A charge too far

"What are you up to?" she asked. "Marks & Spencer," was my answer. You see, I am worried about Marks & Spencer's profit.

According to those who know, the company has taken its eye off its customers' whims and fancies, and profit has suffered. So, I was fumbling in my pants to find out if my wife was still buying my smalls from Marks. For years and years, she has popped into the men's department and supported M&S' profit via socks, pants and shirts. Was she still doing it, and if not, why not?

Talking of customers and their whims and fancies, can I please get to my sensitive topic? Deep breath. Did you know that arbitration has something in common with Marks & Spencer? They both have customers. The other day, I was the arbitrator. On one side of the table were the claimant and his lawyers; on the other side were the respondent and his lawyers. It dawned on me that here were my customers. They were buying my services, as my wife buys socks and pants from Marks. And it dawned on me, too, that if the service is duff or daft or doubtful, they are as likely to shop elsewhere. I would. And then I asked what customers do not like about arbitration that might persuade them to go elsewhere. Well, let me tell you what sticks in the craw about arbitrators: it is cancellation charges.

Yesterday my clerk spoke to me. A firm of solicitors had phoned to see if I was available to act as arbitrator in some quarrel or other. The solicitor wanted a word. What is my fee rate per hour? Did I charge cancellation charges? Oh dear, here we go again. She explained that she and her opponent and their clients are very anti cancellation fees.

I was fumbling in my pants to find out if my wife was buying my smalls from Marks. Was she still doing it, and if not, why not?

I will tell you how the charges operate. Once a date is set for the actual hearing, the arbitrator reserves or sets aside that period in the diary. But say the parties settle or compromise their quarrel and cancel the time for the hearing. "Ah ha," says the arbitrator, "here is my cancellation charge". Charges vary between arbitrators, but typically they will say this: once the date is set in stone, if it is cancelled three months to one month before the hearing, they want 50% of the fees they would have earned; if cancelled within one month of the hearing, they want 90%, and if cancelled once started, they want the lot.

What are the chances of cancellation?

Highly probable in all cases. Nowadays, we lawyers are bombarded with reminders that we must work very hard to negotiate a settlement and avoid the costs of expensive hearings or trials. Say the hearing time set aside is two weeks. Will the poor old arbitrator have absolutely nothing to do with the time set aside if the hearing is cancelled? Balderdash. It is wonderful news. There is almost always a whole pile of things to get on with in the gift of two weeks. But to coin two weeks of fees, or 90%, or 50%, is even better news. Just imagine how many pants you could buy.

Arbitrators love all this. It has gone on for years, but their customers have always, always loathed cancellation charges. It is one of the reasons people shop elsewhere. They cross out the arbitration clauses and use the courts. I don't think arbitrators have quite twigged how unpopular this has become. Like Marks & Spencer, if you don't listen to customers, the market is likely to slip away. What is the answer? Easy. Put the price up. Charge a realistic hourly rate, but dump cancellation charges for run-of-the mill, modest arbitrations. The prospect of settlement is very high, all the participants know that.