Originally posted on 11/21/2013
Arbitration is a rare occurrence in alliances. Normally, disputes are resolved through operating committees, the Joint Steering Committee, or perhaps two very highly placed executives from each organization. However, if all else fails, many contracts build in arbitration as the ultimate step for forcing and agreement when formal dialogue cannot produce a resolution.
In a 2013 ASAP BioPharma Conference panel session titled “Arbitration: How to Avoid It—and What to Do When You Can’t,” four leaders of the alliance management functions of big pharmaceutical organizations—Dr. Robert Wills, Ph.D., vice president of global alliance management at the Janssen Pharmaceutical Companies of Johnson & Johnson; Dr. Varavani Dwarki, CA-AM, vice president of global alliance management at Sanofi; Andy Hull, vice president of global alliance management at Takeda Pharmaceuticals; and Jason Powell, CA-AM, general manager of global pipeline marketing at AbbVie—entertained several questions related to avoiding arbitration, managing the process when it is required, and dealing with the aftermath of a decision.
Here are some highlights from the panel, which was moderated by Wills.
What role does alliance management play before a dispute makes it to arbitration, and who is involved when it escalates to executives?
This is where the equity you have earned by building a strong relationship with your alliance manager counterpart pays off, according to Powell. The use of “off-the-record” or “sidebar” conversations is critical to getting to the bottom of a situation and keeping the relationship on track as the dispute escalates.
Hull pointed out that legal, functional leaders, and Joint Steering Committee members have been engaged by the time arbitration is in sight. Everyone knows the consequences of arbitration can be very negative, so there is a great incentive to “give it another shot” before going to arbitration.
Dwarki’s main takeaway: keep the asset the primary focus while the process takes shape. Neglecting the asset’s interests is “the worst thing you can do.”
If negotiations have gone down to the 11th hour, a change in scenery for senior executives can help diffuse emotions, according to Wills. It’s human nature to react differently when the partner executive is in the same room versus when you’re alone in your office where your anger can potentially fester. He likened it to the difference between “blowing whistle in a dog’s face” as opposed to blowing it while the dog’s head is sticking out the window, happily breathing in fresh air.
Now, you’re in arbitration. What do you do with teams and people involved?
Although people usually associate arbitrations with tension and ill feelings, Hull actually felt it could have a positive effect in two circumstances: 1) if both companies are so far apart after objective analysis that an unbiased party thinks a 50-50 compromise is unrealistic, and 2) if a compromise would be unfair. To Hull. An independent third party expert “isn’t the worst thing in the world” at this point.
Wills and Powell stressed the importance of limiting the number of people deposed and involved in the arbitration, wherever possible. The alliance manager will play a big role in the arbitration because he or she has the most knowledge of the relationship. Sometimes the alliance manager will lead the arbitration efforts with the lawyers running the process, according to Wlils. Powell added that the alliance manager has to maintain a strong relationship with the alliance manager counterpart, so that the healing process proceeds much faster after the arbitration.
Hull made the point that managing the legal process as an arbitration takes its course can be much easier for disagreements concerning specific functional areas. However, if the dispute is central to the joint working committees, that added layer of legal involvement during the arbitration period can get tricky.
How do you instill in alliance team members that they need to be careful as the legal process takes its course?
Wills recounted that Janssen’s legal warned employees that careless communications can lead to a deposition and/or jail time, which got everyone’s attention.
The panel also agreed that it was imperative to find ways to communicate without legal without putting your organization in hot water. Wills recounted that the “redlining [of documents by legal] got so dysfunctional.” On the flip side, he later warned of potential ramifications of ignoring legal altogether—he recalled an instance in which four sentences destroyed an entire case.
Dwarki suggested a good alliance manager will sit with the legal team and do more than just wordsmith. He noted that root causes of the arbitration went well beyond the actual arbitration issue, and was often the result of other underlying factors in the relationship. The alliance manager was critical in providing this insight, both to the legal team managing communications and the alliance team dealing with their counterparts while the process took shape.
How do you implement changes that have mandated by an arbitration decision?
Powell said he starts by pulling the core team of six or so people together to assess the situation in the aftermath. If people are not speaking the language of “let’s move forward,” getting the alliance back on track may not be as tough as you might think. However, if bitter feelings linger, a formal “relaunch” of the partnership may help move things forward again.
Again, Hull reminded the audience that having an objective person weigh in can help with a relaunch; the objective ruling is not always “a bad starting point.”
In Dwarki’s observation, the joint assessment of the decision and why it happened should “percolate down” starting with a crisp dialogue between the Joint Steering Committee members. “Transparency” is a much better way to move forward, he added.
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