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2002

Commercial Alternative Dispute Resolution in
Cascadia
Noemi Gal-Or
Kwantlen Polytechnic University

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Original Publication Citation
Gal-Or, N. (2002), Commercial Alternative Dispute Resolution in Cascadia. Canadian Journal of Regional Science, 24 (2). Available at
SSRN: http://ssrn.com/abstract=2238807

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Commercial Alternative Dispute
Resolution in Cascadia *
Noemi Gal-Or, Ph.D., LL.B.
Kwantlen University College
Chair, Department of Political Science
Chair, Study Group on Transborder Politics, Business, Society and Law
Surrey, BC V3W 2M3

ln this interdisciplinary research 1 1 will study the convergence of two phenomena
intricately linked and highly topical of the late 20'h and early 21 III centuries: Re­
gional Market Integration (RMI) and Alternative Dispute Resolution (ADR).
Both in the literature and in the real world, RMI, which is premised on theories
and policies of free trade, is perceived as the "better" economic arrangement.
But what are the contours of the "benefit" of RMI? Can access to justice be
construed as a non-tariff barrier to RMI trade (NTB)?
1 limit the scope of inquiry to the study of companies as the beneficiaries of
RMI, focusing on the dichotomy of big versus small and medium size companies.
l further limit the focus to address the process of justice (not substance) as it
arises in the event of disputes among firrns. 2 Cascadia, which is a trans-border
region within the North Arnerican Free Trade Agreement (N AFTA 1992) is thus
a natural candidate for such research.
ADR, mainly arbitration and mediation, but also other alternatives to court

1 would like to acknowledge the contribution of ail those interviewed and mentioned in the paper
as weil as Mariene Yri who offered helpful comments, Catherine Morris, Sukumar Periwal, Tim
Gallagher, Steve Rhodes, Skip Triplett, Roger Elmes, Ted Cohn, John Redford, Jean McKendry,
Yuen Mui Chao, and Christine Kirzinger who provided much needed information.
* The original version of this paper was presented at the 6'" Annual BCPSA Meeting, University
of Victoria, Victoria, B.e., May 5-6,2000, Canadian Peace Research and Education Associa­
tion (CPREA) Conference June 1-4'", 2000 Queen's University, Kingston, Ontario, and
Interaction 2000, 6"1 Biennial National Conflict Resolution Conference, Conflict Resolution
Nerwork Canada, University of British Columbia, Vancouver, B.C., June 10-13,2000.
1.
International political economy and law.
2.
1 use the terms firm, corporation, company, and business interchangeably.

"' Canadian Journal of Regional Science/Revue canadienne des sciences régionales,
XXIV:2
(Summer/Été 2(01),221.248.
ISSN: 0705-4580
Printed in Canada/Imprimé au Canada

Electronic copy available at: http://ssrn.com/abstract=2238807

222

GAL-OR

adjudication, have become increasingly popular at four levels of application:
~
~
~
~

Legal and para-Iegal practitioners praise ADR as ajust, efficient, and effec­
tive means to settle civil and international disputes;
The courts throughout Canada have incorporated mandatory as weIl as
voluntary ADR as a pre-trial procedure;
The British Columbia (B.C.) Attorney General maintains a Dispute Resolu­
tion Office to administer this area of law; and
The NAFTA provides for, and continues to develop, procedures and rules
of ADR.

COMMERCIAL ALTERNATIVE DISPUTE RESOLUTION IN CASCADIA

scope of trade disputes and ADR in Cascadia.
The objective of the research represents a formidable challenge. Given
especially the confidential nature of ADR, many of the hurdles present at the
outset of the research have not been crossed in this paper. In this regard, 1 am
quoting from a trend leading article by Carruth:
''[. ..] [T]he study of harmonisation and convergence of previously
divergent social values and frameworks for regulation, market gover­
nance, and the protection of the collective good in North America and
Europe will require comparative and empirical research methodologies.
Although traditional models of stakeholder analysis are useful for ex­
ploratory and descriptive purposes, new and empirically verifiable
theories and conceptual frameworks that address the regional interac­
tions of corporations and their govemments are needed for the advance­
ment of the study of business, govemment, and society. [...]
Therefore, the exarri.ination of enduring structural, institutional,
and cultural differences that serve as the basis for regional market
integration and for diverse models of business, govemment, and society
provides new and intellectually challenging opportunities for the schol­
arly community in the 21S! century" (Carruth 1999: 412, myemphasis).

Many in the legaJ'profession, judiciary, and executive in Canada and the U.S.,
as wellas in the North American free trade forum, have subscribed to ADR.
However, the attitude of the private sector remains unknown.
Consequently, three general questions arise:
~
~

~

ln the corporate and commercial area, does business perceive lack of access
to justice as NTB?
Is business aware of the ADR option? and
Does business share the above mentioned enthusiasm for ADR?

Ta this date, there is no literature, statistical or otherwise systematic research on
small regions cross-border commercial ADR available. 3
Ultimately, the objective of my research is to study the awareness of the
ADR option ofprivate small and medium size companies engaged in cross-border
trade in Cascadia. 1 am specifically interested in assessing the reasons for, and
the extent of, inclusion of provisions for ADR in commercial agreements.
1 apply a mixed methodology using primary and secondary sources on
regionalism, Cascadia, the NAFTA, and ADR. To this 1 add over 55 interviews
(mostly over the phone) 1 conducted in the business sector, the legal community,
ADR non-legal practitioners, govemment, and regional organisations and associ­
ations. This quantitative part of the research, which is exploratory in nature
should be considered as a pilot study. 1 chose the interviewees from across the
business sector so as to capture as broadly as possible the commercial diversity
in Cascadia. The responses reflect, on the one hand, the degree of willingness to
acknowledge the existence of disputes and, on the other hand, the reluctance ta
disclose the fact of resorting to a resolution process as weil as to share informa­
tion about the process and its outcome. The upshot of the interviews in the
remainder sectors largely conveys the appreciation, or the lack thereof, of both

3.

For example, in borderland regions, e.g. along the French-German, Swiss-French·German and
French-ltalian borders, as distinguished From international regions e.g. EU, NAFTA. Since
lhis is an inlerdisciplinary study, and to assisllhe uni-disciplinary reader, 1 will elaborate on
fundamentals regarding both integration theory and reality, and ADR. 1 use the terms border­
land, cross-border, and trans-border interchangeably.

223

1 begin by setting out the general framework of RMI, which is the context
of operation of ADR, and then move on ta discuss Cascadia (section 1). The next
section provides a general panorama of ADR. Then, 1 present a survey and
analysis of the specifie use of ADR in Cascadia according to a sectoral classifica­
tion. 1continue in the following section with a study of new ADR initiatives both
in Cascadia and the NAFTA. This is followed by a brief summary and conclu­
sion.

Regional Market Integration (RMI)
It is precisely in the era of accelerated globalisation that regionalism has been
resurfacing. The new regionalism, i.e. of the late 1980s as distinguished from its
predecessor of the 1950s and 1960s, has propelled trade theorists to pose several
questions, conspicuously concerning the relationship between the formation of
regional trade blocs and the status of welfare (Ethier 1998: 1149). In this context,
1 argue that there is an intricate and indissoluble link between economic effi­
ciency, social welfare, and the management of legal justice. 4

4.

Carruth refers to a similar link, albeit in the more general context of change, since she
mentions that RMI "in the transatlantic area can be conceptualized as simultaneous processes
of economic, institutional, and sociological change in North America, the Western
Hemisphere. and Europe" (l999: 403).

Electronic copy available at: http://ssrn.com/abstract=2238807

224

GAL-OR

In globalisation and regionalism studies, welfare has largely been used in two
main respects. In the North-South dichotomy as weil as in the Capitalist/
Democratic-post-Communist context, welfare loosely denotes a standard mea­
sure ment of prosperity. Seen from a phenomenological perspective, welfare
relates to collective interests, the public good, and the notion of civil society. The
latter approach has largely, but not solely, focused on labour standards and
interests, and the environmentalists' struggle for sustainable growth. The trade
(international and political economy) literature however, unlike, for instance, the
legalliterature, pays little if any attention to justuce as a condition of welfare. It
ignores the gap regarding access to justice between big and small corporations,
despite the fact that the small company is an important economic actor in the
trade system along with the state and multinational enterprises. Questions of
justice and their impact on RMI, free trade, and the economy at large have been
ignored,e.g. the proposition that inadequate justice processes and procedures
may weil be considered an NTB.
It has been argued that trade liberalisation is achieved primarily by smalt
countries linking up with a large country in an RMI, the former compelled to
make significant unilateral reforms effectively rende ring the trade agreement one­
sided : "The liberalisation in NAFTA is due much more to 'concessions' by
Mexico and Canada than by the United States" (Ethier 1998: 1151). Such
liberalisation occurs mainiy among neighbouring countries (Ethier 1998: Il52). 5
From a global trade liberalisation perspective, RMI represents constellations used
by small states as bridges to enter the global and multilateral trading system.
Pasquero maintains that "RMI is the concerted effort by governments sharing the
same geographical area to harmonize their trading rules and create more competi­
tive markets. [...] RMI is an intermediate phenomenon between the globalization
of trade rules under GATT and WTO, and domestic trade liberalization within
member countries" (2000: 7) Moving down the echelon to the next level of
analysis, 1 suggest the application of a similar logic to the smaller actors within
the trading system. Thus, small and medium size companies in a larger RMI
system (e.g. the NAFTA) could be expected to consider the local borderland
arena as their playing field (and perhaps their bridge to the entire RMI) if they
wish to survive in the larger RMI.
Other arguments developed in the context of international, transgovern­
mental, and transnational relations draw the attention to proximity, transporta­
tion, and social cohesion among the trading partners regarding labour standards
as crucial factors in trade agreements (Hefeker 1998).6 It is in the interest of

5

6.

"[...] [R)egional integration now usually involves reform-minded small countries 'purchasing',
with moderate trade concessions, links with a large, neighbouring country that involve 'deep'
integration but that confer relatively minor trade advantages" CEthier 1998: 1152).
See the typology of provincial/state internationalism in Cohn and Smith (1996: 26-29).
Introduced by Keohane and Nye, "transngovernmental" stands for direct and relarively
autonomous interactions between governmenral sub-units of different governments, whereas
"transantional" implies cross-border interactions comprising ofat ieasr one non-goverrunenral

COMMERCIAL ALTERNATIVE DISPUTE RESOLUTION IN CASCADIA

225

neighbouring states to trade freely as
"[b]y moving towards free trade, [...] govemments lose an important
instrument for gaining political support from import-competing indus­
tries. Therefore it is obvious that the viability of a free trade agreement
might be increased if other instruments can substitute for tariffs to
protect negatively affected industries.
One such instrument can be social integration. [...] An obvious
example is the social chapter and the protocol of social policy (annexed
to the Maastricht treaty) of the EU. In this regulation an approximation
of social regulation across ail member countries of the EU is required.
This has not happened to protect workers in countries with lower stan­
dards, but in fact aimed to 'level the playing field' for international
trade (see Vaubel 1995)" (Hefeker 1998: 383-384).
The argument for social justice can be taken one step further. Yoffie (1993)
maintains that in the real world, it is the comparative advantage of companies that
affects international trade and production, and not the comparative advantage of
states. If this is valid, then social justice may be relevant not only to the em­
ployee worker; then social cohesion must encompass also the business sector,
those active in the marketplace either as self-employed or employers. Byexten­
sion, social justice embraces also small and medium size firms.
Focusing on "corporate social management", Pasquero (2000) explores the
various multipartite and multilevel negotiations taking place at the instance of
govemment economic decision making. 7 These have resulted, in part, from a
process of power consolidation by the MNEs. Focusing on Canada and the U .S.,
and cognisant of the different goals pursued in entering the NAFTA, the agree­
ment seems to have economically fulfilled both these partners' expectations.
However, socio-political cri tics contend that the logic of integration has been
largely commercial, ignoring the undesirable consequences of integration (Pas­
quero 2000). This statement merits further elaboration for it draws the attention
to the multidimensional nature of free trade. As Pasquero himself observes,
intrafirm trade in the NAFTA -- which is a characteristic of big business -- "is
20%-40% of total trade, depending on the country, gpvemment, and growing"
(ibid: 11) and "[al democratic deficit, to use the term first applied to the con­
struction of the European Union, also marks RMI in North America. To date, the
process has largely been one of 'executive democracy', that is, decision making
among govemments, in association with powerful business groups" (ibid: 13).
Furthermore, even economists admit that the determinants of trade policy are
inherently political (Rodrik 1994: 44), and that the importance of intrafirm trade

7.

actor (1976: 4).
See th.is excellent paper for a review of four major theoretical streams in the study of regional
market arrangements.

GAL-OR

226

caUs for a fundamental revision of previously held assumptions about free trade
(Yoffie 1993: xi).
Consequently, the answer to the crucial question -- "integration for the
benefit of whom?" (Pasquero 2000: 15) -- must be revisited. Rather than search
for it in theoretical models, a survey of NTBs will prove an eye-opener. Adding
to the long list of such barriers also the cost (economic and other) of dispute
settlement will explain why local RMI has proceeded only reluctantly in North
America. Empowering small and medium size companies by opening avenues to
equalise access to justice among business will prove a catalyst to RMI. Multi­
party organisations and multilevel communication could facilitate this.

Cascadia
Cascadia is the generic term representing the binational (Canadian and American)
Pacific Northwest region. Among the numerous variations, three main different
boundaries as well as three different foci arise. The "Narrow Corridor" or
"Main Street Cascadia" refer to British Columbia, Washington, and Oregon,
focusing largely on facilitating efficient and effective transit and communication
to enhance competitiveness in the larger RMI and globally.8 The "Economic
Nation" or the "Pacific Northwest Economic Region" ranges from Alaska to
Yukon, British Columbia, Alberta, Idaho, Montana, Washington, and Oregon.
It is intended to intensify the NAFTA by forging doser local-regional economic
ties and further liberalising and coordinating free trade in the region. "Bio-region
Cascadia" represents an area in a range similar to the larger region however
focusing on environmental issues and sustainable development.
As integration activities crosscut between the two regional spheres, the main
part of this paper refers to the larger "Economic Nation", although sorne of the
data collected (the interviews with business and the legal profession, though not
the cross-border organisations) are at this time confined to the "Narrow Corri­
dor" boundaries.
The NAFTA has spawned an almost NAFTA-independent transgovemmental
dynamic involving state, provincial, municipal, and other local govemments. The
NAFTA involves intemally, directly or indirectly, the interests of about 85,000
types of govemments, induding 91 states or provinces, and 40,000 cities, many
of which are more powerful than states and keen to expand their autonomy
(Pasquero 2000). In addition, a multitude of businesses and other lobby groups
have joined in the RMI transnational process. Lateral, vertical, and diagonal
relationships represent inter-central govemment negotiations, central-subnational
govemment contacts encompassing also cross-border state and provincial associa­
tions, and relations between non-executive bodies, e.g. the continental association

COMMERCIAL ALTERNATIVE DISPUTE RESOLUTION IN CASCADIA

of 164 subnational state legislatures (Pasquero 2000). Furthermore, at the supra­
NAFTA level, the North American free trade arrangement has generated also
inter- and transnational energies. One such, for example, is the Transatlantic
Business Dialogue (TABD), that lobbies and negotiates mutual recognition
agreements (MRAs) in view of promoting regulatory harmonisation, and the
Transatlantic Consumer Dialogue (TACD) seeking to mobilise inter-regional
public interest and policy groups.9
Since 1986 (with sorne interruptions), this trend has been actively endorsed
by RC. Premiers intent on developing doser relations with the Western states
as a strategy to consolidate the province's economic power locally as well as
globally (Cohn and Smith 1996). In Cascadia, this RMI movement manifested
itself in the emergence of several bodies. 10 While still needing to gather steam,
they have already effected sorne reverberations across the Canadian-American
border and in the region at large. Among the chief actors are two organisations,
tailed by a third. The Pacific Northwest Economic Region (PNWER) is a 1991
statutory-created partnership of the public and private sectors in the five states
of Alaska, Washington, Oregon, Idaho, and Montana, and the Canadian prov­
inces of Alberta, British Columbia, and the Yukon territory. Its membership
consists of legislators and executives (Governors and Premiers) and various
public sector bodies (e.g., counties) and private members (e.g., industry associa­
tions). [1 PNWER's goal reflects the "bridging" concept mentioned earlier,
whereby local cross-border initiatives enhance their competitive edge by taking
advantage of the larger RMI -- here the NAFTA -- as a spring board to both this
arena as well as the global one. 12
The Pacific Corridor Enterprise Council (PACE) was established as a cross­
border trade council in 1989. Unlike PNWER, which is a private-public partner­
ship, PACE is a non-profit private sector-supported organisation established to
promote free trade along the North American west. Over time, and in reaction
to the NAFTA, PACE's mandate has expanded to assist in educating business on

9.

10.
Il.

12.

8.

For a systematic review see, Cohn and Smith (1996).

227

"Through this regional process of business strategy and societal transformation, the United
States, North America, and Europe are rapidly developing a transatlantic value consensus
relative to the governance of corporate strategy and competition and the collective good"
(Carruth 1999: 407).
For one such detailed list of Main Street Cascadia see Consulate General of Canada, Seattle
(2oooa).
The organisational structure comprises ofnine working groups representing agriculture, forest
products, transportation, environmental technology, government procurement, recycling,
tourism, teleconununications, and trade and finance, each sector lead by a legislative, public,
and private sector co-chair. Their activities consist of initiating legislation, sponsoring
teleconferences, industry fora, and research papers in view of benefiting the member
jurisdictions. In addition, PNWER has a Private Sector Council the legal initiative of which
will be discussed later.
Hoping to become one of the top 12 economies in the world" (www.pnwer.org), the combined
GDP of the region is over US $350 billion annually, the combined population about 18
million, in an area totalling 1,885,346 square miles. Chosen as headquarter ta eighteen
"Fortune 500" companies (in 1996) and in 1995, the total volume of bilateral merchandise
trade (excluding services) between Washington, Oregon, Idaho and Alaska and Canada was
Cano $ 14,526. 622,000 (Consulate General of Canada, Seattle 2oo0b).

228

GAL-OR

international commerce and engaging in dialogue with business councils and
governrnents throughout the Pacific Corridor (PACE membership form). 13
The Cascadia initiative is yet another forum promoting cross-border integra­
tion. It was started by the Seattle-based Discovery Institute in 1993, in view of
developing a network of local leaders working with state, federal, and provincial
officiais so as to improve Amtrak, border crossing, and international freight
mobility. In 1994, the Canadian Cascadia Institute in British Columbia ensuing
in the Cascadia Project supplemented the U.S. initiative. Unlike PACE and
PNWER, the Cascadia Project focuses largely on transportation issues (www.dis­
covery.org/ cascadia, and www.seattletimes.com/news/editorial/htmI98) . Only
recently has it addressed the attention also to marine conservation and support of
cross-border vacation.
Other Pacific Northwest trans-border initiatives are less relevant to commer­
cial cross-border activity.14 An example for a government initiative is the Seattle
Canadian Consulate General's match-maker project entitled Strategic Alliances
(reminiscent of similar popular initiatives in Europe, Asia, and North America)
encouraging "a formai and mutually agreed-upon commercial collaboration
between companies (www.canada-seattle.org./SAC/ALL.HTM) .15 This endea­
vour perhaps exemplifies Pasquero's (2000) observation that governrnent has
been gradually shifting its role from that of social and economic regulator to
promoter of national competitiveness.
The foregoing description paints a picture of disjunctive initiatives, largely
sectoral even if supported by governrnent. Although extremely important as
public policy factors in promoting the Pacific Northwest RMI, these endeavours
are not weil grounded in the larger society as two important societal factors -­
labour and education -- are not yet involved. (Alper 1999) While the latter are
critical in creating an integration-friendly atmosphere, more direct pre-requisites
for success are still missing. One such factor most closely linked to business and
trade on the one hand, and "welfare" (as discussed earlier) on the other hand, is
the LegaL connection.
Business and trade require effective, affordable, and speedy justice systems.
The notion of welfare is founded on guarantees of equal opportunities and results.
Equitable access to justice -- the elimination of discrimination generated by "non­
legal barriers to justice" such as burden of costs, duration of process, type of
procedure, etc. -- has long been a paramount concern in the contexts of domestic
and international trade. In the latter, they have been compounded by conflict of
law and choice of law issues (e.g. the enforcement of foreignjudgments, differ­
ences in legal procedure, to name only a few) combining to stack costly obstacles

13.

14.
15.

lnilia Il y, it has focused on facililating cross-border movement, eSlablishing the so-called PACE
lane to simplify land border crossings and transportation. This resulled in the creation of a
special commuler lane at the main Pacific Nonhwest border crossing, which was quickJy
adopted at Olher Canada-U.S. border crossings and renamed as CANPASS (COM 1999: 8).
E.g., the "eco-information weaver" Cascadia Planet (www.mews.com). the Cascadia
Education and Research Society (Cohn 1999: 8).
This strategy is material to the ADR discussion later herein.

COMMERCIAL ALTERNATIVE DISPUTE RESOLUTION IN CASCADIA

229

in the pursuit of justice.
1have argued elsewhere (Gal-Or 1998a) that legal standing is crucial for free
trade to be fair and freer. 16 The NAFTA has created two kinds of justice by
practically distinguishing between two classes of economic actors: Big business
versus small and medium size businesses. Enjoying lobby leverage, big business
maintains a quasi-institutional framework through which to resolve disputes (with
governrnent or among big business) aided by means of an arbitration process and
governrnent representation (NAFTA, Chapter 2022). Small and medium size
companies have been locked out of this vehicle of dispute resolution. 17 Unless
grouping in professional and sectoral associations, or engaging in "sector lobby"
action, the small entrepreneur remains powerless and, in fact, may be deterred
from engaging in cross-border trade. 18 Faced with obstructions to justice, the
opportunities for such economic actors to partake in the local -- and also larger-­
RMIs are being curbed, their chances of benefiting from the freer trade
reduced. 19
The NAFTA has not only caused apprehensions but has also created opportu­
nities. 20 It is up to the NAFTA citizens (corporate and others) (0 take the initia­
tive and carve out their special regime within the still institution-poor free trade
region. By-passing sorne conflict of law and choice of law impediments by
drafting and adopting ADR rules of the game to facilitate the resolution of private
disputes involving small and medium size firms may be exactly one such open
avenue. This may also contribute to bolstering the welfare of the integrating
societies.

Alternative Dispute Resolution (ADR)
ADR consists of three general categories: unassisted negotiation, assisted negoti­
ation, and adjudication (Fashler 2000). In unassisted negotiation -- typically the
initial step of most dispute resolution processes -- communication occurs directly
between the parties or their agents. Assisted negotiation is divided into two
categories: Without and with outcome prediction. The former includes mediation,
conciliation, and facilitation, and reflects different stages of the negotiation
process as weil as different "Ievels" of mediation (i.e. regarding the role of the
neutral third party). The latter consists of neutral evaluation to provide a non­
binding opinion on the likelihood of either party winning the dispute; fact finding
by a third party with or without a recommended solution; minitrial where a panel

16.
17.
18.

19.
20.

To be truly free. the free mobility of persons is a necessary ingredient (Gal-Or 1998b).
Except for the investor chapter, see section Il, infra.
This situation apphes also to immigration procedures, constraints of red-tape regulations, etc.
Allhough they are part of the larger picrure of integration and intensification of free trade,
disputes or problems arising in this context are not the subject of this paper which concentra teS
on private commercial disputes.
1 document relevant support for this sentiment in the next section.
See the precedents set by the professional associations of engineers, chartered accounlants, and
lawyers, discussed in Gal-Or (l998b).

230

GAL-OR

or key decision makers of the parties negotiate with the assistance of a neutral
advisor in a court-like setting; and med-arb which consists of two steps, the
second one, i.e. arbitration, activated only upon failing mediation. The neutral
may either stay on for the second stage or be replaced.
Adjudication may include med-arb, arbitration, and institutional procedures
(e.g. the Universal Dispute Resolution Policy of the Internet Corporation for
Assigned Names and Numbers). While the latter is prescribed by a particular
organisation and adhered to by its members, arbitration is more flexible in the
choice of rules and procedures (Fashler 2000).
At the domestic level, ADR has been widely used as an ad hoc practise.
Main and Park report that (whether in Britain or the U .S.) over 90 % of cases
entering the legal system settle out of court in what is known as "bargaining in
the shadow of the law" (2000: 37). While the procedural frameworks ta adminis­
ter civil justice vary among these states, such variance does not produce differ­
ences in the frequency of pre-trial settlements, although it may affect the extent
of settlement. 21
At the international level, ADR has since long figured as the system of
choice. While applied to a range of internationallegal areas, ADR has become
increasingly attractive as a means to resolve economic disputes. At the Interna­
tional Federation of Commercial Arbitration Institutions (lFCAI)'s 1999 meeting,
arbitration has been described as "a key to economic and political development"
(www.adr.org/publications). ADR utilised under the GATT and the WTO has
been adopted also by the NAFTA drafters. The NAFTA encourages particularly
arbitration, although in the environmental side-agreement (N AAEC 1993) a much
lower level of dispute resolution mechanism -- the submission procedure -- is
provided for.
The main arguments in favour of international ADR begin by listing the
numerous disadvantages associated with litigation in the international context
(Naranjo 1996). The vast majority of international disputes are resolved on a
case-by-case basis, which causes unpredictability and uncertainty. By its nature,
the international scenario entails disadvantages such as time, cost (capital and
persona!), limitations regarding personal jurisdiction, and subjection to the
judicial process in foreign courts with differing legal systems. Even if an award
results from the internationallitigation, its practical enforceability is in question,
which eliminates the benefit in getting it in the first place. In fact, the United
States, as other countries, are concerned with protecting their sovereign public
policy and may deny recognition to a foreign judgment. Finally, a "greater

COMMERCIAL ALTERNATIVE DISPUTE RESOLUTION IN CASCADIA

disadvantage resulting from litigation is a general chilling effect on international
business transactions. Because of these disadvantages, there has been a trend
toward the use of arbitration as "the best alternative for the resolution of private
commercial disputes" (Naranjo 1996: 118).
The NAFTA has incorporated ADR in several ways. Chapter 20 on institu­
tional arrangements and dispute settlement procedures provides for a generic
ADR formula starting with consultation which may end in arbitration; Chapter
19 on anti-dumping and countervailing duty, and Chapter lIon investments, are
the significant dispute resolution highlights of this instrument (Gal-Or 1998a,
Paterson et al 1994, Horlick and DeBusk 1993, Housman 1994, Johnson 1993).22
Nevertheless, the chief drawback of the NAFTA ADR provisions is that a party
to a dispute must be represented by its national government. In other words, the
ADR process allows standing only to the member governments. The only three
exceptions allowing private party initiation of ADR processes stipulate sectoral
limitations. Chapter Il provides for consultation and binding arbitration for the
settlement of investor-state disputes. Chapter 19 establishes the procedure for the
review of relevant administrative determinations made under nationallaw allow­
ing an involved party to request a panel review, and ordering a NAFTA Party to
request a review when requested to do so. Finally, the NAAEC allows private
persons and non-governmental organisations to file a subrnission. These represent
an extremely limited range of non-litigation remedies in a free-trade environment
with an abundance of private sector actors.
What emerges then is the NAFTA's indifference to international, RMI
private commercial disputes. This had elicited the concern of lawyers who at the
outset of the NAFTA remarked that "the settlement of business disputes between
private firms will remain a problem" (Miller 1994: 1316, referring to the U.S.­
Mexico context) and that "under NAFTA, small businessmen without the requi­
site clout seem 'Ieft out in the cold', as NAFTA does re1atively little to empower
small and medium-sized businesses to effectively resolve their own commercial
trade disputes" (Miller 1994: 1318).23
Yet, deplorable as it may be, that the NAFTA ignores private and small and
medium size businesses must not necessarily be considered a failure. 24 Withhold­
ing from imposing a dispute resolution regime on such actors may be interpreted
as a license to private actors to carve out their own appropriate dispute resolution
space within the NAFTA. After ail, Article 2022 calls on private parties to settle
their international commercial disputes by the use of arbitration and other ADR

22.
21.

Main and Park (2000) provide a good survey of the abundant Iheoretical lileralure of models
explaining the approach to pre-trial negotiation. Having themselves conducled an experimental
(Jaboratory) research, they deplore the almost total absence of relevant empirical sludy.
According to Spier (1992), most of the lawsuits that are settled out of court are settled close
to the trial date or even in the first days of trial. She proposes a model making the legal
expenditures endogenous suggesting that expendirures might signal information about the case.
For other relevant modelling of out-of-court setllement see, Gould (1973).

231

23.
24.

Clearly, intemalional ADR is nol a panacea to ail ills, particularly notthe regulatory ones, and
even not at the domestic level as it has been observed Ihat even in the context of anti-dumping
and countervailing dUly "Ihe administration of the trade remedy laws in the United States can
be [domeslically) biased in favour of the home plainliff againsl Ihe importer, as has occurred
in Ihis seclor" (Rugman and Anderson 1997: 936, who corrobora le Ihe daim wilh a long list
of studies).
Miller cites the Bush administration's NAFfA chief negotiator stating that NAFfA does not
deal with private party-to-private party disputes.
"At over 1000 pages in length, lit] has only one article dealing with private commercial
disputes" (Miller 1994: 1319).

232

GAL-OR

mechanisms.
Retuming the attention to Cascadia, in B.e., domestic ADR has been widely
practised in the area of family law. Recently however, government and the courts
started piloting with ADR in-the civil non-family arena as weil (McEwen 1999).25
Among other things, this may also be attributed to a spill over effected by experi­
ence with ADR at the international level, where the economic rationale reigns
supreme and guides the process of justice.
At the institutionallevel, several initiatives have been under way. The Court
Mediation Practicum in B. C. trains mediators in settling disputes of no more than
$10,000 value filed in Smail Claims Court. Since May, 1999, a S' terne Court
Notice to Mediate applies in the construction area. A similar procedure has been
available since April, 1998, in matters of personal injury in motor-vehicle acci­
dents. A Notice to Mediate (General) Regulation applying in ail civil procedures
. at Supreme Court level came into force in February, 2001. A mediator roster has
been established with the Ministry of the Attorney General, is however not
anchored in any statutory form to professional accreditation and licensing, and
at best operates as a general referral list. Expanded settlement conferencing
involving lawyers, judges, and the parties has taken the role of the judges beyond
the traditional adjudicative function and was successfully applied in the suits
related to denominational residential school abuse of native children (McKwen
1999). Finally, the climax of this concerted push to promote ADR within the
court system was ironically reached with the resignation of B. C. Supreme Court
Chief Justice, Bryan Williams, who encountered mounting objection to court
ADR from many on the bench (Vancouver Sun 2000).
In conclusion, while the current wisdom suggests that ADR is the panacea
to many of the ills of a post-modern "new economy" as weil as an overburdened
judicial system, the negative aspect of ADR merits mention, and caution is called
for regarding its use: At the end of the day, ADR still remains parti y dependent
on the judiciary, e.g. when the issue of enforcement of arbitral awards or medi­
ated settlement agreements arises, or where the impartiality of an arbitrator is at
stake. 26

COMMERCIAL ALTERNATIVE DISPUTE RESOLUTION IN CASCADIA

Cross-Border Commercial ADR in Cascadia
Awareness of the ADR option and its use in private party cross-border commer­
cial transactions in Cascadia is at an early embryonic stage. In addition to other
factors delaying the spread of commercial ADR in cross-border transactions,
ADR supporters deplore the lack of education both of business and the legal
profession. 1 will now describe and analyse the attitude to ADR and to RMI as
manifested by three types of actors relevant to the fostering of cross-border trade.
Although at this stage of research the sample of the population surveyed (over 55
interviews and written communications) is relatively small, it is nevertheless
sufficiently varied to imply an attitudinal pattern towards commercial ADR in
cross-border trade held by stakeholders in B.e. and in "Main Street" Cascadia
at large .

The Iegal profession
A very vocal lobby of lawyers and para-Iegal ADR practitioners who are particu­
larly impassioned about the virtues of ADR, has been pressing for its wider use,
conveying the impression that ADR has already gained popularity.
Established in 1986, the British Columbia International Commercial Arbitra­
tion Centre (B.C.I.e.A.) is said to have played an important role in the develop­
ment of ADR in B.e. and to be Canada's best-knowninternational arbitration
institution. 27 While reckoning that parties are likely to use ADR for such clauses
are included in many contracts, and because ADR is a less expensive procedure
than litigation, the B. e. 1. e.A. does not compile statistics about the extent to, and
the circumstances in, which ADR is being used (Grove 1999).
For 15 years, the B.e. ADR Chambers, a commercial/civil mediation
centre, has been organising the service of mediation and engaged mediators for
the parties, while refraining from involvement in the mediation itself (Gardiner
2000). To date it has organised oilly very few cross-border mediations. Several
factors explain this lack of cross-border ADR (Gardiner 2000). First, an impres­
sion prevails that the volume of cross-border commercial activity is negligible.
Second, the legal profession has not yet come to terms with ADR and lawyers
lack sufficient knowledge as to its operation. Because litigation is the conflict
resolution method entrenched in the mind-set of most lawyers, proposing media­
tion early on in the process is not an option, on the contrary -- it is frequently
considered a sign of weakness. 28 Moreover, as negotiation has not yet been
integrated by lawyers as a preparatory step towards litigation, the recognition that

27.
25.

.
'

26.

Increasingly, it has gained in popularity also in cri minai law, particularly conceming
aboriginal criminals and in view of combining rehabilitation with law enforcement, e.g. the
heal ing ci rcles.
These issues have been discussed atlength at the conference on Alternative Dispute Resolution
(1999).

233

28.

However, according to unrelated sources the" facility may be non-existent as it is under­
utilised, the B.C. govemment which has supported it, cut the funding as there was no matching
financing coming From the business commwlity" (1999).
This sentiment was echoed by Robert Fashler addressing a B.C. Continuing Legal Education
(CLE) audience (April, 2000), who complained about the inability of adversarial-minded
litigators to employ what enjoys the reputation ofa "touchy/good feel" sentimental strategy .

234

GAL-OR

mediation may also represent such a stage is even less prevalent. Third, even
when a commercial contract does include a mediation clause, it most often
remains unused: Its wording is likely to be very generic leaving much leeway not
to act on it, a practise reinforced by the perception that mediation is a time
consuming process. The situation differs somewhat when arbitration is defined
as a mandatory term of contract, and where it prescribes mediation as a prerequi­
site. Fourth, their unfamiliarity with mediation evokes in clients almost total
distrust of the method. According to typical "client psychology", the lawyer is
expected to solve the problem while the client is relegated to a passive position
refraining from pressing for any specific method. But even should a client wish
to proceed by mediation, lawyers are inclined not to take such client's instruction
seriously and prefer to prepare for trial. Fifth, counsel tend to feel that their role
is to negotiate a settlement and not to mediate. As the clients are left at the
margins of the process and are "prohibited" from communicating directly, the
parties fail to address the core issues. Mediation is resorted to only when the
lawyers reach a stalemate, but often such stalemate does not depend on a substan­
tive issue but results rather from posturing by the lawyer. In sum, ail the above
reflects that the legal profession in B.e. is stilliagging behind when compared
to its American colleagues in Cascadia. The Washington bar is proactive in
mediation, and the V.S. bar at large is more open to both arbitration and media­
tion.
Finally, confidentiality is a bar to the collection of information on ADR. As
a matter of ADR practise, a written memorandum records mediation, and a
written award -- an arbitration; yet the confidentiality requirement which lies at
the core of ADR permits their release only upon the parties' agreement and
knowledge of the identity of the subject to whom the memorandum or award is
being released (Sanderson 1999).
The B.e. Arbitration and Mediation Institute (BCAMI) is an ADR training,
referral, and appointment facility but similar to the other organisations, does not
maintain any statistics on ADR neither concerning domestic RC. nor regarding
cross-border disputes (Ladner 1999). The Society of Practitioners of Dispute
Resolution (SPIDR) is a North America wide network of ADR practitioners but
was unable to provide any information as to the extent and nature of commercial
ADR whether in general, across the NAFTA, or specifically in Cascadia.
The NAFTA 2022 Committee had attempted to conduct a survey about the
extent of ADR use in the NAFTA, however no analysis was undertaken, let alone
data made a vailable (Branson, member of the committee 1999). In fact, education
regarding the benefit of ADR still requires much to be done at least in order to
prevent rnisuse of the court system. Even where a contract provides for ADR,
sorne parties choose to proceed by litigation in the local courts, oblivious to the
fact that such move enables the adversary to stay the court action because of the
arbitration prerequisite (Branson 1999).
The B.e. Supreme Court has rarely, if at ail, encountered cases of cross­
border commercial disputes in which attempted but failed ADR landed the

COMMERCIAL ALTERNATIVE DISPUTE RESOLUTION IN CASCADIA

235

dispute in trial (Lysyk 2000, Vickers 2000).29 Judge Vickers attributes the (at
least appearance of) lack of ADR to the fact that the older generation of legal
practitioners are weary of such mechanisms, while the younger generation of
ADR trained people eager to embrace the process have not yet won the upper
hand.
An interesting exception emerges from an in-house counseI's perspective
who clearly prefers ADR to the traditional court avenue in the cross-border
commercial setting (Wallace 2000). Companies that employ in-house counsel are
more inclined to use ADR because, among other things, they are "bombarded"
with information about it. Typical in-house counsel use of ADR consists of
attempting an internai resolution of the dispute first, and mediation as the second
option. The use of final binding arbitration is preferably avoided for it is expen­
sive, protractive, and limits the right of appeal.
Based on aggregated information, the impression gained is that the notoriety
of ADR in B.C. is due mairùy to rhetorical rather than practical presence. 30 It is
still in the stage of public education (as a "joint effort" strategy of the legal
profession and stakeholders in govemment) for there simply is not that much
ADR activity taking place as the profession would like the public to believe.
ADR used is stilliargely limited to specific legal areas such as farnily, construc­
tion, personal injury, and wrongful dismissal. Disputes in other areas are regu­
lated by legislation and administrative tribunals. Disputes related to the cross­
border trade activity (including migration -- both of corporate entities and oftheir
human resources) are private party-to-govemment matters. These tend to be
resolved not through ADR but rather through the administrative tribunals set up
by the Department of Justice, State and Labour in the V.S., and the equivalent
bodies in Canada, and by the federal courts on both sides (Andersson 1999).
Finally, unI ike B. e., in Washington there appears to be sorne resolu te
movement in view of promoting the use of commercial ADR in the Cascadia
cross-border trade. 31 American lawyers have recently joined forces in drawing
up an ADR programme for parties' use across Cascadia (Sailer 2000),31 Contrary
to the information collected in B. e., Sailer maintains that the magnitude of
commercial cross-border trade activity in Cascadia is "huge". The degree of pent
up frustration is commensurate with the trade expansion for there is no inexpen­
sive and short way available to business to resolve their disputes. Business people
feel competent enough to resolve their disputes by themselves, but recognise the
need for a third party to act as an interrnediary and to provide guidance (Sailer).

29.

There may be several explanations for this, amongst them choice of law, namely that the
preferred jurisdiction is the American and not the Canadian.
30. lncluding data collected From other sources, e.g. govemment and business, see infra.; several
lawyers and para-Iegal practitioners Icnown as ADR experts in the B.C. community preferred
not to express themsel ves on the issue.
31. On both sides of the border however, neither the B.C. nor the Washington bar associations nor
their relevant ADR sections do maimain any statistics on ADR.
32. Members of PNWER (including one member From Alberta) see, PNWER ADR Service,
section IV, infra.

GAL-OR

236

The organised business community, government, post-secondary education
and research institutions
Lack of systematically gathered information by the legal profession was not
compensated for by researching the public sectorY

'flze organised business community in B. C. 34
It appears that the subject of private party-to-private party dispute resolution has
not attracted attention at ail, in fact, with the exception of PNWER, it remains
a non-issue. 35 A recurrent but doubtful explanation was that the number of
disputes in the Cascadia trade is minimal as B.C. and Alberta companies carry
on business on a scale larger than Cascadia and only to a negligent fraction in
Cascadia itself. The commercial activity that does take place is largely of
government-to-government nature (Parker 1999).

Government in B. C, Washington State, and Oregon
A devoted promoter of ADR, the Dispute Resolution Office in the B.e. Ministry
of Attorney General has recently undertaken two ADR initiatives: Housing the
B.C. Mediation Roster Society which is a general referral service, and introduc­
ing the Notice to Mediate (General) Regulation to "allow any party to an action
in the Supreme Court to compel ail other parties to the action to participate in a
mediation of the matters in dispute" (McHale 1999a).36 However, the Ministry
of the Attorney General maintains neither documentation on the status of ADR
at the provinciallevel, nor regarding trans-border trade (McHale 1999b). With
the exception of the Canadian Consulate General in Seattle, (Cook 2000) other

33.
34.

35.

36.

Confidenriality was occasionally advanced as an excuse to avoid specifying whether ADR is
being practised in cross-border commercial dispute setllemenl.
The World Trade Centre, B.C. Chamber of Commerce and the local municipal chambers of
conunerce, B.C. Board ofTrade. Vancouver Board ofTrade, B.e. Council of Business, Better
Business Bureau, Council of Forest Industries, Lumber Trade Council, Northwest Cmise Ship
Association, PACE, PNWER. and the Alliance of Manufacturers and Exporters of Canada
were sorne of the organisations representing business inrerests contacted in the course of this
research.
When addressing the conference Rethinking the Line: The Canada-U.S. Border, Canada's
Minister of Foreign Affairs and lnternational Trade, Lloyd Axworrhy, remarked that out of
200 U.S.-Canada treaties, onJy two provide for ADR.
This consultation document, which refers to previous experience in B.e. and mediation in
Ontario and Saskatchewan. canvassed onJy lawyers, not the disputants, and reportS no
systematic analysis from the other jurisdictions to assess their effectiveness. The Rules
Committee appointed by the Attorney General objected 10 a Notice to Mediate court rule
(Minutes of the Meeting. ADR Subsection (2000».

COMMERCIAL ALTERNATrvE DISPUTE RESOLUTION IN CASCADIA

237

governmental agencies were unable to offer information. 3? Awareness to ADR
as a crucial component in facilitating trade relations has simply not yet arisen.
Although ADR is more intensely practised south of the Canadian border,
government there appears to be no better informed and knowledgeable than in
B.C. 38 The Senior Counsel for Trade Agreements, V.S. Department of Com­
merce, does not maintain a registry of ADR cases or settlements, nor do the
usual sources induding the Commercial Arbitration and Mediation Centre for the
Americas (CAMCA) (Grier 1999). The V.S. Consulate General in Vancouver
does not have but anecdotal information about the subject (Samara 2000; L10­
rens, Consul General and Brown 2000).

Post Secondary and Research Institutions in B. C. 39
Interviewing faculty and researchers studying ADR and free trade has ponrayed
a picture not unlike the one already gained. 40 While B.C. universities have
embarked on the larger domain of conflict resolution studies, and the B.C. 41
Justice Institute as weil as the B.C. CLE have been offering conflict resolution
training for several years now, nohe of them maintains any data pool concerning
ADR. The Sustainable Development Research Institute, could not provide any
data either (Munnis 1999).

Private companies
In the absence of documented data on ADR cases; the lack of systematic statisti­
cal data on the attractiveness of ADR to the business community collected by
either the legal profession, the organised business community, government, or
the post-secondary education and research institutions; and in view of the veil of
confidentiality in ADR, the on1y remaining source of information were the
potential parties to a dispute. Supposedly the most authentic source of informa­
tion, the hurd1e to overcome was in determining which type of companies to

37.

38.

39.

40.
41.

Canada-B.C. Information Centre, Enquiry B.C., Canada-B.e. Service Centre, Tourism B.C.,
the Vancouver Economic Development Commission, Western Economic Diversification
Canada.
This impression is gained from information gathered from state and municipal governments,
which in lUrn referred to sorne of the above mentioned organ.isations and practitioners (Ietters
by Paul Schell, Mayor of the City of Seattle. February 18, 2000, Vera Katz, Mayor of the
City of Portland, February 3, 2000, and Stan Biles, Mayor of the City of Olympia, Febmary
14, 2000). More research is required, e.g. with me Oregon State Dispute Resolution
Commission, and other government branches.
American universities, e.g. University of Oregon Law School and, Willamene University, 10
menrion onJy a few, which offer ADR programs (the former the Active Mediation and ADR
Program. the Janer the ADR Program). have not yet been canvassed in this research.
Professor Dave McPhillips. Faculty of Commerce, UBC, could not be of any further help
(personal conununication, January 11, 2000) and others contacted did not respond.
The University of Victoria, Royal Roads University, and the University of British Columbia.

238

GAL-OR

approach and the size of the sample. 42
Targeting companies with cross-border awareness, e.g. members of PACE,
and companies 1 was referred to by those interviewed earlier, a sampIe emerges
which is too small to allow 'grouping by economic sectors. The sample includes
custom broker firms, daily involved in cross-border activity, a helicopter com­
pany servicing the natural resources industry, sorne heavy industry, a firm in the
tourism business, etc. The overall finding arising l'rom this random survey is of
widespread unawareness of the ADR option, lack of education -- and where there
is awareness -- presence of "cultural" bias as ADR is being considered an
"American" practise not yet adopted in Canada.
Only two companies indicated their awareness and practise of using ADR.
The Burnaby based TCS Intemational Inc., a privately held franchise automotive
glass repair and replacement company with offices in Canada and the U.S. and
a turnover of $350,000,000 to 400,000,000 (perhaps already at the higher mar­
gins of medium-size), has introduced an ADR clause in ail its franchise
contracts. 43 When addressing the settlement of a dispute, the company begins
with unassisted negotiations whereby the senior vice presidents on each side
attempt a resolution. Should an internaI resolution l'ail, mediation follows, the
mediator being either selected and mutually agreed upon by the parties or chosen
bya U .S. court. Failing mediation, the process moves on to arbitration. Confi­
dentiality is central to the process. The process has been found satisfactory as it
saves costs and lowers the level of adversariality. Being costlier and limiting the
right of appeal, arbitration is used only reluctantly. While arbitration offers the
advantage of a quick decision making, the duration of the resolution process is
a factor less important in the particular business of TCG (Wallace 2000).
A&A Contract Customs Brokers is the only other firm interviewed which
resorts to ADR. Dealing with small and medium size Canadian and U .S. compa­
nies, it is engaged mainly in import to B.C. Since the NAFTA, the number of
disputes has shrunk thanks to the newly introduced customs and tariff legislation
and the formaI regulations regarding refunds and redetermination of classifica­
tions. Most of the disputes have revolved around import quotas and were private
party-to-government rather than private party-to-private party. They are usually
settled in the relevant administrative tribunals, the procedure is inexpensive
unless the firm elects to retain counsel to represent il. A&A resorts to ADR on
a case to case basis only and as a matter of individual, not standard, contracL
While conceding that in the custom brokerage business there is room for private
party-to-private party disputes, for instance regarding product deficiencies,
credit, freight forwarding, etc., such disputes occur largely with small compa­
nies. As they are costly to resolve and usually require retaining a trade lawyer,
the cost becomes prohibitive and companies prefer not to pursue justice. Small
and medium size companies also tend to avoid legal confrontation for fear of

42.
43.

See. Introduction. supra. At this stage, my research of companies' attitude to ADR has been
preliminary, confined tO B.e., and only lentalively indicalive of the situation in B.C.
PACE member.

COMMERCIAL ALTERNATIVE DISPUTE RESOLUTION IN CASCADIA

239

disturbing their business relations (Eros and Danmayer 2000).
Ail the other companies interviewed were either unaware of the ADR option,
maintained that they had no history of disputes (Hemlock Printers Ltd. 2(00)44
or were aware that ADR was a practise popular in the U.S. but not in Canada.
For instance, in the service sector, the Vancouver downtown Waterfront Hotel
uses its tailor-made hotel contract which does not include an ADR provision
although U .S. clients do provide for such term in their contracts. Disputes are
uncommon, and should a problem arise the tendency is to resolve it by negotia­
tion (Hicks 2000). A firm providing financial services to corporations in the
cross-border region maintains no record ofuse of ADR, the explanation for ADR
underuse being that clients are "probably not aware of it" (Norton, Outsource
Financial Services 2000).45
In transportation, Helijet Airways Inc., a B.C. carry cargo and passenger
airline firm, does not provide for any ADR mechanism in its contracts (ticket). 46
Problems are largely customer service related and are usually resolved informally
at the office level. In fact, my interview elicited the response "first time that l
hear of it [ADR]" (Dettweiler 2(00).
Of special interest because it was dispelling the notion of peaceful commer­
cial relations devoid of conflict and dispute, was Neil Bradely Trucking l'rom
RC. Arising mainly in the relationship with govemment, e.g. the confiscation
of trucks by U.S. authorities for unpaid fines or problems related to the person
of the driver, disputes have been handled under relevant federal legislation and
regulation. In this relationship, companies look to different business associations
to represent them, e.g. the business chambers, B. C. Trucking Association, etc.,
as these associations participate in govemment consultation processes regarding
also the regulation of cross-border trade (whether transportation or commodities).
Cross-border mobility hurdles -- mainly U .S. immigration policies and regula­
tions -- effect the formation of close lines on the part of the immigration "cus­
tomers", regardless whether big or small, and perhaps alleviate the attention
away l'rom private party-to-private party disputes (e.g. with customers or em­
ployees) (Bradely 2000).
Notwithstanding the above, the need for affordable justice processes is
pressing: "The middle guy needs il. The poor get legal aid, the rich golf with the
legal profession" (Bradely 2(00). This has prompted.resort to means ofmaking
justice affordable, albeit through financing, not by seeking alternative legal
processes. The company has never provided for ADR in its contracts, but has
recently chosen to use and promote pre-paid legal insurance which for a small fee
enables the "medium guy" affordable access to legal services. The insurance
policy provides free access to legal advice and legal representation (which may

44.
45.
46.

PACE member.
PACE member.
lATA rules and regulalions govem. 1 have not inquired whether these incorporale ADR.

240

GAL-OR

indirectly lead to the use of ADR) at reduced cost and offered by the "bigger
Vancouver down-town firms" (Bradely 20(0).
The picture painted on the U. S. side of the border shows small and medium
size companies (which comprise roughly 95 % of the firms involved in cross­
border trade in Cascadia) as unable to afford to write off losses, sue in a foreign
jurisdiction, or sue in the U .S. and file the judgment north of the border and have
it enforced there. Furthermore, as a general rule, there is a growing sense that
even the international arbitration rules are too formai for the needs of Cascadia
cross-border business regardless whether in private party-to-private party, private
party-to-government, or even government-to-government relations (Sailer 2(00).
That the experience with the NAFTA ADR procedures has been a "horror story
to stay away from" is echoed in the sentiment that the NAFTA complaint proce­
dure does not foster co-operation, and although ADR provisions are being written
in contracts as a matter of habit, they have often proven unsatisfactory (Morrison
2000a).

Conclusion
The main picture arising from the foregoing survey is one of dearth of informa­
tion. Most of the data available is partisan, haphazard, anecdotal and reflective
of lack of understanding of, and awareness to, commercial free trade needs.
Confidentiality of the ADR mechanism can not legitimise a system's refraining
from self-education.
At a less generallevel of analysis, the approach to ADR by Canadian versus
American firms in Cascadia reveals a significant asymmetry. While in B.e.
awareness and use of ADR is rather limited, American companies which already
have a history of experience with ADR are dissatisfied with the traditional choice
of ADR mechanisms. They are pursuing more relaxed dispute resolution proce­
dures, such which would foster co-operation, rather than emulate or adopt sorne
of the judicial system's adversariality. Given this Canada-U.S. discrepancy in
attitude toward ADR, a fresh approach to dispute resolution is recommended. It
preferably be founded in a common vision of the partners to commerce and trade
on both sides of the border so as to remove this particular barrier to trade and
economic development.

COMMERCIAL ALTERNATrvE DISPUTE RESOLUTION IN CASCADIA

241

New ADR Alternatives
Two ADR initiatives were born out of the dissatisfaction with the present
ADR (and non-ADR) dispute resolution mechanisms employed in the NAFTA
region.

PNWER ADR Service
Continuing barriers to trade encountered in various trade sectors, e.g. tourism,
construction, waste recycling, and failure to successfully apply the NAFTA
dispute resolution mechanisms, which culminated in a crisis in the cattle growing
industry, have contributed to increased frustration with the available ADR mech­
anism. 47 Indeed,so much so, that PNWER members have reached the conclusion
that the ways disputes have been dealt with consisted a barrier to trade in itself
(Morrison 2ooob). Although dissatisfaction has arisen more in the context of
government-to-government and private party-to-government trade rather than in
private party-to-private party transactions, it has been the PNWER Private Sector
Council which launched the ADR Service project in view of serving also the
business-to-business needs. This project is designed ta develop and promote a
pre-formaI ADR process to provide facilitated mediation services for trade,
business, and government disputes within the PNWER region before resorting
to existing ADR systems. "It will allow each business or government to speak on
its own behalf, and would limit attorneys or negotiators to be in advisory capacity
only. The PNWER ADR will be informaI and confidential, without written
record, at a moderate cost to applicants" (PNWER 2000a: 2). True ta the RMI
spirit, the project's organisational structure features Canadian and American co­
chairs, an advisory committee, and a timeline for launching the service by early
May, 2000.
Inspired by the Hong Kong International Arbitration Centre, PNWER offers
among the attractions of its ADR service:
~
~
~

47.

A fixed fee ranging between US $2,500 to $10,000 ofwhich 50 % will go
to PNWER;
Tailor-cut "PNWER Region" facilities for mediations and arbitration;
The prevention or resolution of "cross-border commercial and business
disputes (e.g., involving vendors, customers/clients, competitors, distribu­

Caule growers looked for redress 10 free lrade problems plaguing the indusrry by lobbying
govemmenr, and upon failure embarked on a fruilless NAFTA process. PNWER offered ilS
services 10 assisl in breaking lhe stalemare in ilS Norrhwesl CaIlle Pilol Projecl consisling of
medialing a Solulion belween federal governmenlS, stales, and provinces. A so-called Caltle
Sununil was held in Idaho, Jalluary 19-20. 2000. calling for lransparency and cooperaIion
between the jurisdictiollal authorilies as weil as elldorsing the conlinualion of lhe Pacific
Norrhwesl Pilol Projecl and cooperative and communicalion endeavours by the Pacific
Norrhwesl Canle associations (PNWER 2000a: 1-2).

GAL-OR

242

~

tors)" as wel1 as "business-goverrunental agency disputes (e.g. rule interpre­
tations, permits, rulings)" ; and
A service menu induding dispute management (consulting/program design),
training, early neutraL evaluation of business disputes prior to commence­
ment of adjudicative proceedings, mediation, and arbitration (Proposed
Timeline: 1 [sic]).

1 suggest that it might be useful to develop a register indexing the activities
of the project (without compromising confidentiality) so as to enable longitudinal
assessment, comparison with other similar enterprises, and consequently the
introduction of informed improvements in the future.

Thè NAFfA Advisory Committee on Private Commercial Disputes

.

t'

The NAFTA Advisory Committee on Private Commercial Disputes, Sub-Com­
mittee IV of the NAFTA 2022, has been presented with a report (Paradis and
Delisle 1998), which fol1owed the sub-committee's decision to explore the
possibility of developing solutions or programs "to enhance the means to settle
smal1 international private commercial disputes in the context of the North­
American market. The goal is to provide those involved in such smal1 daims a
quick and inexpensive way to resolve the matter" (Paradis and Delisle 1998: 1).
Based on a roundtable discussion with representatives of smal1 and medium
size businesses in Canada and the U .S., the study recommends ta address several
"aching spots". Being slow, costly, inequitable, and resulting in an unpredictably
prohibitive opportunity cost, current forms of ADR present a significant impedi­
ment to small businesses. The contractual relationship of small businesses dealing
with big corporations is most often dictated by the larger business and in terms
difficult to understand. In addition, the most frequent users of ADR are expected
to be big businesses involved in small-scale disputes with, e.g. disputes with
small exporting firms over col1ecting payments and over the quality or specifica­
tions of products supplied. Yet, small businesses are still uneducated about ADR.
AIso, such knowledge could come handy also in the very simple contractual
relationship among small companies themselves. Any successful ADR mechanism
would have to be fast, cheap, fair and consistent, and measures securing the
enforcement of any award or decision are critical ADR concerns for smal1
businesses (Paradis and Deslile 1998: 1-2). A "People's Court" to deal with
small-scale disputes arising from international commercial transactions was
suggested as an interesting possibility to explore. An institutionalised solution
might be more attractive to small businesses which are said to "put the most faith
in a pri vate commercial dispute resolution mechanism set forth by the NAFTA
Parties with sorne lùnd of tribunal to deal with cross-border enforcement ques­
tions" (Paradis and Delisle 1998: 1-2).
Consequently, Paradis and Delisle propose to be "imaginative" and ask the
Advisory Committee to consider proposing to the NAFTA Parties "judicial ways
or new institutions for 'smal1 daims'" to be settled in the North-American con-

COMMERCIAL ALTERNATIVE DISPUTE RESOLUTION IN CASCADIA

243

text (1998: 2). Having reviewed the small daims "simplified procedure" project
in Ontario, the procedure adopted in the Quebec Code of Civil Procedure, and
various expedited "fast-track" arbitration models in non-An1ericanjurisdictions,
they suggest a study "to determine what is considered as a 'small daim' in each
of the NAFTA parties, both legal1y and statistically spealùng. Surveys could also
be conducted to ascertain the range of international disputes experienced among
the smal1 and medium-sized business [sic.] North-An1erican community in order
to get a sense of what real1y constitute 'small' and 'large' claims" (Paradis and
Delisle 1998: 10).48 Furthermore, the drafting of a list of matters or disputes
considered as being simple enough to proceed in an expedited or simplified
fashion is desirable. Final1y, Paradis and Delisle recommend to foster the use of
expedited procedures of arbitration, analyse "the possibility of and conceiving a
Model Law on the Judicial Seulement of Internatiof1!ll Small and/or Simple
Claims to be adopted by each of the NAFTA countries", and "the possibility and
conceiving a NAFTA Court of Justice for the seulement of pnvate commercial
daims with a 'smal1 and/or simple daims' division" (1998: 29).
While out of line with PNWER's "even-Iess-than-ADR" initiative, the
rationale behind this proposai, and the recommendation for a preparatory study,
reflect concerns similar to those which have led PNWER to embark on its ADR
project, and which are applicable to Cascadia regardless of any commercial
cross-border ADR.

Conclusion
1 have argued that in order to generate the welfare promised to ensue from free
trade, small and medium size companies must be assured that the RMI structures
and processes wil1 not leave them by the roadsides. One relevant condition,
overlooked particularly in the international political economy literature, is equita­
ble access to legal justice. Similarly, this subject has been ignored by drafters of
internationallegal instruments designed to promote economic integration among
states. When a dispute arises between companies based in two (or more) national
jurisdictions, the already prevailing "non-Iegal barriers to justice" such as burden
of costs, duration of process, type of procedure, etc. are further compounded by
hurdles erected by the conflict of law, namely the enforcement of foreign judg­
ments, differences in legal procedure, etc. Economical1y, these amount to repre­
sent prohibitive costs which may deprive the smal1 and medium size actors in the
market place from reaping the full benefits of trading across international bor­
ders.
Practice in Cascadia -- chosen as a micro-cosmos to test the above argument
and to study the relevance and applicability of ADR -- is revealing. First, from
studying the attitude of legal and para-Iegal ADR practitioners, business associa­
tions, govemment, post-secondary education and research institutions, and the

48.

Such srudy could be instructive tO the PNWER project as weil.

GAL-OR

244

small and medium size business community itself, a clear picture emerges. But
for very few exceptions, there is no awareness of the linkage between free trade,
economic integration, and access to justice.
Second, while access justice, and facilitating it through ADR mechanisms
are domestically (and to a negligible extent intemationally) promoted by the local
legal profession, commercial ADR is still very scantily applied; and if so, it is
used chiefly in the context of private party-to-govemment disputes. Commercial
ADR appears to be practically non-existent in business-to-business commercial
trans-border disputes. Post-secondary education and research institutions reveal
a similar level of interest. Business associations are almost oblivious to the issues
of business-to-business conflict management and dispute resolution. Private
companies are practically "illiterate" in ADR.
Third, there are several explanations for the indifference to ADR, and
perhaps for the failure to integrate the subject of dispute resolution within the
larger picture of RMI. Confidentiality constraints hinder assessment of ADR,
lawyers' traditional adversarial attitude combined with expediency stand in the
way of such options, and Canadian culrural attitudes (self-distinction and reluc­
tance to adopt American ways), are sorne among other reasons listed in this
paper.
Fourth, while central and provincial governments have failed to address the
issue of access to justice, this want of attention does not necessarily spell the
death knell for a "Ievelled" playing field for small and medium size versus big
companies. The NAFTA framework is still open-ended, leaves much room for
improvements on the original instrument, and encourages ADR without distin­
guishing between businesses according to their size. Thus, in a world in which
national govemments are overwhelmed by the amount of problems and challenges
they are facing, the following statement continues to apply today as it did 15
years ago:

ta

"Establishing hierarchies, setting up international regimes, and attempt­
ing to gain acceptance for new norrns are ail attempts to change the
context within which actors operate by changing the very structure of
their interaction. lt is important to notice that these efforts have usually
not been examples of forward-Iooking rationality. Rather, they have
been experimentaI, trial-and-error efforts to improve the current situa­
tion based upon recent experience". (Axelrod and Keohane 1985: 251)
The growing number of groupings forming in Cascadia, whether public­
private or private alone, reflect such realignment. Transnational interactions and
constituent diplomacy are on the rise, focusing on issues which escape exhausted
national governrnents' attention, and may result in policies complimentary to
national socio-economic programs. In Cascadia, the PNWER ADR initiative
provides such example. On a larger scale, the NAFTA Advisory Committee on
Private Commercial Dispute's concern about institution building and the proposai
to consider the setting up of a NAFTA small claims court are cases in point.
Laudable endeavours as they are, it must be remembered that these efforts

COMMERCIAL ALTERNATIVE DISPUTE RESOLUTION IN CASCADIA

245

are based on impressionistic assessments of the RMI situation and the obstacles
to freer trade. The findings of this paper suggest that more needs to be leamt
about the connection between free trade and Iegaljustice; more specific informa­
tion about the situation in Cascadia must be collected; obtaining a systematic and
scientific evaluation of ADR is crucial to the designing of new structures and the
introduction of new norms; and lastly but not least, such knowledge is politically
indispensable in deciding on further relevant resource allocation (also regarding
the Free Trade Agreement of the Americas).

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