Originally from Dispute Resolution Journal

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Because of the nature of ADR, says David Bristow and Jesmond Parke, mediators and arbitrators are increasingly becoming exposed to the risk of liability. In the following article, Bristow and Parke point to the growing “drift towards claims against mediators [and arbitrators] in the U.S.,” as a warning to ADR practitioners in Canada. Using examples from court decisions, the authors trace the direction of the “gathering storm” and offer advice on how to survive it if and when it strikes.

In Joseph Conrad’s novel Typhoon the sun was still shining but the birds had stopped singing. There was an ominous silence. Everyone was going about their business as usual but the typhoon was just over the horizon. Mediators and arbitrators have up to the present been living in the sunshine of a rather unrestricted and uncritical world. They must now listen carefully as the birds are beginning to stop singing.

As lawyers, doctors, and indeed all professionals stood for so long seemingly immune from blame and liability, before the harsh winds of change struck them, so now our arbitrators and mediators carry on from day to day while the barometer is falling.
This paper attempts to alert mediators and arbitrators as to the direction the gathering storm may be moving and how to survive it if it strikes.

Arbitrators’ Liability
In May 1999, the Ontario courts in the Cohen1 case pondered the problem of an arbitrator accused by the arbitrating parties of negligence in the conduct of an arbitration and in his decision. The parties did not want to pay the arbitrator anything as they claimed the arbitration was of no benefit to them. After the arbitration between landlord and tenant over rent to be paid by the tenant the arbitrator found for the landlord. On appeal from this award the court allowed the appeal and set aside the decision of the arbitrator, finding that he had made two errors which resulted in the arbitrator exceeding his jurisdiction.

Both parties to the arbitration refused to pay the arbitrator his fees and the arbitrator applied to an assessment officer to have his account assessed pursuant to section 56(1) of the Ontario Arbitration Act under which an arbitrator’s account for fees and expenses may be assessed by an assessment officer in the same manner as a solicitor’s bill under the Solicitors Act. The assessment officer found the arbitration of no benefit to the parties and assessed the account at nil. The arbitrator appealed to the Ontario Superior Court of Justice. The arbitrator argued that his errors were errors in judgment, not amounting to negligence and he should be paid; the parties argued that the services provided by the arbitrator were negligently provided and were worth nothing and the arbitrator should not be paid. The issue: was the arbitrator negligent?

The court found that: “although the arbitrator made serious errors in his report which ultimately rendered the report worth little or no value to the clients, he was not negligent.” Consequently he should be paid for his services. The court further found that the arbitrator prepared “lengthy, well organized reasons” and that but for two important matters he “acted fairly and capably.”