{"id":3062,"date":"2020-04-09T16:16:01","date_gmt":"2020-04-09T14:16:01","guid":{"rendered":"https:\/\/wagner-arbitration.com\/?p=3062"},"modified":"2024-03-18T11:45:55","modified_gmt":"2024-03-18T09:45:55","slug":"cooperation-beats-confrontation","status":"publish","type":"post","link":"https:\/\/wagner-arbitration.com\/de\/2020\/04\/09\/cooperation-beats-confrontation\/","title":{"rendered":"Cooperation\u00a0beats\u00a0confrontation\u00a0"},"content":{"rendered":"

The\u00a0<\/span>Corona<\/span>\u00a0<\/span>Crisis<\/span>\u00a0will place a massive burden on\u00a0<\/span>state\u00a0<\/span>courts<\/span>\u00a0in Germany and elsewhere<\/span>.\u00a0<\/span>However, there are alternatives available to businesses and lawyers.<\/span>\u00a0<\/span><\/p>\n

<\/p>\n

With the Corona\u00a0<\/span>p<\/span>andemic\u00a0<\/span>the entire world\u00a0<\/span>is\u00a0<\/span>witnessing\u00a0<\/span>an unprecedented crisis that threatens people’s lives, restricts\u00a0<\/span>civil rights<\/span>\u00a0and puts the global economic system to a test. Even though Germany<\/span>,<\/span>\u00a0<\/span>like many other\u00a0<\/span>countries<\/span>, quickly put\u00a0<\/span>together<\/span>\u00a0emergency stimulus packages<\/span>,<\/span>\u00a0there is\u00a0<\/span>legitimate\u00a0<\/span>concern that<\/span>\u00a0many of the 3.5 million\u00a0<\/span>German\u00a0<\/span>companies,\u00a0<\/span>4 million self-employed and their employees will\u00a0<\/span>stand with\u00a0<\/span>their backs\u00a0<\/span>against<\/span>\u00a0the wall\u00a0<\/span>financially<\/span>\u00a0within weeks\u00a0<\/span>or<\/span>\u00a0months.\u00a0<\/span>A large number of<\/span>\u00a0those affected will\u00a0<\/span>seek to obtain justice<\/span>,\u00a0<\/span>be it before<\/span>\u00a0labor, social, administrative or civil courts.\u00a0<\/span>In practice, parties are already breaching contractual obligations or are threatening to do so.\u00a0<\/span>The German\u00a0<\/span>court\u00a0<\/span>system will have to cope with an unprecedented flood of lawsuits<\/span>. The fight\u00a0<\/span>for<\/span>\u00a0justice will\u00a0<\/span>likely\u00a0<\/span>take years.\u00a0<\/span>N<\/span>ot only in Germany.<\/span>\u00a0<\/span><\/p>\n

Could\u00a0<\/span>contractual due dates\u00a0<\/span>be\u00a0<\/span>rightfully\u00a0<\/span>postponed and contractual obligations\u00a0<\/span>rightfully\u00a0<\/span>be suspended? Could employment contracts and supplier relationships be\u00a0<\/span>rightfully\u00a0<\/span>terminated? Could general meetings be\u00a0<\/span>rightfully\u00a0<\/span>cancelled?\u00a0<\/span>Were\u00a0<\/span>there ad hoc\u00a0<\/span>publicity requirements regarding certain business judg<\/span>e<\/span>ments<\/span>?\u00a0<\/span>These are the kind of\u00a0<\/span>legal\u00a0<\/span>questions that will arise. At the same time, insurance companies will face a flood of lawsuits,\u00a0<\/span>both\u00a0<\/span>justified\u00a0<\/span>and<\/span>\u00a0unjustified. Additionally,\u00a0<\/span>there will be public law disputes about issues such as refused or delayed permits<\/span>, delay<\/span>ed<\/span>\u00a0processing of<\/span>\u00a0<\/span>building applications\u00a0<\/span>as well as other\u00a0<\/span>administrative<\/span>\u00a0<\/span>measures or omissions infringing the rights of\u00a0<\/span>those<\/span>\u00a0affected. If\u00a0<\/span>on top of that,\u00a0<\/span>courts\u00a0<\/span>will\u00a0<\/span>have to reduce their activities over the period of the crisis<\/span>.<\/span>\u00a0<\/span>T<\/span>heir\u00a0<\/span>current\u00a0<\/span>structural and staff capacities<\/span>, available as of today,<\/span>\u00a0will not\u00a0<\/span>even\u00a0<\/span>be\u00a0<\/span>nearly\u00a0<\/span>sufficient<\/span>\u00a0to cope with the flood of legal disputes, and certainly not within a reasonable timeframe.<\/span>\u00a0<\/span><\/p>\n

Business\u00a0enterprises\u00a0need solutions\u00a0for\u00a0their problems<\/h3>\n

There are alternatives available to business<\/span>\u00a0enterprises\u00a0<\/span>and their lawyers. While there will inevitably be\u00a0<\/span>disputes at an unforeseen scale,\u00a0<\/span>businesses can decide for themselves how to resolve them. The recently deceased\u00a0<\/span>economist<\/span>\u00a0Clayton Christensen argued that companies should design their products and services to solve the problems, tasks and needs of their customers. He developed the theory of „jobs to be done“. Businesses do not need\u00a0<\/span>state\u00a0<\/span>courts or\u00a0<\/span>private\u00a0<\/span>arbitration. They also do not need court decisions or\u00a0<\/span>arbitral\u00a0<\/span>awards. And courts are not there\u00a0<\/span>to serve<\/span>\u00a0lawyers. Businesses need solutions\u00a0<\/span>to\u00a0<\/span>their problems. If you ask an entrepreneur<\/span>\u00a0or a CEO<\/span>, the solution\u00a0<\/span>to\u00a0<\/span>his\u00a0<\/span>or her\u00a0<\/span>legal problem is rarely\u00a0<\/span>a court case<\/span>.\u00a0<\/span>\u00a0<\/span><\/p>\n

Court proceedings\u00a0<\/span>and arbitration\u00a0<\/span>have undisputed\u00a0<\/span>advantages<\/span>: they\u00a0<\/span>provide<\/span>\u00a0<\/span>access to justice, offer legal certainty and, at best, create legal\u00a0<\/span>peace<\/span>. But they are<\/span>\u00a0also<\/span>\u00a0expensive and take a long time.\u00a0<\/span>W<\/span>hen a quick and\u00a0<\/span>inexpensive<\/span>\u00a0solution to a\u00a0<\/span>dispute<\/span>\u00a0is required<\/span>, they are\u00a0<\/span>not the right choice<\/span>.<\/span>\u00a0Many small and medium-sized businesses are lacking liquidity<\/span>\u00a0already\u00a0<\/span>today\u00a0<\/span>and do not have the\u00a0<\/span>resources<\/span>\u00a0<\/span>to engage in time- and cost<\/span>–<\/span>consuming litigation<\/span>\u00a0or arbitration<\/span>. Also, due to the unique character of the\u00a0<\/span>C<\/span>orona situation<\/span>\u00a0and its manifold consequences<\/span>, many disputes will\u00a0<\/span>be subject to\u00a0<\/span>very specific<\/span>\u00a0<\/span>factual<\/span>\u00a0circumstances and<\/span>\u00a0will<\/span>\u00a0therefore\u00a0<\/span>r<\/span>equire a<\/span>n individual approach and handling<\/span>.<\/span>\u00a0This is not\u00a0<\/span>what at least<\/span>\u00a0<\/span>German\u00a0<\/span>state\u00a0<\/span>courts are\u00a0<\/span>known\u00a0<\/span>for<\/span>,\u00a0<\/span>particularly<\/span>\u00a0not\u00a0<\/span>in the lower instances<\/span>.<\/span>\u00a0<\/span><\/p>\n

Therefore, in this current crisis<\/span>\u00a0and its aftermath<\/span>,\u00a0<\/span>the\u00a0<\/span>t<\/span>hree\u00a0<\/span>following\u00a0<\/span>measures aimed at cooperation rather than confrontation can help businesses<\/span>\u00a0and entrepreneurs<\/span>\u00a0<\/span>anywhere in the world to\u00a0<\/span>resolve their upcoming disputes in a\u00a0<\/span>non-confrontational and more\u00a0<\/span>business-wise<\/span>\u00a0<\/span>manner<\/span>: cooperation between their lawyers, cooperative dispute resolution procedures and cooperative business models in the future.<\/span>\u00a0<\/span><\/p>\n

Collaborative lawyering<\/h3>\n

First: Cooperation between lawyers.\u00a0<\/span>L<\/span>awyers\u00a0<\/span>and in-house counsel\u00a0<\/span>are hired to represent the interests of their clients. If the interests of the parties diverge, they quickly fall into confrontation mode,\u00a0<\/span>at the latest\u00a0<\/span>when the dispute is litigated in court or\u00a0<\/span>in an\u00a0<\/span>arbitration proceeding. There is, however,\u00a0<\/span>another<\/span>\u00a0way.\u00a0<\/span>C<\/span>ooperation\u00a0<\/span>works also,\u00a0<\/span>and\u00a0<\/span>particular<\/span>,<\/span>\u00a0<\/span>in<\/span>\u00a0case of conflicting interests.\u00a0<\/span>As our private lives show,\u00a0<\/span>a\u00a0<\/span>dispute<\/span>\u00a0<\/span>does not necessarily entail<\/span>\u00a0<\/span>confrontation. A\u00a0<\/span>d<\/span>ispute\u00a0<\/span>arises when there are<\/span>\u00a0conflicting interests.\u00a0<\/span>Provided that<\/span>\u00a0<\/span>parties<\/span>\u00a0<\/span>have the will<\/span>\u00a0to do so<\/span>, they\u00a0<\/span>can\u00a0<\/span>cooperate\u00a0<\/span>in a dispute\u00a0<\/span>in order to find\u00a0<\/span>a<\/span>\u00a0<\/span>mutual\u00a0<\/span>solution that best suits\u00a0<\/span>both parties\u2019\u00a0<\/span>interests instead of\u00a0<\/span>going through a\u00a0<\/span>confrontational\u00a0<\/span>court procedure<\/span>. The method of\u00a0<\/span>Collaborative Lawyering<\/span><\/i>\u00a0developed\u00a0<\/span>by lawyers\u00a0<\/span>in the U<\/span>.<\/span>S<\/span>.<\/span>\u00a0aims\u00a0<\/span>to achieve exactly this<\/span>: The parties agree with each other that their lawyers should cooperate in order to work out the best possible and legally acceptable solution to the dispute for all parties. In\u00a0<\/span>a crisis situation<\/span>, when the aim is to find a viable and practicable solution to the dispute as quickly as possible, there is no time for confrontation and escalation. Court decisions and\u00a0<\/span>arbitral<\/span>\u00a0awards<\/span>\u00a0relating to \u201ccorona cases\u201d<\/span>\u00a0will not be\u00a0<\/span>available for months and years to come<\/span>. What\u00a0<\/span>businesses need<\/span>, however, are solutions that will be effective tomorrow.<\/span>\u00a0<\/span><\/p>\n

Second: cooperative dispute\u00a0<\/span>resolution<\/span>\u00a0procedures.\u00a0<\/span>Alternative dispute<\/span>\u00a0resolution procedures such as mediation, conciliation,\u00a0<\/span>expert determination<\/span>, adjudication and\u00a0<\/span>mini-trial<\/span>s<\/span>\u00a0are either unknown\u00a0<\/span>or\u00a0<\/span>unused\u00a0<\/span>in\u00a0<\/span>Germany. What\u00a0<\/span>businesses<\/span>\u00a0and their lawyers\u00a0<\/span>do not know,<\/span>\u00a0they\u00a0<\/span>will<\/span>\u00a0not\u00a0<\/span>do<\/span>.\u00a0<\/span>These<\/span>\u00a0<\/span>uncertain times offer the\u00a0<\/span>chance to try the unknown.\u00a0<\/span>O<\/span>ut-of-court proceedings\u00a0<\/span>are quick and cost\u00a0<\/span>\u2013\u00a0<\/span>efficient<\/span>\u00a0<\/span>\u2013\u00a0<\/span>at least in comparison to court and arbitration proceedings. When entrepreneurs and companies need quick and cost-<\/span>efficient<\/span>\u00a0<\/span>solutions to their (legal) problems, it is\u00a0<\/span>illogical<\/span>\u00a0to\u00a0<\/span>file a lawsuit<\/span>\u00a0or<\/span>\u00a0<\/span>initiate<\/span>\u00a0<\/span>arbitration<\/span>\u00a0proceedings<\/span>. After all, by the time a judgment or arbitration award is rendered,\u00a0<\/span>facts\u00a0<\/span>will\u00a0<\/span>have long been established<\/span>.\u00a0<\/span>To resolve<\/span>\u00a0different opinions on one or more legal issues,<\/span>\u00a0parties do<\/span>\u00a0<\/span>n<\/span>ot need a court. They can jointly appoint an\u00a0<\/span>expert<\/span>\u00a0to\u00a0<\/span>determine a solution to<\/span>\u00a0the legal issues<\/span>\u00a0in dispute<\/span>.\u00a0<\/span>Alternatively<\/span>, each party\u00a0<\/span>can appoint<\/span>\u00a0an expert\u00a0<\/span>and\u00a0<\/span>instruct\u00a0<\/span>the<\/span>se<\/span>\u00a0two experts to prepare a joint\u00a0<\/span>legal<\/span>\u00a0opinion.\u00a0<\/span>At an early stage, t<\/span>he highest possible common denominator is often more helpful than\u00a0<\/span>a final<\/span>\u00a0judgement\u00a0<\/span>in\u00a0<\/span>the<\/span>\u00a0distant future<\/span>.\u00a0<\/span>Businesses<\/span>\u00a0that want or need to quickly negotiate a<\/span>\u00a0<\/span>settlement<\/span>, but are unable to do so, have the option of engaging a\u00a0<\/span>neutral expert<\/span>\u00a0<\/span>or adjudicator to\u00a0<\/span>issue\u00a0<\/span>a\u00a0<\/span>recommendation\u00a0<\/span>or legally binding decision. This out-of-court decision\u00a0<\/span>can, but<\/span>\u00a0does not have to be\u00a0<\/span>submitted\u00a0<\/span>to judicial review by one of the parties<\/span>\u00a0to the dispute<\/span>.\u00a0<\/span>Parties<\/span>\u00a0who want an interest-based\u00a0<\/span>rather than a rights-based\u00a0<\/span>dispute resolution<\/span>,<\/span>\u00a0can\u00a0<\/span>engage<\/span>\u00a0<\/span>a mediator to\u00a0<\/span>facilitate<\/span>\u00a0<\/span>negotiating a\u00a0<\/span>viable solution<\/span>.\u00a0<\/span>What makes<\/span>\u00a0out-of-court dispute resolution\u00a0<\/span>procedures so appealing is<\/span>\u00a0the variety of\u00a0<\/span>approaches<\/span>,\u00a0<\/span>the flexibility<\/span>\u00a0driven by<\/span>\u00a0<\/span>party<\/span>\u00a0<\/span>autonomy\u00a0<\/span>and the\u00a0<\/span>procedural speed<\/span>. If the parties and their lawyers<\/span>\u00a0are willing to do so<\/span>, they can resolve the dispute in days or weeks\u00a0<\/span>rather than\u00a0<\/span>months or years.\u00a0<\/span>In addition, the fact that\u00a0<\/span>out-of-court procedures\u00a0<\/span>are far less costly than\u00a0<\/span>court and arbitration proceedings is\u00a0<\/span>widely<\/span>\u00a0unknown to otherwise cost-conscious entrepreneurs.<\/span>\u00a0<\/span><\/p>\n

Rethinking\u00a0contracts\u00a0\u00a0<\/span><\/h3>\n

Third: cooperative business relations in the future. Both in Germany and around the world, business relations are coming to a standstill during the Corona\u00a0<\/span>c<\/span>risis. Alexander\u00a0<\/span>Dibelius<\/span>, former head of Goldman Sachs<\/span>\u00a0Germany<\/span>, considers the „shutdown“ of the economy to be more frightening than the\u00a0<\/span>pandemic itself<\/span>. Millions of employees and the companies they work for are facing weeks and months\u00a0<\/span>that\u00a0<\/span>will be<\/span>\u00a0uncertain<\/span>, if not\u00a0<\/span>life-threatening<\/span>.<\/span>\u00a0Many of yesterday\u2019s<\/span>\u00a0<\/span>b<\/span>usiness models no longer work<\/span>, and<\/span>\u00a0<\/span>t<\/span>omorrow’s business models\u00a0<\/span>may<\/span>\u00a0<\/span>be<\/span>\u00a0<\/span>different. The idea of rethinking contractual relationships\u00a0<\/span>as<\/span>\u00a0„formal relational contracts“\u00a0<\/span>has been the subject of discussion<\/span>\u00a0<\/span>in the U.S.<\/span>\u00a0for\u00a0<\/span>some\u00a0<\/span>time<\/span>.<\/span>\u00a0Last year\u2019s report in the Harvard Business\u00a0<\/span>R<\/span>eview\u00a0<\/span>may serve as an example. According to this relational concept,<\/span>\u00a0contracts are\u00a0<\/span>not as much designed to<\/span>\u00a0primarily serve the purpose\u00a0<\/span>o<\/span>f<\/span>\u00a0regulat<\/span>ing<\/span>\u00a0<\/span>\u2013 with specific intentions and expectations \u2013\u00a0<\/span>the rights and obligations of the parties\u00a0<\/span>in a static\u00a0<\/span>manner\u00a0<\/span>from a particular\u00a0<\/span>fixed\u00a0<\/span>point in time<\/span>\u00a0together with quite often<\/span>\u00a0<\/span>drastic sanctions\u00a0<\/span>and remedies<\/span>. Accordingly, contracts are not a „battle zone“ for\u00a0<\/span>bargaining\u00a0<\/span>power. Rather,\u00a0<\/span>contracts<\/span>\u00a0are<\/span>\u00a0simple, understandable and<\/span>\u00a0<\/span>practical<\/span>ly implementable<\/span>\u00a0<\/span>instruments\u00a0<\/span>to<\/span>\u00a0design a future business relationship\u00a0<\/span>in a way that works<\/span>\u00a0<\/span>for the mutual benefit of the parties<\/span>\u00a0<\/span>for<\/span>\u00a0<\/span>an extended period of time<\/span>\u00a0and<\/span>\u00a0that, through specific regulations, enable<\/span>s<\/span>\u00a0parties<\/span>\u00a0\u2013 in their common commercial interest \u2013<\/span>\u00a0to put their (business) relationship on an equal footing and to balance it continuously.<\/span>\u00a0In this way, contracts\u00a0<\/span>evolve<\/span>\u00a0<\/span>in line with the underlying business relationship. This is because business relationships are oriented towards the future and not centered\u00a0<\/span>on\u00a0<\/span>the present, they are dynamic and not static.\u00a0<\/span>Contracts are<\/span>\u00a0created through cooperation between the future contractual partners<\/span>\u00a0and they\u00a0<\/span>rely on<\/span>\u00a0sustainable incentives for cooperative\u00a0<\/span>collaboration for the duration of\u00a0<\/span>the contractual term.\u00a0<\/span>Due to the regulations agreed upon by the parties, a<\/span>\u00a0<\/span>formal relational contract<\/span><\/i>\u00a0<\/span>keeps<\/span>\u00a0<\/span>adapt<\/span>ing constantly throughout its duration<\/span>.<\/span>\u00a0<\/span>Disputes or even court decisions as to whether the contract had to be adapted in retrospect\u00a0<\/span>on the basis of<\/span>\u00a0good faith or\u00a0<\/span>due to a\u00a0<\/span>fundamental\u00a0<\/span>change in circumstances\u00a0<\/span>thus\u00a0<\/span>become obsolete<\/span>. In the\u00a0<\/span>U.S.<\/span>, Dell, FedEx, and AstraZeneca practice this new business relationship-oriented\u00a0<\/span>method of drafting and\u00a0<\/span>executing<\/span>\u00a0<\/span>contracts.<\/span>\u00a0In Sweden<\/span>,<\/span>\u00a0<\/span>Telia<\/span>\u00a0is doing the same.\u00a0<\/span>L<\/span>ong-term business relationships are\u00a0<\/span>particularly well-suited\u00a0<\/span>field<\/span>s<\/span>\u00a0of application<\/span>:<\/span>\u00a0<\/span>e<\/span>xamples include<\/span>\u00a0<\/span>o<\/span>utsourcing, purchasing, franchise and joint venture agreements as well as long-term project contracts in\u00a0<\/span>the\u00a0<\/span>construction and capital goods business, including public-private partnerships.<\/span>\u00a0<\/span><\/p>\n

The\u00a0<\/span>ongoing<\/span>\u00a0<\/span>Corona<\/span>\u00a0<\/span>c<\/span>risis<\/span>\u00a0is\u00a0<\/span>forcing us to think differently<\/span>\u00a0in many respects<\/span>.\u00a0<\/span>In\u00a0<\/span>light<\/span>\u00a0<\/span>of<\/span>\u00a0the foreseeable over<\/span>whelming<\/span>\u00a0of<\/span>\u00a0courts and\u00a0<\/span>arbitral<\/span>\u00a0tribunals, this also applies to the way in which\u00a0<\/span>businesses<\/span>\u00a0will\u00a0<\/span>resolve<\/span>\u00a0legal disputes arising from or in connection with the pandemic.\u00a0<\/span>They will do this in the manner they and their lawyers choose to. If they want to, they can use alternatives to contradictory decisions by<\/span>\u00a0state<\/span>\u00a0courts and arbitral tribunals\u00a0<\/span>here and\u00a0<\/span>now.<\/span>\u00a0<\/span><\/p>\n

***<\/span>\u00a0<\/span><\/p>\n

This is an English\u00a0<\/span>adaptation<\/span>\u00a0<\/span>of a German article\u00a0<\/a><\/span>which the authors<\/span>\u00a0<\/span>published on April 6, 2020, in\u00a0<\/span>F<\/span>.<\/span>A<\/span>.<\/span>Z<\/span>.<\/span>\u00a0<\/span>Einspruch<\/span>, the online law magazine of the leading German newspaper\u00a0<\/span>Frankfurter Allgemeine Zeitung<\/span><\/i>\u00a0(F<\/span>.<\/span>A<\/span>.<\/span>Z<\/span>.<\/span>). The authors wish to thank Malte Benfeldt and Petrit Elshani for their invaluable support with the English\u00a0<\/span>translation<\/span>.<\/span>\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

The\u00a0Corona\u00a0Crisis\u00a0will place a massive burden on\u00a0state\u00a0courts\u00a0in Germany and elsewhere.\u00a0However, there are alternatives available to businesses and lawyers.\u00a0<\/p>\n","protected":false},"author":22,"featured_media":3065,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-3062","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-announcements"],"acf":[],"yoast_head":"\nCooperation\u00a0beats\u00a0confrontation\u00a0 | WAGNER Arbitration Berlin | Dr. Philipp K. Wagner, Dr. Joseph Schwartz<\/title>\n<meta name=\"description\" content=\"Dr. Philipp K. 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