examining key themes topical to cross border franchising. (link below)
This chapter discusses different approaches to resolving cross-border disputes between a franchisee and franchisor, including different types of resolution mechanisms and the various stages of each. It will consider the benefits and drawbacks to various methods of alternative dispute resolution, such as negotiation, mediation and arbitration, as well as litigation. It will also discuss particular considerations to keep in mind when conducting discovery across jurisdictions. Many of these dispute resolution mechanisms may be used together in a progression from least to most formal. Ultimately, the best approach will depend upon individual factors, such as the complexity of the dispute, the stakes and the temperament of the parties.
When a dispute arises between a franchisee and a franchisor, informal negotiation is generally the first method used to attempt to resolve the dispute. The parties will lay out their grievances and attempt to reach a resolution through direct exchanges with each other, and perhaps between counsel, but without engaging a third-party neutral to assist. The first exchanges might take the form of demand letters.
As the parameters of the dispute become more defined, the parties may decide that it would be beneficial to meet face to face for a more concentrated negotiation session. This meeting typically involves representatives from the franchisee and the franchisor, as well as their counsel, and the two sides talk through their competing positions and concerns. The goal is to negotiate a mutually acceptable resolution.
When planning a face-to-face negotiation session, the parties will need to consider the location. It is likely more costly for both parties to travel, but each party may resist the perceived imbalance of going to the other side's offices. The best solution may be to select a neutral location, such as a conference room or rental office in the city where one party is located, so that only one party has to incur travel costs. The language in which the negotiation will be conducted is another concern, with parties most commonly choosing to use the language of their franchise agreement.
Mediation uses a neutral third party to assist the parties in negotiating a resolution to their dispute. Mediationmay occur at the outset of a dispute, or it may be done at some point during the process of an action in arbitration or litigation. Several ADR agencies (listed below) offer mediation services or at least help parties locate a private mediator. Private mediators generally charge an hourly fee that the parties most often choose to split, but the fee may be apportioned however the parties choose. Mediators may be retired judges or practitioners who have experience with franchise disputes or businesses in a particular industry. Alternatively, some courts may offer mediation services with magistrate judges at no charge to the parties.
The parties' discussions during the mediation proceeding, as well as the results of the mediation, are generally confidential. Parties often agree that any statements or offers made in mediation must be kept confidential and cannot be used in later court proceedings. Like negotiation, mediation is nonbinding and completely voluntary, and any party may withdraw from the mediation at any time. The goal of mediation is to craft a written settlement agreement, or at least a term sheet outlining the agreed-upon settlement.
Before the mediation, the parties will typically submit for the mediator's review written statements outlining their positions on the facts and law at issue, as well as their settlement positions. The statements may also incorporate a few relevant documents. The mediation itself is usually a face-to-face meeting that might last anywhere from a few hours to a couple of days. Depending on the preference of the parties and the mediator, the mediation may begin with opening statements made by counsel in the presence of both parties, or the parties may decide that it is best to remain separate the entire time. The mediator then typically engages in shuttle diplomacy, travelling back and forth between the parties to discuss their positions.
There are two different approaches to mediation - facilitative and evaluative, with facilitative mediation being the more common type. In a facilitative mediation, the mediator will ordinarily present one party with the other party's offers and counter-offers, discuss the potential expense and risk of proceeding with arbitration or litigation, and may endeavour to explain the other side's view of the issues in dispute or any business realities that need to be addressed in the resolution. But the mediator will generally avoid providing their own analysis of the factual or legal merits of the dispute. On the other hand, in an evaluative mediation, the mediator will provide each party with an assessment of the strengths and weaknesses of its position. The mediator may also provide an analysis of the damages likely to be recovered by the parties. This tactic can be particularly useful if one or both parties have an unrealistic view of the case.
Mediation has many of the same benefits as informal negotiation. It is a non-adversarial process ideal for parties who wish to remain in an ongoing business relationship or who are willing to compromise in resolving their dispute. It offers a very flexible procedure and allows the parties to work together to form creative, forward-looking solutions to disputes.
Mediation is generally quick and therefore relatively inexpensive. It does not use the same types of procedural mechanisms, such as discovery or motion practice, as arbitration or litigation, so the associated attorneys' fees are much lower.
Like negotiation, the biggest drawback to mediation is that there is no guarantee of a resolution. The parties should think carefully about the best timing for mediation. While it might be most cost-effective to mediate a dispute as soon as it arises, parties may be in a better position to reach an appropriate settlement after fleshing out the facts through discovery. On the other hand, even if a settlement is not reached in early mediation, it can be a useful tool through which the parties may learn more about the other side's position.
It may be more difficult to enforce a mediated settlement agreement than it is to enforce an arbitration award, as there is currently no law in place that allows for easy cross-border enforcement. Parties generally turn to local contract laws for enforcement. However, over the summer of 2018, an UNCITRAL Working Group proposed a Convention on international settlement agreements resulting from mediation (A/CN.9.942), which would allow parties to enforce such settlement agreements in court.2 The convention requires three signatories to enter into force, and the signing ceremony is expected to occur in Singapore in 2019. Thus, the Singapore Convention will become mediation's answer to the New York Convention that applies to arbitral awards.
A final consideration for franchise systems is that settlements made through mediation do not establish precedent for other similar cases that might arise between the franchisor and other franchisees. This may be a positive or a negative depending on the dispute.
The Japan International Mediation Center in Kyoto (JIMC-Kyoto), which is the first Japanese international mediation centre, was officially launched on 20 November 2018. The centre has a panel of non-resident international mediators. Kyoto, the former Imperial capital of Japan, is a city rich in culture. As one of the non-resident mediators, I am interested to know more about Japan, the people and its culture. Below is a short sharing that I have prepared after reading some materials on DanShaRi.
Dan-Sha-Ri, the philosophy of decluttering is an idea advocated by Hideko Yamashita, author of the bestselling book DanShaRi. Hideko Yamashita introduces herself in her book as the first clutter management consultant in the world.
So, what is DanShaRi and how is it relevant to mediation practice?
DanShaRi comprises three themes: -
Dan - refuse the unnecessary items to enter into one's living space;
Sha - throw away the endless garbage derived from the household items; and
Ri - stay away from the obsession of keeping the unused items at home.
On the face of it, DanShaRi seems to be a way of helping people tidy up items around them by going through a process of making decisions on what should be kept and what should be abandoned. From another perspective, it appears to be advocating minimalism.
DanShaRi, in fact, has a much deeper sense. It is a thinking process of reviewing the relationship between the items and the person (but not the relationship between such items with other people) at the present moment (rather than in the past or the future). If one thinks that it is sad to throw something away and thus keep it, the focus is on that something rather than the person. According to Hideko Yamashita, the real spirit of DanShaRi is not only to help people declutter the room but it also helps them understand themselves better and deeper. Hence, the proper question to be asked is "whether the relationship between the items and me still exists". If not, one should part with them. Keeping the clothes that we wore 10 years ago would not free up the space for new clothes or space for other purposes.
In the context of dispute resolution, a mediator may make use of the philosophy of DanShaRi to help a disputant review the relationship that he has with the disputes as well as the related litigation at the present moment. What should we do when a legal action has been initiated but it has been put on hold for some time? What should we do when a legal action has been initiated but it has been dragging on for years with all sorts of interlocutory proceedings and incidental appeals? As a mediation practitioner, I always ask the parties whether they enjoy the disputes and the related litigation. The usual answer is "No" with the explanation that they thought litigation would be the way to resolve the disputes. I also ask them what they will do with a household item bought for a reason but the item in fact is not as useful as expected. Should the item be kept? When a disputant is tired of litigation or when he is aware that the litigation does not help in the way as expected, his attitude towards the disputes and the related litigation will be different. He will be more ready to take part in the mediation with a view to decluttering the legal action, reaching a settlement and/or redefining the relationship.
Family mediators could also make use of DanShaRi to coach divorcing parties who are emotionally stuck with the shattered relationship, the financial dispute and issues relating to their children to move on and redefine their relationship. If a divorcing party is still at the stage of denial and anger, it is unlikely that the party will be emotionally and psychologically prepared for the mediation process because he/she either is still hopeful about the relationship or is still too angry to negotiate. It is only when both parties accept the fact that the marriage relationship has come to an end emotionally and sociologically, they will then be ready to end it legally by thereafter making the best use of mediation to declutter issues arising out of the closure of the relationship. By explaining to the parties that they can choose to refuse litigation entering into their lives, let go of the unhappiness derived from the marriage and stay away from the obsession of obtaining a favourable judgment from the court, the mediator may in effect inject the philosophy of DanShaRi to the parties so as to facilitate them to be more ready to go through the mediation process.
Although Albert Einstein once asked "if a cluttered desk is a sign of a cluttered mind, of what, then, an empty desk a sign?", modern psychologists seem to suggest otherwise - clutter breeds stress. Mediators, to some extent, are like clutter management consultants. In the process of mediation, mediators use questioning, listening, summarizing, reframing, reality-testing and other skills to facilitate the disputants to understand their needs, concerns and fears (collectively "interests") behind their positions, generate options to address the interests and understand their BATNA/WATNA. Mediators are in substance helping the disputants understand themselves better and deeper. The shift of a mindset on the part of the disputants is quite often a by-product of the process which leads to a settlement. Each party, through the mediation process, should be able to review one's relationship with the dispute and with the other party. With the self-determination principle, each party may decide the way forward as to whether the dispute should be abandoned and parted with by way of a settlement and how to do it.
Fans of William Ury and readers of his book "Getting To Yes with Yourself" will probably remember Ury's description about his involvement in the dispute between Abilio Diniz, a highly successful and prominent businessman from Brazil and his French business partner. The Financial Times described the dispute as "one of the biggest cross-continental boardroom showdowns in history." During the mediation, Ury asked Abilio what he really wanted. In addition to getting a list of things that Abilio would like to have, Ury noticed that Abilio wanted to have freedom and his partner also wanted to run the company freely. Eventually, the settlement, amongst other things, was that Abilio was released from a 3-year non-compete clause and at the same time he agreed to leave the board. Ury, though without him knowing, had assisted the parties to settle by using the core values of DanShaRi. Had the parties been obsessed with the dispute and the related litigation, they would not have let go of the hatred arising out of the dispute and thus would not have freed up sufficient mental and psychological space for Abilio to move on with his freedom to do other things upon departure from the company and for the French businessman to run the company without intervention.
With the philosophy of DanShaRi in mind, mediators would be in a better position to assist the parties not to cling to something simply because they have spent a lot of time and money on it.
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Mediation has found increased statutory recognition in India and the legislature has recently introduced it in the Companies Act 2013, the Insolvency and Bankruptcy Code 2016, as well as the Commercial Courts Act 2015, among others. Two separate updates from the Supreme Court of India this month have engaged the Indian community in the discussion of giving mediation a more expansive role in the country.
Update I: Proposal for an Indian Mediation Act
On March 5, 2019, a two-judge bench of the Supreme Court asked the government to examine the feasibility of setting up a Motor Accident Mediation Authority in every district so that road accident claims can be settled in a speedy and amicable manner.
Two factors specific to India make this ruling very significant. One, there are a large number of accidents in India - in 2017, about 147,000 people
in road deaths, a number which surpasses the entire population of Shillong, the capital of an Indian state. Two, these large number of accidents have given rise to a phenomenal jump in claim cases, adding to the already piling litigation backlog that India is infamous for. It is not too difficult to understand then that mediation is needed in India for quick resolution of these motor claims. What is most notable about this ruling, however, is that the Supreme Court held that the need for more mediation efforts in the country is generally felt, and is not limited to motor vehicle claims alone. The bench noted that "the way [the] mediation movement is catching up in this country, there is a dire need to enact [an] Indian Mediation Act as well." Acting upon this note, it held that "we impress upon the government to also consider the feasibility of enacting [an] Indian Mediation Act to take care of various aspects of mediation in general."
An 'Indian Mediation Act' as suggested by the Supreme Court is indeed a promising proposal for India. Even though various statutes have given the parties the autonomy to get their disputes resolved via mediation and there exist court-referred as well as private means of engaging in mediation, there is a scarcity of clear procedural guidance on this aspect. The Mediation and Conciliation Rules, 2004 are inadequately framed and do not cover the entire spectrum of the mediation process. Moreover, these rules have been lazily drafted as they seem to be more or less lifted from the Arbitration and Conciliation Act, 1996. This lends a great lack of confidence and uncertainty to the mediation process in India. A comprehensive statute will certainly clear up the muddle.
Update II: Mediation becomes a topic of household discussion in India
The second update is from March 8, 2019. A five judge "constitutional" bench of the Supreme Court of India ordered a court-monitored mediation in the Ayodhya dispute.
2) The Ayodhyadispute is of immense political and religious sensitivity in India. It started centuries ago in the year 1528 when a mosque was built under Mughal emperor Babur's regime on the site which Hindus believe marks the spot where Lord Ram, a highly revered Hindu deity, was born. Thus, the Hindus want a temple to be built there instead of the mosque. The first recorded incidents of religious violence at the site emerged as long back as in the year 1853. Members of both religious groups filed civil suits in the Indian courts in 1949. Worse, in 1992, the mosque was torn down by some Hindu groups prompting nationwide rioting between Hindus and Muslims in which over 2,000 people died. Since then, efforts by courts of all levels in the country, commissions of inquiry, renowned archaeologists as well as politicians have failed to resolve the dispute. It is then significant that even in the face of slim chances of consensus between the parties, the Apex Court has relied on mediation as a last ditch attempt to bringing peace. In its order, the Supreme Court has stressed on the necessity of confidentiality of the mediation proceedings. It has also given liberty to the chairman of the three-member panel to bar the press from reporting the proceedings. More pertinently, it has asked the panel to submit a report of the progress of the mediation process within four weeks from its commencement to the Supreme Court.
The reference of the highly sensitive Ayodhya dispute to mediation has brought the mediation process to the attention of the general Indian citizen. It cannot be denied that any outcome of this process will play a heavy role in influencing the opinion of Indian citizens about the mediation process. Lack of public awareness about ADR methods is the key reason why the Indian citizen is more conditioned to signing up for the adversarial process by default. In the case of arbitration, this changed when the Arbitration and Conciliation Act, 1996 was enacted. Today, there is a much better arbitration culture in the country than 1996 thanks to the statute. A mediation-specific statute may similarly make the country more open to mediating disputes.
India currently faces a lack of not merely a dedicated mediation statute, but also mediation focussed institutions with trained professionals as well as public awareness on the meaning and significance of the mediation process. It is hoped that the push from the Supreme Court in the first update, and the rise in public awareness about mediation due to the second update will help remedy this situation.
Facilitating Earlier Intervention in Child Protection Mediation
Read Full Article on RSI Blog
June 27th, 2019
Since 2017, RSI has been mediating cases involving families in the child welfare system in Kane County, Illinois. In these mediation sessions we focus on the dynamics within the family, such as communication between family members and how their relationships with one another impact the children. Our roster of volunteer mediators also address issues involving family members and the professional stakeholders, such as the Department of Child and Family Services caseworkers, guardians ad litem, and attorneys; for instance, we assist parties in clarifying what services family members should be receiving and the logistics therein.
Many of these cases, unfortunately, linger in the child welfare system for a long time. There is robust evidence suggesting that children experience more adverse effects the longer they are in foster care, or without permanency (finding these children a stable, long-term home and support). Another unfortunate outcome of cases lingering in the system is that as cases languish without resolution, the parties often become disillusioned. When these sorts of cases are referred into mediation the neutrals often find themselves with a nearly insurmountable challenge: finding common ground between parties who have years of negative interactions between them.
One way our program is trying to combat this problem is by intervening at an earlier stage in the court case, in what will be called "facilitation" sessions. Modeled off similar sessions we observed
in Cook County
, Illinois, our goal for these facilitations is to help better orient the family to what they can expect from the court process as well as to build rapport between family members and professionals. The role of the mediators in these sessions is still to facilitate a conversation, but one that is centered less on exploring a potential agreement and more on the exchange of information and answering questions. This seemingly simple objective has the potential to prevent major conflict down the line by providing clarity about the Child Protection process and establishing positive relationships early on.
We are still finalizing details about what exactly these sessions will look like, but we expect them to take place very soon after the children have been removed from the home. One challenge this presents is helping family members navigate the shock and raw emotions of this experience, and presenting information in a way that can be absorbed in spite of the overwhelming circumstances they face. We're also mindful after
having evaluated the DC Child Protection Mediation program
that conducting a mediation session too early can run the risk of duplicating the family team meeting, which is why we want to have a clear purpose for facilitation and distinguish it from the mediation sessions we conduct later in the process.
In spite of these potential pitfalls, we are hopeful that the facilitation session will be another powerful tool in navigating these fraught cases. We are operating in a context where, among all states,
Illinois ranks last in time to permanency
. Everything we can do to help bring the focus on the kids and their needs stands to help ameliorate this unacceptable status quo. We welcome the input of any and all of our colleagues for suggestions on how we can get the most out of these sessions.
In an effort to recognize the specialization in the ADR community, we are creating 3 separate newsletters broadly covering these areas: Mediation - Arbitration - International ADR.
A newsletter focused in one of those areas will be sent out bi-monthly. In order for you to subscribe to as many types of newsletters that fit your particular practice/interests, please click on the Update Profile/Email Address link at the bottom of this email. From there you will be able to select which newsletters you wish to receive or if you would like to opt out all together.
Thank you for reading my newsletter, and as always, if you have any questions on any of the articles listed, do not hesitate to contact me.
Thomas P. Valenti, P.C.
300 N. LaSalle St., Suite 4925
Chicago, IL 60654-3406