Law and Ethics in Negotiation: Building Trust and Principle

Introduction and Core Principles

Law and ethics are important in negotiation, as they serve as the groundwork for a process of mutual respect and collaboration, which is key to all successful negotiations (Fischer, Ury, 1991). However, although there may be some agreement as to the universality of morals and ethics among some researchers, others point to differences in culture and history to explain why certain groups have different views on the role of law and ethics in negotiation. This paper analyzes the role of law and ethics in negotiation and uses examples from the U.S., Europe, and the Middle East to support the analysis.

In their influential book Getting to Yes, Fisher and Ury identify law and ethics as essential to successful negotiations in business. They are the backbone of all functioning societies, and in a negotiation between two parties, they can serve as the supports for the bridge that both seek to build. Negotiations require other elements, but without the use of law and ethics, they are not anchored or sturdy enough to accomplish the desired aims. Who wishes to negotiate with deceivers or with individuals, businesses, or nations who scoff at the law?

As Fisher and Ury describe, the art of negotiation is one that requires principle, which is why they call their model "principled negotiation." They explain their model thus: "The method of principled negotiation is hard on the merits, soft on the people. It employs no tricks and no posturing. Principled negotiation shows you how to obtain what you are entitled to and still be decent. It enables you to be fair while protecting you against those who would take advantage of your fairness" (Fisher, Ury, 1991, p. xviii). Principled negotiation is an example of how negotiations are about trust, fairness, and respect—all of which enable win-win scenarios to be constructed that satisfy both parties.

The Gazprom Case: Law and Ethics in International Disputes

An example of the way law and ethics play a part in international business negotiations can be seen in recent events surrounding Russian gas exporter Gazprom and its commitments to European countries. The relationship of Russia with the West has come under heavy strain due to developments in Ukraine, France's refusal to pay for work contracted and completed by Russia, and various economic sanctions leveled at Russia (Escobar, 2014). Russia has attempted to show how reputation, morals, and ethics should compel France to honor its side of the deal. However, because of politics and Cold War rhetoric, law and ethics take a less important role in the negotiation.

Reports of Gazprom diverting its gas to Turkey and compelling Eastern European countries to buy their gas from Turkey have circulated, which would indicate that when law and ethics fail to play a dominant role in international business negotiations, business is taken elsewhere (Durden, 2015). Moreover, in retaliation for lost funds due to France's unwillingness to pay for services tendered, it is speculated that Russia may default on its foreign debts, which would only serve to exacerbate the relationship between Russia and the West. Essentially, because one side of the negotiating table refused to play by an acceptable standard of rules and ethics, the entire relationship has turned sour, with both sides showing resentment and disapproval of the other's actions.

Russia views the West as adhering to a zero-sum game, which does not consider negotiation as a valuable tool. The West views Russia as an obstacle to its zero-sum game success. This same situation can be found in other examples where law, ethics, and morality are traded for selfish gain and winner-take-all mentality. Laws and ethics are part of the social fabric because they serve to hold society together. Ancient philosophers such as Socrates, Plato, and Aristotle have always contended as much. When parties seek to negotiate terms of a business relationship, they do well to consider what such ancient philosophers meant when they discussed the value of a system of ethics.

The reason that law and ethics are so readily flaunted in negotiations is fundamentally simple: there is a lack of respect either for the value of law or for the value of the other party at the negotiating table. Oftentimes, unsuccessful negotiators will view their counterpart with distrust, trying to judge how the counterpart is taking advantage of them. This mentality goes against the principle of mutual respect and the spirit of collaboration that Fisher and Ury acknowledge is so helpful in successful negotiations.

Cultural Factors in Ethical Negotiation

What fosters this lack of respect? Graham's (1983) study hints at the different cultural mentalities that breed unsuccessful negotiating skills. In America, for instance, Graham cites representational bargaining strategies as the most fundamental in American negotiations. By contrast, Brazilian negotiations are hotbeds of deceptive bargaining strategies, utilized to create outcomes that favor only one side of the negotiating table. Graham examines how cultural mentalities affect the way negotiators respect law, ethics, and the counterpart at the negotiating table.

In Leung and Tong's (2004) study of negotiation models, they discuss culture as the arbiter of law and ethics. In this sense, it may be argued that the development of culture is essential in the maintaining of a law-abiding and ethical mentality, which can then be used to support successful, principled negotiations. Leung and Tong state that "cultural differences in justice practices may constitute significant barriers to intercultural negotiation" (Leung, Tong, 2004, p. 330).

In the U.S., Archer Daniels Midland (ADM) set aside law and ethics when it engaged in price-fixing of the lysine market with its competitors. Price-fixing is illegal in the U.S., and when the FBI was alerted to the actions of ADM, a sting operation was put into effect. Top executives at ADM were found guilty and sentenced to prison (Eichenwald, 2000). Here is an example of a business failing to negotiate within the accepted parameters of society's ethical and moral system and the codified laws of the nation. Instead of adhering to an ethical code, it participated in the act of dividing up market share, violating the trust of the U.S. government and costing itself millions of dollars in fines.

The ADM Price-Fixing Example and Corporate Ethics

Because of cultural differences, ideas of justice, fairness, law, and ethics can actually become barriers to successful negotiation. One side of the party, for instance, will reflect that it is acting solely while the counterpart is acting unreasonably or selfishly—when in actuality, it is merely adopting a judgmental attitude based on a misconception of its own righteousness. As Socrates attempts to teach Euthyphro in the ancient text, "knowing oneself" is of utmost importance in discerning right actions and attitudes. In other words, one cannot act rightly—according to morals and ethics—if one does not first understand the nature of one's own habits and their orientation.

In the example of Russia turning to Turkey to act as middle man between it and Europe (amid accusations of Europe illegally siphoning off gas from Gazprom's pipelines), Turkey's good reputation and standing with Russian traders precedes it. Turkey's situation in the Middle East moreover makes it a valuable partner for Russian exporters seeking to sell gas without having to deal with untrustworthy European counterparts. Turkey's relationship with the West is somewhat more stable than Russia's and it therefore represents a viable alternative. In this context, Turkey brings a good reputation, mutual respect, and an appreciation of both cultures' ethical attitudes.

Cultural Differences as Negotiation Barriers

Salacuse (1999) reminds negotiators that when it comes to international business, sales representatives will always have to be prepared to appreciate the cultural and ethical code of individuals from different cultures. In Salacuse's cross-cultural comparative survey, which polled 310 business executives, lawyers, and graduate business students from five different continents, negotiators' perceptions of their own styles were acquired and examined. The data that Salacuse gathered illustrates the importance of appreciating law and ethics in the negotiations process. Salacuse divided cultural influences into four categories—"behavior, attitudes, norms and values" (p. 217). Each has a bearing on negotiators' respect for law, ethics, and the counterpart at the negotiating table. These influences can be seen in each of the examples discussed in this paper.

In the case of ADM, the culture of the company was one in which price-fixing was a tradition. This tradition affected the behavior of the company's negotiators and distorted their sense of ethical value. They accepted the "norm" of price-fixing as legitimate rather than the external cultural values that the state had codified in national law regarding price-fixing.

In the case of Gazprom's diverting gas to Turkey as a means of dealing with failed negotiations with European countries, the NATO-inspired developments in Ukraine and the mounting pressure on Russian borders have less to do with ethical negotiation practices and more to do with winner-take-all tactics in a geopolitical game. The value of the zero-sum game among Western corporations has long been held as supreme, and it is this cultural value that affects its attitude when it comes to negotiating with a giant like Gazprom. Russia's insistence on fair play has helped it to achieve a successful negotiation with China regarding the energy exchange (and the willingness of both parties to trade in rubles and yen); it has also put it at odds with its Western counterparts, whose values are affected by a geopolitical approach that does not consider law and order as conducive to an overall strategy of international relations.

Eastern Alternatives and Turkey's Mediating Role

The role of law and ethics in negotiation is, therefore, demonstrably important. Its participation serves as strong support; its exclusion serves to undermine the relationship that negotiation is meant to foster. Several theoretical approaches maintain this line of thought, especially in the post-9/11 world, where suspicion is the norm and reliance upon good behavior and upstanding reputation is critical for negotiation success.

Another example can be found in the recently signed energy deal between Russia and China, which has been reported as being worth billions for both countries. Neither country has treated the other with disrespect or used deception to win a zero-sum game. Both countries have entered into a spirit of collaboration, which is built upon respect for universal principles of ethical business practices and a desire for mutual gain or win-win negotiations rather than exclusive zero-sum game goals. So as Western nations and companies attempt to disentangle themselves from the post-9/11 suspicions which have clouded international relations, the East stands to capitalize on the West's loss of ethical standards.

Based on these examples, the best way for negotiators to be successful in the long run is to base their negotiations not on zero-sum games but on the attitude that views the counterpart as a potential collaborator. With respect for universal law, a good strategy becomes a willingness on the part of the negotiator to conduct himself with openness, forthrightness, integrity, and a spirit of collaboration. Escobar (2014) states that the West is at risk of falling from the geopolitical stage because it refuses to adopt a collaborative spirit at the negotiating table. As Western standards of living, levels of trust, and expectations continue to decline, the East is showing signs of health and promise because it is not bent on mutual destruction but on mutual appreciation (Escobar, 2014).