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Tuesday, November 3, 2015

Arbitration ~ is that privatization of Justice system

Can you identify what Chris Gayle is signing ~ it is calling for Third Umpire to intervene – a referral !! 

Arbitration is a dispute resolving mechanism - I had earlier posted on the general condition of Standard Fire and Special Perils Policy – ‘arbitration clause’. Insurance is primarily a contract of indemnity – there can be difference of opinion, variance of interpretations and disputes.  In any commercial transaction, the traders undertaking such business transactions sure would have only good intentions of carrying out their trade deals, still there would arise disputes during performance of contracts; disputes on small to larger issues – much to annoyance of all the parties concerned. Unresolved disputes not only upset smooth continuance but also involve litigation at costs, time and efforts. Everyone would like to have such dispute areas narrowed thinner and have a mechanism for faster and efficient resolution.  


General condition no. 13 of Standard Fire Policy is – ‘arbitration clause’, which is present in most insurance contracts. Arbitration, a form of alternative dispute resolution, is a legal technique for the resolution of disputes outside the courts, where the parties to a dispute refer it to one or more persons.  An arbitration clause is a commonly used clause in a contract that requires the parties to resolve their disputes through a process of arbitration.  The clause may not incorporate  a specific jurisdiction, but sure would bind  the parties to a type of resolution outside of the courts, and is therefore considered a kind of forum selection clause. The clear advantage of arbitration would the speedy disposal, lesser legal technicalities and formalities, flexibility and lower costs.

In India, an Act  to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of  foreign arbitral awards as also to define the law relating to conciliation and for matters connected therewith or incidental thereto – came into being in Aug 1996 and is known as “The Arbitration and Conciliation Act, 1996’.One important aspect in Insurance Policy is that ‘arbitration’ can be invoked only when the liability is admitted and dispute is on the amount.  The condition mentions of appointment of arbitrator and if a single arbitrator cannot be agreed upon, it will be a team of 3 – one  appointed by the Insured; one by the Company and the other appointed by the two selected arbitrators. (earlier policies – A/B/C contained reference to Umpire as third arbitrator !)….  Here are some excerpts from an interesting article in NewYork Times titled:   “In Arbitration, a ‘Privatization of the Justice System’”.

When she bought her car, Tinker Martin-Bowen signed a contract with an arbitration clause that took away her right to a jury trial. Only later did she realize just what she had given up. Deborah L. Pierce, an emergency room doctor in Philadelphia, was optimistic when she brought a sex discrimination claim against the medical group that had dismissed her. Respected by colleagues, she said she had a stack of glowing evaluations and evidence that the practice had a pattern of denying women partnerships.

She began to worry, though, once she was blocked from court and forced into private arbitration. Presiding over the case was not a judge but a corporate lawyer,  who also handled arbitrations. When Ms. Pierce showed up one day for a hearing, she said she noticed Mr. Kalogredis having a friendly coffee with the head of the medical group she was suing.

During the proceedings, the practice withheld crucial evidence, including audiotapes it destroyed, according to interviews and documents. Ms. Pierce thought things could not get any worse until a doctor reversed testimony she had given in Ms. Pierce’s favor. The reason: Male colleagues had “clarified” her memory.When Mr. Kalogredis ultimately ruled against Ms. Pierce, his decision contained passages pulled, verbatim, from legal briefs prepared by lawyers for the medical practice, according to documents.

“It took away my faith in a fair and honorable legal system,” said Ms. Pierce, who is still paying off $200,000 in legal costs seven years later.If the case had been heard in civil court, Ms. Pierce would have been able to appeal, raising questions about testimony, destruction of evidence and potential conflicts of interest.But arbitration, an investigation by The New York Times has found, often bears little resemblance to court.
Over the last 10 years, thousands of businesses across the country — from big corporations to storefront shops — have used arbitration to create an alternate system of justice. There, rules tend to favour businesses, and judges and juries have been replaced by arbitrators who commonly consider the companies their clients, The Times found.

A New York Times study of the increasing use of arbitration clauses in contracts, which has effectively forced millions of people to sign away their right to go to court.The change has been swift and virtually unnoticed, even though it has meant that tens of millions of Americans have lost a fundamental right: their day in court.“This amounts to the whole-scale privatization of the justice system,” said Myriam Gilles, a law professor at the Benjamin N. Cardozo School of Law. “Americans are actively being deprived of their rights.”

All it took was adding simple arbitration clauses to contracts that most employees and consumers do not even read. Yet at stake are claims of medical malpractice, sexual harassment, hate crimes, discrimination, theft, fraud, elder abuse and wrongful death, records and interviews show.

The family of a 94-year-old woman at a nursing home in Murrysville, Pa., who died from a head wound that had been left to fester, was ordered to go to arbitration. So was a woman in Jefferson, Ala., who sued Honda over injuries she said she sustained when the brakes on her car failed. When an infant was born in Tampa, Fla., with serious deformities, a lawsuit her parents brought against the obstetrician for negligence was dismissed from court because of an arbitration clause.Even a cruise ship employee who said she had been drugged, raped and left unconscious in her cabin by two crew members could not take her employer to civil court over negligence and an unsafe workplace.For companies, the allure of arbitration grew after a 2011 Supreme Court ruling cleared the way for them to use the clauses to quash class-action lawsuits. Prevented from joining together as a group in arbitration, most plaintiffs gave up entirely, records show.

Still, there are thousands of Americans who — either out of necessity or on principle — want their grievances heard and have taken their chances in arbitration.Little is known about arbitration because the proceedings are confidential and the federal government does not require cases to be reported. The secretive nature of the process makes it difficult to ascertain how fairly the proceedings are conducted.Some plaintiffs said in interviews that arbitration had helped to resolve their disputes quickly without the bureaucratic headaches of going to court. Some said the arbitrators had acted professionally and without bias.But The Times, examining records from more than 25,000 arbitrations between 2010 and 2014 and interviewing hundreds of lawyers, arbitrators, plaintiffs and judges in 35 states, uncovered many troubling cases.

Behind closed doors, proceedings can devolve into legal free-for-alls. Companies have paid employees to testify in their favour. A hearing that lasted six hours cost the plaintiff $150,000. Arbitrations have been conducted in the conference rooms of lawyers representing the companies accused of wrongdoing.Winners and losers are decided by a single arbitrator who is largely at liberty to determine how much evidence a plaintiff can present and how much the defense can withhold. To deliver favorable outcomes to companies, some arbitrators have twisted or outright disregarded the law, interviews and records show.

These are excerpts from that article in NYTimes.com ~ not reproduced in its entirety – but sufficient to reveal their views on  perceived flaws in  alternate method of dispute resolution.  The Indian version,  has not thus far been subject to such accusations, is a positive note. 

Concluding – you know of DRS in Cricket and Indian stubborn opposition to it.  Former Test Umpire Daryl Harper is of the view that players must be eliminated from the Decision Review system and replaced by a fulltime, third TV arbitrator to fix a discredited process ruining the game.  After some howlers in the Ashes, Harper expressed that TV powerbrokers will never let the DRS go – as it showcases high drama and sometimes portrays some players as villains.  His view is that in the 3rd Umpire’s chair, a full-time TV Umpiring analyst would act swiftly – without prejudices. 

With regards – S. Sampathkumar

3rd Nov. 2015.

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