Dispute Resolution Reference Guide
Dispute Resolution Series
Practice Module 1
Produced by Dispute Prevention and Resolution Services
Department of Justice, Canada
I. What is negotiation?
Negotiation has been defined as any form of direct or indirect communication whereby parties who have opposing interests discuss the form of any joint action which they might take to manage and ultimately resolve the dispute between themFootnote 1. Negotiations may be used to resolve an already-existing problem or to lay the groundwork for a future relationship between two or more parties.
Negotiation has also been characterized as the “preeminent mode of dispute resolution”Footnote 2, which is hardly surprising given its presence in virtually all aspects of everyday life, whether at the individual, institutional, national or global levels. Each negotiation is unique, differing from one another in terms of subject matter, the number of participants and the process used.
Given the presence of negotiation in daily life, it is not surprising to find that negotiation can also be applied within the context of other dispute resolution processes, such as mediation and litigation settlement conferences.
II. Characteristics of a negotiation
- Voluntary: No party is forced to participate in a negotiation. The parties are free to accept or reject the outcome of negotiations and can withdraw at any point during the process. Parties may participate directly in the negotiations or they may choose to be represented by someone else, such as a family member, friend, a lawyer or other professional.
- Bilateral/Multilateral: Negotiations can involve two, three or dozens of parties. They can range from two individuals seeking to agree on the sale of a house to negotiations involving diplomats from dozens of States (e.g., World Trade Organization (WTO)).
- Non-adjudicative: Negotiation involves only the parties. The outcome of a negotiation is reached by the parties together without recourse to a third-party neutral.
- Informal: There are no prescribed rules in negotiation. The parties are free to adopt whatever rules they choose, if any. Generally they will agree on issues such as the subject matter, timing and location of negotiations. Further matters such as confidentiality, the number of negotiating sessions the parties commit to, and which documents may be used, can also be addressed.
- Confidential: The parties have the option of negotiating publicly or privately. In the government context, negotiations would be subject to the criteria governing disclosure as specified in the Access to Information Act and the Privacy Act (see confidentiality section). For general information on the privileged nature of communications between solicitor and client during the course of negotiations, please refer to the Department of Justice Civil Litigation Deskbook.
- Flexible: The scope of a negotiation depends on the choice of the parties. The parties can determine not only the topic or the topics that will be the subject of the negotiations, but also whether they will adopt a positional-based bargaining approach or an interest-based approach.
III. Advantages of negotiation
- In procedural terms, negotiation is probably the most flexible form of dispute resolution as it involves only those parties with an interest in the matter and their representatives, if any. The parties are free to shape the negotiations in accordance with their own needs, for example, setting the agenda, selecting the forum (public or private) and identifying the participants. By ensuring that all those who have an interest in the dispute have been consulted regarding their willingness to participate and that adequate safeguards exist to prevent inequities in the bargaining process (i.e., an imbalance in power between the parties), the chances of reaching an agreement satisfactory to all are enhanced.
- Like any method of dispute resolution, negotiation cannot guarantee that a party will be successful. However, many commentators feel that negotiations have a greater possibility of a successful outcome when the parties adopt an interest-based approach as opposed to a positional-based approach. By focusing on their mutual needs and interests and the use of mechanisms such as objective standards, there is a greater chance of reaching an agreement that meets the needs of the parties. This is sometimes referred to as a “win-win” approach.
- Negotiation is a voluntary process. No one is required to participate in negotiations should they not wish to do so.
- There is no need for recourse to a third-party neutral. This is important when none of the parties wants to involve outside parties in the process, e.g., the matter to be discussed or the dispute to be resolved may be highly sensitive in nature.
- Unlike the outcomes of certain adjudicative processes, e.g., the courts, the outcome of a negotiation only binds those parties who were involved in the negotiation. The agreement must not, of course, be contrary to Canadian law (e.g., an agreement to commit a crime would be illegal and thus void for public policy reasons).
- Assuming that the parties are negotiating in good faith, negotiation will provide the parties with the opportunity to design an agreement which reflects their interests.
- Negotiations may preserve and in some cases even enhance the relationship between the parties once an agreement has been reached between them.
- Opting for negotiation instead of litigation may be less expensive for the parties and may reduce delays.
IV. Disadvantages of negotiation
- A particular negotiation may have a successful outcome. However, parties may be of unequal power and the weaker party(ies) may be placed at a disadvantage. Where a party with an interest in the matter in dispute is excluded or inadequately represented in the negotiations, the agreement's value is diminished, thereby making it subject to future challenge. In the absence of safeguards in the negotiating process, the agreement could be viewed by a participant or others outside the process as being inequitable, even though the substance of the agreement may be beyond reproach.
- A successful negotiation requires each party to have a clear understanding of its negotiating mandate. If uncertainty exists regarding the limits of a party's negotiating authority, the party will not be able to participate effectively in the bargaining process.
- The absence of a neutral third party can result in parties being unable to reach agreement as they be may be incapable of defining the issues at stake, let alone making any progress towards a solution.
- The absence of a neutral third party may encourage one party to attempt to take advantage of the other.
- No party can be compelled to continue negotiating. Anyone who chooses to terminate negotiations may do so at any time in the process, notwithstanding the time, effort and money that may have been invested by the other party or parties.
- Some issues or questions are simply not amenable to negotiation. There will be virtually no chance of an agreement where the parties are divided by opposing ideologies or beliefs which leave little or no room for mutual concessions and there is no willingness to make any such concessions.
- The negotiation process cannot guarantee the good faith or trustworthiness of any of the parties.
- Negotiation may be used as a stalling tactic to prevent another party from asserting its rights (e.g., through litigation or arbitration).
V. How to use negotiation
- Objective of a Negotiation
Negotiations allow the parties to agree to an outcome which is mutually satisfactory. The actual terms of the agreement must be concluded by the parties and can be as broad or as specific as the parties desire. A negotiated settlement can be recorded in the form of an agreement. Once signed, has the force of a contract between the parties. If the settlement is negotiated in the context of a litigious dispute, then the parties may wish to register the settlement with the court in conformity with the applicable rules of practice.
- Negotiating Styles
Generally speaking, although the labels may vary from one commentator to the next, negotiating styles can be divided into two categories:
- Competitive/Positional-Based Negotiation
In the competitive model, the parties try to maximize their returns at the expense of one another, will use a variety of methods to do so and view the interests of the opposing party or parties as not being relevant, except insofar as they advance one's own goal of maximizing returns. Competitive bargaining has been criticized for its focus on specific positions rather than attempting to discern the true interests of the partiesFootnote 3. Among the criticisms which have been levelled at the competitive model are its tendency to promote brinkmanship and to discourage the mutual trust which is necessary for joint gainFootnote 4.
- Cooperative/Interest-Based Negotiation
Cooperative or problem-solving negotiation starts from the premise that the negotiations need not be seen as a “zero-sum” situation, i.e., the gains of one party in the negotiation are not necessarily at the expense of the other partyFootnote 5. Common interests and values are stressed, as is the use of an objective approach, and the goal of the negotiations is a solution that is fair and mutually agreeableFootnote 6.
In recent years, the form of cooperative negotiating style known as principled bargaining has won widespread acceptanceFootnote 7. The proponents of principled bargaining believe that bargaining over fixed positions can lead to situations where parties will either be stubborn (“hard bargaining”) or accept unilateral losses (“soft bargaining”) in order to reach agreementFootnote 8. Principled bargaining, which attempts to reconcile the interests underlying these positions, helps the parties to reach agreement and circumvent the problems of hard and soft bargaining. It is this form of negotiation which is seeing increasing use. See Part G “Steps of a Negotiation” for further discussion.
- Competitive/Positional-Based Negotiation
- What is the Role of Justice Counsel in a Negotiation?
Simply put, a negotiator is supposed to advance the interests of the party that he or she represents in order to obtain an optimal outcome. Beyond this general statement, the functions to be performed by a negotiator will vary, depending on the mandate conferred on her or him by the party.
In the most elementary form of negotiation, two or more parties work to achieve an agreement between themselves. However, the parties can delegate representatives to act on their behalf. These representatives include the following:
- members or employees who have been designated by the party in question;
- third parties (e.g., dispute resolution professionals, lawyers, labour negotiators, etc.) whose services have been retained by the parties because of the negotiating skills of these individuals rather than any involvement on the part of the latter in the dispute or discussion in question.
The role of Justice counsel in a negotiation will vary with the circumstances and the mandate of the negotiating team. The extent to which Justice counsel will participate in the negotiations will depend on a variety of factors, including whether or not legal issues or issues of mixed fact and law are at stake as well as whether the client department needs or simply wants Justice counsel to participate actively in the negotiation. For example, counsel with Legal Services Units work with their clients and on their behalf and help represent their views in a variety of situations, e.g., formulating contractual terms concerning the development of a project. In some cases, Justice counsel will have carriage of files such as ongoing litigation and may be directly involved in negotiations, e.g., settlement conferences in litigation files.
When negotiating on behalf of the client, counsel must ensure that there is no divergence between his or her negotiating stance and the mandate of the client. This is best done through following the client's instructions and providing frequent updates to the client. At other times, client departments may ask the Justice counsel to participate as a member of the negotiating team. Should the client be present at the negotiations, counsel must determine in advance whether the client will actually participate in the negotiations. It is crucial for the success of the negotiations that no divergences, real or apparent, emerge between the positions advanced by Justice counsel and those proposed by the client. To avoid any such disclosures, counsel and the client should clarify their respective mandates and formulate a common negotiating strategy.
The choice of negotiating style will also be an important consideration, as a competitive negotiator will view the bargaining exclusively in terms of advancing his or her interests and will conduct the negotiations accordingly. The cooperative negotiator, however, will view the issues in a fundamentally different light and will attempt to seek common ground with his or her counterpart.
While the role of counsel will depend on the circumstances surrounding the negotiations, she or he is always bound by the principles of professional ethics. For example, the Code of Professional Conduct of the Canadian Bar Association states that when acting as an advocate, the lawyer must treat the tribunal with courtesy and respect and must represent the client resolutely, honourably and within the limits of the law. Although no two negotiations are identical, counsel must apply these principles of professional responsibility in each situationFootnote 9. Counsel for the Department of Justice are bound as well by the provisions of the Department of Justice Act, and relevant directives and policies which outline the appropriate role for Justice counsel. Of note is the Treasury Board Contracting Policy, which specifies negotiations as one means of resolving contractual disputes. Section 12.8.3 reads:
Efforts should be made to resolve disputes as they arise, first by negotiating with the contractor. This can be through discussion between representatives of the contractor and the contracting authority or by a more formal review established by the department or agency. Contracting authorities should develop systems that ensure:
- prompt attention is given to disputes;
- unresolved disputes are brought forward quickly to a designated senior level in the department or agency for decision;
- the decision is quickly communicated to the contractor so that the contractor may take further action if so desired.
- Dealing With Differences
Underlying any successful relationship is the principle of mutual respect. This is particularly true during negotiations, where cultural and/or linguistic differences between the parties may occasionally result in misunderstandings between them. Such differences will influence the perceptions and assumptions of individuals and how they bargainFootnote 10. Differences in gender may also play a role in the negotiating process, whether the parties are of the same or different cultural backgroundsFootnote 11. Reliance on stereotypes, whether they be based on gender, cultural, physical or racial differences or physical disability, will cause and reinforce misunderstandings between the parties.
The ability to deal with others who are not of the same gender or cultural origin or who differ in some way from one's self varies with each individual and the degree to which she or he has been exposed to and is willing to accept diversity. Whatever one's background, clearly demonstrating respect for and an open-minded attitude towards others is always an appropriate course of action. When there are cultural or other differences among parties to a negotiation, it is important to be aware of and sensitive to these differences. In such a situation, it is essential to communicate clearly and effectively with the other party or parties in a negotiation. Doing so will enhance the relationship between the parties as well as minimize the chances of a misinterpretation of the underlying messageFootnote 12.
- Dealing With Difficult or Deceptive Conduct
At any point during negotiations, one party may decide to use a variety of tactics in order to obtain an advantage over another party. This behaviour can range from pressure tactics (attempting to force a party to accept specific terms), intimidation (implicit or explicit), deliberate ambiguity regarding the scope of the negotiating mandate to blatantly unethical behaviour (providing misleading or false information, lies, etc.)Footnote 13.
Advance preparation is essential in order to respond effectively to these tactics, whenever they may arise. In devising strategies to counter such behaviour, each situation must be viewed as unique. Previous experience of others can provide useful guidelines in formulating a suitable responseFootnote 14. Awareness of basic communication techniques and strategies on how to communicate with difficult or deceptive individuals may also be extremely helpful. Ultimately, the choice of tactic(s) to be used to rebut difficult or unethical conduct is a question of personal judgment, as what may be an appropriate response in one situation may be excessive or too conciliatory in other circumstances.
Preparing for a Negotiation
- Initial Assessment
The negotiation process begins with a communication or signal from one party to the other indicating a willingness to bargain. Since negotiation is a voluntary process, the first and fundamental step to be taken is to confirm whether or not the other party or parties are interested in negotiations. In making such an assessment, it is important to take into account the following factors:
- the desire to resolve the dispute;
- whether a negotiated solution is in the interests of any or all of the parties in question;
- the credibility of the other party(ies);
- the willingness of the parties to establish or preserve a relationship;
- whether or not there is a disparity between the parties to the extent that it would be impossible to bargain equally, i.e., there is a marked contrast between the parties in terms of the level of education or the resources of the parties;
- the desirability of using another form of alternative dispute resolution, such as mediation or arbitration; and
- proper authority to enter into negotiations and to reach an agreement or settlement.
- Contacting the Other Party
Once it has been decided that negotiations are an appropriate course of action, arrangements that must be made with the other parties include:
- outlining the agenda and the scope of the negotiations;
- fixing the timetable, i.e., whether or not there will be a fixed period for the talks as well as the frequency and the duration of the negotiations;
- determining the identity of the participants, ensuring that all interested parties have been consulted;
- choosing the locale for the negotiations (preferably a neutral location) and arranging necessary support services;
- specifying the official language(s) to be used for the purposes of the negotiations, as well as the need for translation and interpretation services (please refer to the discussion of the Official Languages Act).
- deciding whether or not the negotiations and any resulting agreement will be confidential (please see the discussion of the Access to Information and Privacy Acts).
Consistency in these matters will not only assist in ensuring the negotiations are as effective as possible, they will also reinforce one's credibility and can thus contribute to establishing mutual confidence and trustFootnote 15.
- Preparation of a Strategy and Interest Assessment
A crucial factor in achieving one's goals in negotiation is thorough preparation. Therefore, it is suggested that the following steps should be taken prior to any bargaining session:
- Study the dispute in question before the negotiations. This means not only obtaining the facts surrounding the dispute, but also attempting to find out as much as possible about the other party or parties, their background and their negotiating interests.
- Harmonize and reconcile the varying and sometimes competing interests within one's negotiating side before negotiating with the other sideFootnote 16. Failure to do so can undermine one's negotiating stance by making the other party aware of internal disagreements and thus raising doubts as to one's ability to implement any future agreement.
- When assessing one's interests as well as those of other parties, the Best Alternative To a Negotiated Agreement (BATNA) must be taken into accountFootnote 17. The BATNA is
“the standard against which any proposed agreement should be measured”Footnote 18. It is, in essence, the best of all the possible alternatives to negotiation should the latter fail. Assessing one's BATNA is indispensable and should be done carefully and well in advance of any bargaining session so as to avoid unpleasant surprises from the opposing party during the negotiations. Attempting to estimate the BATNA of the other party will also be worthwhile when planning one's negotiation strategy.
- Creativity is necessary when attempting to devise solutions when at first glance the dispute appears to be insoluble. An impasse will often result when the negotiating parties advance specific positions and refuse to change them. Each party should then canvass the various members of the negotiating team in order to obtain their views regarding possible solutions, i.e., determining the parties' underlying interests and how they may be satisfied. This should be done in an environment which encourages the team members to express their ideas freely and without fear of criticism, e.g., a brainstorming session.
- Thought must be given as to how the negotiations will be handled. For example, it must be decided in advance whether there will be one spokesperson or whether each member of the negotiating team will be responsible for one or more particular areas or topics. Another consideration is fixing in advance when and how to call a private team caucus that will interrupt the negotiations. Resorting to a caucus of team members is helpful when a new issue emerges at the table or an issue on the table requires clarification or further analysis. Finally, all members of the negotiating team should be aware of the need to resolve any internal disputes away from the negotiating table and to avoid revealing any such disputes or doubts to the other parties, e.g., through the use of inappropriate body language.
- Initial Assessment
- Steps of a NegotiationFootnote 19
Each negotiation has its own unique characteristics. There is thus no uniform and exclusive manner governing the organization of a bargaining session. For example, the timing of an offer and the question of which party is to make the first offer fall within the discretion of the negotiator and are determined by the overall dynamic of a particular negotiation.
- Negotiation Session
During any negotiation, the following considerations should be kept in mind:
- Concentrate on interests, not positions. Try to focus on the underlying interests of all the parties, i.e., their needs, desires, concerns and fears, and how they might be acknowledged and reconciled.
- Separate the people from the problem. Avoid blaming the other side for the problem(s) one has encountered and discuss the perceptions held by each side. Ensure that there is effective communication between all parties.
- Listen carefully and actively to what the other side is saying and acknowledge what is being said. This can be done through methods such as asking questions and by making frequent summariesFootnote 20.
- Try to make the negotiations a “win-win” outcome by creating options for mutual benefit.
- There is no need to wait until negotiations have begun, however, in order to develop these options. They can and should form part of the development of the negotiating strategy, although they are subject to modification in the course of the negotiation.
- Creating these options implies a willingness to look beyond the limits of the issue(s) in question. Doing this can be achieved through means such as brainstorming sessions with one's negotiating team. Brainstorming can also be a joint exercise involving all the parties. These sessions should be structured so as to allow all participants the opportunity to voice ideas in a non-adversarial and non-critical environment.
- Use objective standards. Citing objective standards such as legislation or government policies enables parties to view the issues in rational rather than emotional terms and facilitates the conclusion of an agreement. There is likely a variety of alternative objective criteria that could be cited by the parties and, if possible, they should be identified by each negotiating team prior to entering into the negotiating session.
- Evaluate proposals of the other party and the progress of the negotiations in light of the BATNA (Best Alternative To a Negotiated Agreement). It may become necessary to break off the negotiations if there appears to be no way of achieving an outcome which is superior to the BATNA. This can occur when it becomes apparent that the underlying interests between the parties are irreconcilable or that the other side does not really want an agreement.
- When necessary, feel free to stop the negotiations if there is a need for the members of the negotiating team to confer on a new development. To avoid revealing the content of these discussions, the caucus should be held in a private location which is preferably not visible to the other side.
- Stay within the limits of one's negotiating mandate. Ensure that there is constant communication with the client when acting on the latter's behalf. The same principle applies when bargaining in the governmental context; before committing the government to a position Justice counsel must be clear as to the extent of her or his bargaining authority. More specifically, counsel must be certain that they have received specific instructions as to whether or not to conclude an agreement as well as the limits of the mandate, e.g., the limits governing any offer to the other party as well as the degree to which other options can be offered. As well, any agreement that is reached must respect existing laws and government policies.
- Prepare for the possibility of being confronted with provocative, intimidating, unfair or deceptive behaviour of a party to the negotiationsFootnote 21. At worst, it may become necessary to end the negotiations, having carefully examined one's BATNA and having concluded that termination is the preferable course of action.
- Statutory/Policy Considerations
A negotiator's authority is limited not only by the mandate given by his or her principal or client, but also by factors that may not be explicitly mentioned in her or his mandate, such as existing statutes, regulations or government policies.
Justice counsel have a particular duty to ensure that any agreement reached does not breach the terms of any law or policy directive. For example, the Minister of Justice has responsibility for a number of federal statutes, including the Access to Information Act, the Canadian Human Rights Act, the Canadian Bill of Rights, the Commercial Arbitration Act, the Crown Liability and Proceedings Act, the Federal Real Property and Federal Immovables Act, the Official Languages Act, the Privacy Act, and the United Nations Foreign Arbitral Awards Convention. These statutes are cited here only as examples and are not intended to provide a definitive list of federal statutes to be consulted by Justice counsel. Counsel should examine the relevant federal, provincial or territorial laws which may be applicable to the particular fact situation or client department.
Any agreement reached between the parties cannot override the terms of the Access to Information Act, the Privacy Act or the Official Languages Act as these laws are of general application. Please refer to sections ins “Confidentiality: Access to Information Act and Privacy Act” and “Official Languages Act: Considerations” contained in this Reference Guide for further discussion.
- Negotiation Session
- Objective of a Negotiation
Appendix A: Checklist for negotiation
- Authority/Mandate to negotiate and reach an agreement or settlement
- Willingness to negotiate
- Credibility of other party(ies)
- Ability to negotiate (equality?)
- Alternatives to negotiation
- Contact with the other party to arrange/confirm:
- Location (neutral)
- Participating parties
- Public/Confidential nature (See statutory requirements, below)
- Official Languages
- Support services (word processing, etc.)
- Preparation of a strategy and interest assessment:
- Study the issues
- Harmonize/reconcile competing interests within the team
- Assess the BATNA (Best Alternative to a Negotiated Agreement) for all parties
- Assign roles for team members (spokesperson(s), etc.)
- Create options for mutual gain (“win-win”)
- Consult relevant statutes (including the Access to Information Act, the Department of Justice Act, the Official Languages Act, the Privacy Act) and relevant policy directives
- Pointers for a negotiation:
- Concentrate on interests, not positions
- Separate the people from the problem
- Listen carefully and actively
- Respect the other party (e.g., any cultural, linguistic or other differences)
- Create and propose options for mutual benefit (“win-win”)
- Use objective standards
- Assess progress in light of one's BATNA
- Caucus if necessary
- Anticipate and avoid responding to provocative tactics
- Communicate frequently with the client
- Remain within the limits of the negotiating mandate
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