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What are the Limits of ADR?- And what are the limits of judicial
dispute resolution?IFC
Mediating Corporate Governance Disputes
Paris, 12 Februari 2007Eric M. Runesson([email protected])
Eric M. Runesson
What are the limits of judicial dispute resolution?
One-dimensional perspectiveExorbitant information costsDecisionmakers have less information than dispute ownersCannot deal adequately with multi-issue disputes
Eric M. Runesson
Legal persons as parties to a dispute
Legal persons cannot have feelingsLegal persons must act through agentsAgents have feelingsAgents may have other interests than the principal
Eric M. Runesson
What may cause a negotiation failure?
Eric M. Runesson
Economic calculationsStrategic considerationsPsychological traps and cognitive limitations (of agents)
What psychological traps do we need to avoid?
Reactive devaluationThe anchoring trapThe framing trapOver-optimismPartisan perception
Eric M. Runesson
How partisan perceptions work
Eric M. Runesson
The economic dimension revarding low-probability of success
plaintiffs Plaintiff has a 10% chance of vinning 80 and a 90% risk of being liable for dispute resolution costs of 10;Expected monetary value = -2
Defendant 10% of loosing 90 (English rule);Expected risk = -9
Plaintiff can gain up to 9 by risking 2.
Eric M. Runesson
Adding the risk aversion of the defendant agents
Risk neutral principalPersonal liabilityLack of transparencyInvestors may punish ADR-friendliness in corporate governance disputes
Eric M. Runesson
A proposed ADR agenda
Help disputants eliminate psychological trapsHelp eliminate the agency problem Help disputants make rational economic calculationsHelp disputants make rational strategic decisionsHelp disputants think about fairnessMake the market believe that
Eric M. Runesson
Sandart & Partners Advokatbyrå KB
Engelbrektsgatan 7 114 32 StockholmTel 08-679 09 00 Fax 08-679 09 10
Sandart&Partnerssandart.se
Eric RunessonAdvokat, jur.dr, doc., partner
Direkt 08-679 09 11 Mobil 0708-32 78 24
Eric M. Runesson
