What are the Limits of ADR? - And what are the limits of judicial dispute resolution? IFC Mediating...

10
What are the Limits of ADR? - And what are the limits of judicial dispute resolution? IFC Mediating Corporate Governance Disputes Paris, 12 Februari 2007 Eric M. Runesson ([email protected]) Eric M. Runesson

Transcript of What are the Limits of ADR? - And what are the limits of judicial dispute resolution? IFC Mediating...

Page 1: What are the Limits of ADR? - And what are the limits of judicial dispute resolution? IFC Mediating Corporate Governance Disputes Paris, 12 Februari 2007.

What are the Limits of ADR?- And what are the limits of judicial

dispute resolution?IFC

Mediating Corporate Governance Disputes

Paris, 12 Februari 2007Eric M. Runesson([email protected])

Eric M. Runesson

Page 2: What are the Limits of ADR? - And what are the limits of judicial dispute resolution? IFC Mediating Corporate Governance Disputes Paris, 12 Februari 2007.

What are the limits of judicial dispute resolution?

One-dimensional perspectiveExorbitant information costsDecisionmakers have less information than dispute ownersCannot deal adequately with multi-issue disputes

Eric M. Runesson

Page 3: What are the Limits of ADR? - And what are the limits of judicial dispute resolution? IFC Mediating Corporate Governance Disputes Paris, 12 Februari 2007.

Legal persons as parties to a dispute

Legal persons cannot have feelingsLegal persons must act through agentsAgents have feelingsAgents may have other interests than the principal

Eric M. Runesson

Page 4: What are the Limits of ADR? - And what are the limits of judicial dispute resolution? IFC Mediating Corporate Governance Disputes Paris, 12 Februari 2007.

What may cause a negotiation failure?

Eric M. Runesson

Economic calculationsStrategic considerationsPsychological traps and cognitive limitations (of agents)

Page 5: What are the Limits of ADR? - And what are the limits of judicial dispute resolution? IFC Mediating Corporate Governance Disputes Paris, 12 Februari 2007.

What psychological traps do we need to avoid?

Reactive devaluationThe anchoring trapThe framing trapOver-optimismPartisan perception

Eric M. Runesson

Page 6: What are the Limits of ADR? - And what are the limits of judicial dispute resolution? IFC Mediating Corporate Governance Disputes Paris, 12 Februari 2007.

How partisan perceptions work

Eric M. Runesson

Page 7: What are the Limits of ADR? - And what are the limits of judicial dispute resolution? IFC Mediating Corporate Governance Disputes Paris, 12 Februari 2007.

The economic dimension revarding low-probability of success

plaintiffs Plaintiff has a 10% chance of vinning 80 and a 90% risk of being liable for dispute resolution costs of 10;Expected monetary value = -2

Defendant 10% of loosing 90 (English rule);Expected risk = -9

Plaintiff can gain up to 9 by risking 2.

Eric M. Runesson

Page 8: What are the Limits of ADR? - And what are the limits of judicial dispute resolution? IFC Mediating Corporate Governance Disputes Paris, 12 Februari 2007.

Adding the risk aversion of the defendant agents

Risk neutral principalPersonal liabilityLack of transparencyInvestors may punish ADR-friendliness in corporate governance disputes

Eric M. Runesson

Page 9: What are the Limits of ADR? - And what are the limits of judicial dispute resolution? IFC Mediating Corporate Governance Disputes Paris, 12 Februari 2007.

A proposed ADR agenda

Help disputants eliminate psychological trapsHelp eliminate the agency problem Help disputants make rational economic calculationsHelp disputants make rational strategic decisionsHelp disputants think about fairnessMake the market believe that

Eric M. Runesson

Page 10: What are the Limits of ADR? - And what are the limits of judicial dispute resolution? IFC Mediating Corporate Governance Disputes Paris, 12 Februari 2007.

Sandart & Partners Advokatbyrå KB

Engelbrektsgatan 7 114 32 StockholmTel 08-679 09 00 Fax 08-679 09 10

Sandart&Partnerssandart.se

Eric RunessonAdvokat, jur.dr, doc., partner

Direkt 08-679 09 11 Mobil 0708-32 78 24

[email protected]

Eric M. Runesson