General theory of legal design in law and economics framework of commercial contracting

We need law and economics to do the scientific measurement necessary for legal design to be seen as on the stage of science. Law and economics—which is the application of economic theory, especially microeconomic theory, to the analysis and the practice of law--is a valid tool and approach to reflect on what should be empirically investigated in the practice of legal design. The neoclassical (mainstream) theoretical foundation of economic analysis of law is, however, at times far from reality as it often predicts uncooperative and even selfish behaviour. In real life people do cooperate, have empathy, emotions and even behave in an altruistic way. For those reasons, behavioural law and economics and conventional wisdom are needed to complement the teachings from standard theory in the field of commercial contracting.

The world commerce & contracting principles: Can Asia embrace them?

Negotiating a contract with Asian lawyers for the first time could be a baffling experience. Used to clarity on risk allocation and financial obligations, a Western lawyer is confronted with negotiations driven by consensus and contract provisions based on flexibility and good faith discussions. Musyawarah-mufakat (deliberation and consensus in Bahasa Indonesia) goes beyond ASEAN multilateral agreements and pervade doing business as well. Embracing the World CC Principles is a constructive step in Asian contract drafting: they are not alien in concept and have counterparts in domestic civil or common law. The ability to quickly agree on the provisions covered by the World CC Principles provides a sense of collaborative relationship — an essential aspect of doing business in Asia. But Asian lawyers have yet to be familiar with the World CC Principles, be willing to embrace them, and advocate the benefits of imbedding the World CC Principles in their business culture.

Negotiating incomplete contracts

When planning is possible, as in predictive environments, comprehensive contracting is not only desirable, but also useful. However, under conditions of fundamental uncertainty, as is the case in non-predictive environments, incomplete contracting approaches likely prevail. In this study, we explore how trust in such environments affects the way in which venturing professionals negotiate, and how the outcome subsequently manifests itself in the negotiated agreement. In particular, building upon a sample of Norwegian firms, we find that stewardship relationships are more prone to incomplete contracting approaches than agency relationships, paving the way for a relational approach to contracting when uncertainty is high. Implications for theory and practice are discussed.

Lessons from the US: Arbitrability of oppression and mismanagement in India

The present paper delves into an often-discussed question, whether oppression and mismanagement disputes are arbitrable. Public policy concerns are cited as the primary reason for justifying the non-arbitrability of oppression and mismanagement disputes. However, while offering such an argument, what needs to be considered is whether an allegation of oppression and mismanagement in itself amounts to oppression and mismanagement and thereby pushing the tribunal to give up its jurisdiction (which is perverse and completely against the principles of competence–competence). In this paper, a thorough analysis of the concept of arbitrability has been undertaken where arguments beyond the notion of arbitrability being limited to public policy considerations have been explored. The research specifically focuses upon how arbitrability grew in terms of a tribunal’s power vis-a-vis à statutory remedy (courts), by looking at the growth of antitrust and securities transaction disputes in the United States of America.

Designing mediation for Scottish Civil Courts: Options and opportunity

In this article, the author examines whether the dispute resolution processes proposed in 2019 for civil courts in Scotland are suitable for the context of civil justice in Scotland in 2020 and the future. They are measured according to the policy context, what is known about the purposes of litigation, dispute system design and the needs and cultures of an adversarial civil justice system currently grappling with the impact of coronavirus restrictions.

Exploring the concept of arbitral awards under the New York Convention

Despite its importance, the arbitral award was left undefined by the New York Convention and most other major international arbitration laws. This has inevitably led to varying opinions regarding its nature and confusion regarding the thresholds that differentiate arbitral awards from other tribunal decisions. Partly in response to the above, there has been discussion to initiate the revising process of the Convention. Responses have been divided. In this paper, the author finds that revision will not bring the desired results, while the Convention itself has equipped international arbitration practice with tools to overcome obscure legal concepts such as the arbitral award.

The Deming management method and digital partnering in a construction procurement contract

In this case study of a research and development facility construction project at a large biopharmaceutical organization, we explored how digital investments must be accompanied by a partnership approach and a transformation of the cultural values of an organization tied to operational principles. The project faced considerable challenges, including a highly constrained market environment, time and cost constraints, and a multiyear organization transformation with a diverse mix of stakeholder objectives. Despite these challenges, the project was brought in under budget and on schedule, achieving other objectives that often seem at odds with each other (best-in-class sustainability ratings, quality scores from customers, and with a remarkably low number of change requests). We found that significant stakeholder engagement early in the architect and contractor selection process leads to the right contract management process and ultimately successful outcomes. A key insight from this case involves the need for differentiated supplier relationship management for procurement-project team integration.

Innovative solutions for an age-old issue: How transparency and data analytic tools can improve diversity in international arbitration

International arbitration is an inherently diverse field. The disputing parties and their counsel come from all over the world, but the arbitrators selected by these same parties and their counsel rarely reflect their diverse backgrounds. Although the arbitration community largely supports diversity initiatives and the goal of making arbitral tribunals more reflective of the parties and the global community, the available studies that parties and their counsel continue to appoint a small number of repeat players to the tribunals. This paper traces the diversity deficiency to its roots in the lack of available information about diverse arbitrators and the cognitive biases that perpetuate the vicious cycle of repeat appointments. The paper then turns to potential solutions in the form of data analytic tools, that would collect, analyze and provide information on the case management and decision making of arbitrators.

The enforceability of mediation clauses: A critical analysis of English case law

This article shows that the English case law on the enforceability of mediation clauses presents a number of flaws. First, and most importantly, English courts generally fail to distinguish between the positive and the negative obligations created by such clauses. As a result, they wrongly apply the certainty requirement to the former, rather than the latter, which leads to frequent refusals to enforce mediation clauses in situations where enforcement should be granted. These decisions discourage parties from agreeing to multi-tier dispute resolution clauses providing for preliminary mediation, thus undermining the general policy favouring the use of alternative dispute resolution (ADR) mechanisms. Moreover, judicial discretion in deciding whether to give effect to a valid mediation agreement is unjustified and exercised on the basis of questionable considerations.

Effective dispute prevention and resolution through proactive contract design

Research shows that strategic dispute resolution and early intervention reduce direct and indirect costs of conflicts. Minimal costs are involved in preventing and de-escalating disputes, compared with the costs of arbitration and litigation, for example. In this context, the traditional view of contracts as legal documents or reactive enforcement mechanisms is too narrow. Contracts can be used proactively, ex ante, too, enhancing the parties’ chances of success and preventing unnecessary problems. In Europe, this is part of what is known as Proactive Law; in the US, Preventive Law. On both sides of the Atlantic, it can also be framed as practicing proactive contracting or proactive contract design. Well-designed contracting processes and documents can prevent misaligned expectations and disappointments so that unnecessary disputes can be avoided. Early intervention methods of dispute resolution, such as mediation, can be used to de-escalate the dispute and promote cooperation. Along with other crucial elements, contracts can provide pre-agreed procedures and resolution mechanisms if changes, delays, or disturbances occur or a conflict situation arises. Building on our previous work on civil and commercial mediation and a managerial-legal view on contracts and their design we illustrate, with examples, how proactive contract design, combined with early intervention procedures and monitoring systems as well as post-award management processes can be used to better deal with the commercial, legal and human elements of a dispute. With a focus on commercial business-to-business contracts and related conflicts we explore how design methods can be used to address the root causes of legal disputes and to operationalize an effective dispute prevention and resolution system.