Alternative Dispute Resolution in Estonia – Taking Baby Steps, Not Yet a Steady Toddler

Dispute resolution is usually mainly associated with courts that have traditionally been the venue of last resort in finding a solution to one’s legal and not so legal disputes. However, courts might not always be the most efficient venue for resolving commercial disputes.

Business is about relationships and trust.
When miscommunication or perceived or real breaches of trust cause the commercial relationships to break down, the conflict often impacts the entire business. Alternative dispute resolution (ADR) methods help to resolve disputes outside courts, which is conducive to rebuilding the trust and the relationship. This applies particularly to mediation, which is about taking control of your conflict with the help of a third neutral when you have deadlocked on business-critical or emotional topics that have ceased to be about law (or money). Based on the principles of open communication, active listening and principled negotiation, a mediator helps the conflicting parties to focus on the solution and not the past and thus to avoid the stress and the expense of a lengthy litigation by retaining control of their own fate. Arbitration is a suitable dispute resolution method for B2B cases where the parties have failed to resolve their conflict by way of negotiations (and/or mediations).

Solving business disputes by way of ADR methods, especially arbitration but increasingly also mediation, has proven to be effective in several countries worldwide. Yet, notwithstanding the proper legal framework (and with the possible exception of arbitration), the usage of other ADR methods in commercial disputes has been rather scarce in Estonia. The question is why? In our opinion part of the answer probably stems from our history. Perhaps ADR methods are not yet appreciated since we have inherited the unwavering belief in the state court system? Or maybe it is the result of the shift from collective to individual mindfulness that has resulted in the exaggerated need to focus on one’s own interests only? It might also be that the historically developed tendency to keep all your cards close to your chest (as otherwise they can and likely will be used against you) is a difficult (though not impossible) ground for generating openness, trust and negotiation/communication based on real needs and interests. With such background, misinterpretation and breach of trust are easy to come along and this often escalates the conflict to the courthouse. Due to this ADR has not grown into our minds and the knowledge and experience of ADR is rather limited.

Another reason for the under-usage of ADR could be our lack of awareness of how to negotiate based on interests. Most legal counsels in Estonia have been trained towards enhancing their active skillset (arguing, persuading) and not their passive skillset (listening, managing emotions of oneself and others). As a result, parties get torn up in emotions but professionals at their side are not equipped to calm them down. Thus a tunnel view of “I’m right and they are wrong” is created and the real needs and interests are shunned. In some cases it seems that, for some strange reason, “revenge” and “victory” have become the desired norm in our sometimes stiff and stubborn (legal) business culture. The above is certainly not the whole story and far from absolute as lots of disputes do, in fact, settle, but the described behaviour is unfortunately quite evident on the market.

The solution is to educate the legal profession as well as business-people about principled interests-based negotiations. Making the business and legal community
acknowledge that the ability of making a compromise proposal at the right time is a strength not a weakness (and that positioning gets you into more trouble than it is worth) is a slow but steady process.

The authors hope that the currently prevalent mistrustful attitude towards ADR will disappear, the more the lawyers and their clients become aware of effective
communication and effective negotiation techniques. It is important that parties and their legal counsels would understand the nature, purpose, length, risks etc. of the different ADR methods and also of their combination. To a certain extent it is happening already: trained professionals are emerging, there is dialogue and there are legal acts that avail the opportunity of ADR methods. It is important to keep the momentum going. For instance, those companies in Estonia that adhere and advocate corporate social responsibility already think differently and are more likely to consider the efficiency and true cost of the dispute on the company and choose to negotiate based on interests. Furthermore, in response to inquiries about the mediation option from the international business community, the Estonian Chamber of Commerce is contemplating to introduce mediation rules to offer the services of accredited and trusted mediators loosely affiliated with the Chamber – which would create yet another avenue of peaceful and efficient dispute resolution besides the Arbitration Court of the Estonian Chamber of Commerce and Industry, which has successfully operated for years.

To sum it up, any contract or conflict can be mediated, just like any international commercial B2B dispute can end up in arbitration or court. Ultimately, the authors are of the opinion that ADR methods are efficient means of dispute resolution and, in time, they will prove so also in Estonia.

What is ADR?
All dispute resolution methods outside state courts,
i.a.:
- negotiations
- mediation/conciliation
- arbitration (in Europe arbitration is sometimes excluded from ADR)
- binding and non-binding expert determinations/commissions
- dispute review boards
- neutral evaluations
- mixed clauses (med-arb; neg-med or neg-med-arb)

ADR
methods allow parties to make their own rules, valuing speed and least obstacles to resume business as usual, even if this means an intelligent business divorce for the parties that are unable to mend their conflict and re-kindle trust.

Simply put, every minute the business owner, its managers and employees spend on the dispute is time not spent on developing the business.

Published in Focus, The Swedish Chamber of Commerce in Estonia, Issue 2/2014