The DuPont Company's Development of ADR Usage: From Theory to Practice

Vol. 20 No. 3

By

DuPont’s uses of ADR since 1997 somewhat mirror the shifts that Professor Lamare describes between the two studies of ADR in Fortune 1000 companies. As a corporate counsel for DuPont since 1995, I have been both a participant in and a witness to these trends. DuPont’s first emphasis has been to increase mediation actively in the wide range of disputes where it is a good fit, regardless of subject matter or area of law. Usage of domestic arbitration has remained constant, probably because DuPont primarily trades with businesses rather than consumers.

The most significant change in the way DuPont uses ADR is a recent broad project to encourage a sustainable ADR culture through carefully tailored dispute resolution clauses in major transnational contracts. This article will briefly describe the company’s domestic arbitration experience and attitudes toward mediation and then how DuPont has pursued the goal of a sustainable ADR culture globally.

Arbitration and Mediation at DuPont

Whether arbitration results from a purchasing, insurance, or other commercial contract, our main complaint is that domestic arbitration practice has come to resemble much too closely the litigation experience under the Federal Rules of Civil Procedure. Attempts to impose scorched-earth discovery, extensive depositions, or wholly or partly dispositive motions with a low probability of success rob arbitration of its key allure to business: efficient resolution of the current problem. Obviously, when arbitration becomes indistinguishable from a lawsuit, the costs in money and especially creative resources are major turnoffs, for the business clients and in-house lawyers alike. 

We believe that the efficiency of domestic arbitration is redeemable, but only by vigilant professionalism from all participants: parties, inside and outside lawyers, arbitrators, and administering authorities. If one participant wishes to bloat the proceedings, he can often succeed. To discourage that, DuPont subscribes to the methods in the College of Commercial Arbitrators’ “Protocols for Expeditious, Cost-Effective Commercial Arbitration,” a copy of which is in the hands of every DuPont in-house lawyer.[i]

Business is about making agreements for common benefit, not about fighting for years at large expense. Arbitration is adversary in nature and therefore, in that sense, fundamentally unbusinesslike. Mediation, in contrast, is much more like business. So, although possibly redeemable, domestic arbitration is likely to become even less necessary because what often resolves commercial disputes most efficiently is mediation. Direct business benefits of a mediated resolution include settling matters more quickly and redirecting dollars from legal expense to resolution. For all these reasons, at DuPont Legal, every new matter’s suitability for mediation is evaluated programmatically as a job duty of the responsible professional. That potential frequently is revisited through the life of a dispute.[ii]  

Some years ago, a statistical study revealed that average potential litigation cost savings from use of early mediation in our matters were $61,000 per employment litigation matter and $76,000 per personal injury case. Savings in commercial matters averaged $350,000. Even when mediation does not immediately produce a settlement, it can give parties enhanced understanding and the confidence to simplify proceedings, paring legal theories or damages claims. Another obvious benefit is that when parties retain control of the outcome through mediation, business relationships are more likely to be preserved or even improved.

Most of DuPont’s sales are outside the United States, with almost half of those in emerging markets where there may be little confidence in courts and the rule of law. For a company with a surging global profile, early and well-drafted dispute resolution planning is an imperative best practice to mitigate transnational business risk. We have found that if the contract calls for an efficient and well-reasoned process, perhaps with initial steps through escalated negotiation, mediation, and then arbitration, the speed and fairness of resolution are enhanced. If it does not, the parties may find themselves stuck in an undesirable default venue for years.

A Sustainable ADR Culture

While an intellectual understanding of ADR’s benefits is helpful, empowering more than 200 lawyers around the globe to practice high-quality ADR and create a sustainable culture to support it into the future requires nuts and bolts, policies and procedures that are clear, detailed, and practical.

In 2011, we realized that DuPont’s multiplicity of cross-border contracts probably had outstripped any updated available internal guidance on how to contract for alternative dispute resolution. My colleague and boss Tom Sager commissioned a Global ADR Team to create what we initially conceived as a short guide for how to craft ADR clauses in contracts worldwide.

Despite efforts at brevity, the guide became a 58,000-word book, a copy of which is provided to every DuPont in-house lawyer. (Compared with other books on the subject, the resulting internal DuPont Global ADR Guide is short. It’s a big subject.) 

Many corporations provide model ADR language for use in contracts. Our goal was greater: to school our extremely busy commercial attorneys in the fundamentals of mediation and arbitration practice so they could exercise informed judgment in real business situations. Most of the time, they should be knowledgeable enough to customize ADR applications without referring to the home office or outside counsel. We had to account for variation in ADR practice from continent to continent, understanding that while lawyers in North America may be accustomed to using mediation, many other legal cultures take a more cautious approach. Similarly, the guide addresses the American approach to arbitration as opposed to the more streamlined civil law mentality. 

Inside the Global ADR Team

An inside team of commercial lawyers from every continent began with free-ranging teleconferences, developing a consensus on design. Each member collected examples of dispute resolution clauses used in every region. Unsurprisingly, the team found standard clauses repeated almost directly from arbitral institutions’ models and also some quite creative customized clauses, a variability that underscored the need for overall practice guidance.

The DuPont Global ADR Team set its functional goal as a distributed service model in which each regional office could prescribe desired ADR practices routinely using the team member from that region as a principal resource, with strong backup from the entire team and from outside counsel when necessary. We created an updatable book that describes ADR practice generally, building from an elementary level to a business-level competency as briefly as possible. The remainder of what became the DuPont Global ADR Guide then describes regional preferences and suggests clause language for use in commonly expected business scenarios. 

This basic structure of the Guide emerged:

  1. The deal-driven choice between arbitration and litigation
  2. Arbitration basics: essential elements of an enforceable clause
  3. Elevated negotiation and mediation
  4. Regional preferences and solutions
  5. Special considerations in intellectual property contracts
  6. Sparing use of optional elements in arbitration clauses
  7. “Developing world” considerations
  8. Resolving existing disputes
  9. Getting more help

We recruited writing talent from outside firms to assure objectivity, and frankly, to feature the outside firms more expert in these matters, promoting relationships between them and our regions. One might think that many private practice lawyers, hearing that DuPont wanted their help, for free, in writing a book on an abstruse subject strictly for internal use, might politely decline. But the response was enthusiastic. Very soon the drafting committee included four eminent outside counsel from firms large and small. Inside lawyers also drafted large sections. An attitude of genuine eagerness prevailed.

The most challenging aspect was two-pronged: Which arbitral institutions would DuPont choose to recommend, and what wording would be the nucleus of the recommended clause for each region? 

Much communication resolved the first question. Perhaps predictably, the main deciding factors boiled down to familiarity (favoring the institutions our most experienced people had had good experiences with) and geography. 

On the question of language, we came to realize that from DuPont’s point of view, all the model clauses suggested by each selected institution (we offered more than one in each region) are deficient. Most omit the language of arbitration, evidentiary rules, interim relief, entry of an award as a judgment in courts having jurisdiction, confidentiality, or severability and survival. We spent a lot of time on detailed redrafting of standard clauses.

Responses to the release of the DuPont Global ADR Guide have been gratifying. Now we have an internal culture where business lawyers often seek additional information and resources. Our busy people have received a subtle message from management: we are willing to devote our internal talents and resources for the collective good and the long-term benefit of our businesses. 

Our attitude is that creating efficient and fair ADR will also grow our capability and practices. To become sustainable and increasingly efficient, ADR needs the ongoing commitment of its users.

David H. Burt serves as Corporate Counsel to the DuPont Company. Based in Delaware, USA, DuPont is a multinational science-driven company with $37 billion annual sales in industries including chemicals, agriculture, automotive, building, electronics, energy, food and beverage, plastics, and others. He practiced privately as a trial attorney before joining DuPont in 1995, becoming the leader of the company’s trial team in the Delaware courts. His practice now centers on commercial litigation, with special emphasis on international arbitration and other forms of alternative dispute resolution. He can be reached at David.H.Burt@dupont.com.

 

[i] Protocols for Expeditious, Cost-Effective Commercial Arbitration: Key Action Steps for Business Users, Counsel, Arbitrators & Arbitration Provider Institutions (Thomas Stipanowich et al. eds., 2010), available at http://www.thecca.net/sites/default/files/CCA_Protocols.pdf.

[ii] For more on the author’s views and DuPont’s use of mediation, see David H. Burt, Inside Counsel as Sophisticated Users of the Mediation Process, in Contemporary Issues in International Arbitration and Mediation: The Fordham Papers 2010, at 418 (Arthur W. Rovine ed., 2010).

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