Alternative dispute resolution (ADR) methods such as mediation and arbitration are often cited as the more efficient and cost-effective means to resolve a family dispute in comparison to traditional litigation. This may very well be the case, as private ADR schedules are more flexible and not limited to the availability of the courts, which commonly face delays. Litigation can also be very expensive for the parties involved, particularly when a case drags on for years or when the parties appeal an earlier decision. However, ADR methods can also backfire, as many family law parties have learned. A common issue we encounter is that some participants don’t fully appreciate the nature of these proceedings, and how they may impact them, until it is too late.

The Potential Downsides of Mediation & Arbitration

Mediation and arbitration give a great deal more control to the parties than litigation, due to their private nature. This often provides participants with a sense that they are fully in control of the process, which may mean they do not fully appreciate that they may be bound to an outcome they disagree with. Further, mediation and arbitration can become financially onerous, particularly in situations where the parties are not able to reach a compromise or work together constructively, either directly or through their legal representatives.

Retaining a private mediator or arbitrator can be an expensive proposition. Many charge rates starting at hundreds of dollars per hour, which might be fine when the parties are able to reach a settlement quickly. However, if the matter drags on, or proceeds from mediation to arbitration, this can become expensive, especially when combined with the fees a party is already paying to their lawyer as well as additional costs, such as expert witness fees. When it comes to litigation, the litigants have the benefit of not having to pay for the judge’s time.

Further, as mentioned above, many people may not be aware that they might become legally bound to the outcome of the process, with little recourse to appeal. When parties enter into a combined mediation/arbitration agreement, the first step is for a mediator to work with the parties to try to reach a settlement everyone can agree on. Failing that, the agreement will generally call for the matter to proceed to arbitration, where the arbitrator holds the power to impose a legally binding decision on the parties. We have seen many a client after they have received a final decision in an arbitration, who was unaware of the finality of the process until it was too late to change course.

Supreme Court of Canada Finds Arbitration Agreement Unconscionable

In a recent decision relating to an arbitration clause in an employment contract, the SCC held that the clause was unenforceable. The primary reasons for the decision were the unequal bargaining power between the employee and employer, as well as the exorbitant costs the arbitration would have imposed on the employee. In this particular case, the arbitration clause stated the process was to take place in the Netherlands, despite the fact that the employee was located in Canada. Further, the employee would have been required to pay a fee of over $14,000 just to initiate the arbitration. When factoring in the fee, plus travel and other expenses, the SCC found the clause was profoundly unfair to the employees and determined it was invalid. While this was an employment law decision, some are wondering if this case could have wide-ranging effects on arbitration clauses and agreements in other areas of Canadian law, including family law.

The decision addresses concerns that an unequal relationship between the contracting parties, or unfairly high costs, may serve to deny access to justice at least one party to an arbitration agreement. Because of this, the clause was found to be unconscionable and so it was invalidated. How might this apply in a family law context? In cases where a party may have been coerced by a more sophisticated or controlling former partner to enter into a mediation and arbitration agreement, a court may find this was unfair. Further, if the costs of continuing with expensive mediation or arbitration become prohibitive, a court might be able to point to this SCC decision and say that to continue to bind the parties to the agreement would be to deny them access to justice. This case is new and so it remains to be seen how it may impact areas of the law outside of employment issues. However, family lawyers should be sure to fully explain to their clients the implications of entering into a mediation/arbitration agreement, and perhaps add language enabling the parties to pivot to litigation in cases where the costs of ADR become prohibitive.

At Mincher Koeman, our family law lawyers have considerable experience in advising and advocating for clients in mediation, arbitration and traditional litigation. We will always provide honest and practical advice with respect to the best method for any family matter to proceed in order to minimize cost and inconvenience for each of our clients. Please contact our office to make an appointment to discuss your matter with one of our lawyers today by calling us at 403-910-3000 or by contacting us online.

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