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Leveraging Mediation in International Arbitration

Updated: Oct 10, 2023


Leveraging Mediation in International Arbitration

The benefits that mediation brings to international arbitration are similar to the benefits that parties see in any mediation: costs saved, the perspective of a neutral third party gained, mutual agreements made possible, and so forth.


One advantage of mediation that is unique in the international arbitration setting is that mediation assists parties in avoiding the international arbitration. These words - "international arbitration" - tend to strike fear in many inhouse counsel hearts.


In my experience, the problem with international arbitration was rarely cost, time, or efficiency - though these potential drawbacks are often bemoaned. The problem in international arbitration is that you have no control over the outcome because the outcome lies in the hands of the tribunal. And sometimes, it does not matter if you have the best legal team and a preeminent panel. Bad things can happen in arbitration, in the form of arbitral awards, and those things are largely irrevocable.


From a business perspective and a risk management perspective, this feels dangerous.


Mediation Addresses These Concerns


Mediation is different because it is truly the parties' process.


In mediation, the parties - with the assistance of counsel and the mediator - design the solution. This stands in stark contrast to arbitration, where that function is performed by someone external to the dispute and who will not have to live with the impact of their decision. Mediation is designed to recognize that the dispute at hand is the parties' problem; they tend to know it best because they have lived it and they are often in the best position to decide what are the most appropriate next steps towards resolution.


What's more, there are limited constraints in mediation. While institutions often provide mediation rules, they do not relate to the manner in which negotiations proceed. You are empowered to design a bespoke negotiation process with the assistance of the mediator. Here, creative solutions can be introduced to the negotiation table and the process can be constructed in any way, shape, or form that suits the parties. For example, the mediation process may be used as a tool to advance settlement of the case, or perhaps discreet issues presented in the dispute. The solution achieved may be based on the original demand sought or involve services, charitable giving, options for interest rates, other contingencies, and apology.


Mediation & International Arbitration


The history of how the international arbitration community has grappled with the concept of mediation is nicely condensed in the ICC's new Report on Facilitating Settlement in International Arbitration ("2023 ICC Report"), which was released earlier this year. The introduction to the report takes us back to the 2007 ICC Commission Report on Controlling Time and Costs in Arbitration and CEDR's 2009 Report of the Commission on Settlement in International Arbitration, which set out several recommendations to parties, arbitrators, and arbitral institutions that were aimed at increasing the prospects of settlement of arbitration proceedings without the need to proceed through to the conclusion of the hearing.


In sum, the recent ICC Commission found that:


"There is now significantly less concern than there was a few years ago about an arbitral tribunal being aware that the parties are seeking to arrive at a settlement, whether through mediation or otherwise."
"To date, mediation has proven to be the most popular and successful ADR tool for commercial disputes. Securing effective access to mediation during arbitration proceedings is clearly an important initiative that parties, arbitral tribunals and arbitral institutions can take to facilitate settlement of disputes."

But questions remain...

  • If the dispute is guided by a clause that relies on arbitration, how is it possible to leverage mediation?

  • Once the arbitration has commenced, is it sensible to try to initiate mediation?

My answer to both questions is, perhaps not surprisingly, an emphatic "yes" for the reasons set forth above. If you agree, here are ideas for getting to that negotiation table regardless of whether you have a mediation clause in the underlying contract or other concerns about straying from the arbitration path...


Strategies for Utilizing Mediation in International Arbitration


The ICC 2023 Report suggests that parties can agree to mediation windows within their contract (in a pre-arbitration/pre-dispute context) or during the initial case management conference. Further, where mediation takes place in the course of arbitration proceedings, the parties may find it appropriate for the arbitration to be stayed to allow time for conducting the mediation. This enables the parties to focus on the potential for settlement without being distracted by the arbitration process (and incurring the costs of those steps when a settlement may be imminent). In other cases, the parties may prefer to conduct the mediation without requiring a stay or pause in the arbitral proceedings, in order to avoid the potential for lost time.


Additional guidance on pursing mediation alongside an arbitration process can be found in the CPR Institute's Protocols and Sample Clauses for Concurrent Mediation and Arbitration ("CPR Protocols"), which is also cited in the 2023 ICC Report. These materials do envision that the parties would negotiate a concurrent mediation-arbitration clause as part of their contract, in advance of any dispute. But the CPR Protocols also provide a roadmap for parties to to utilize once arbitration is commenced and mediation is desired.


Other ideas for engaging counterparties in mediation include:

  • Simply telling a counterparty that the client has had positive experiences with mediation and would like to explore the option here.

  • Some companies may have started using mediation in their contracts more recently, thus developing a sort of policy the encourages mediation. You can use this information in conversation with counterparty to express a client's positive experiences with mediation.


Proposing Mediation Is Not a Sign Of Weakness


Of particular concern for parties and counsel is often the fear of looking weak for suggesting mediation.


How do you propose mediation without looking like you are desperate?


As mediation philosophies go, I have never subscribed to the mediation-is-a-sign-of-weakness line of thought. Regardless of what you think of your litigation adversary, you do not know what they are thinking. Assuming that your interest in mediation will automatically signal weakness to your opponent is your assumption.


And what if they do see your request to mediate as a sign you are worried? What difference does this make in the long run? They show up to the mediation thinking they are in luck and then the mediator has to bring them back down to reality. Or they say no to the mediation and you haven’t really lost anything simply by asking.


Setting Yourself Up for a Successful Mediation


Remember that it is acceptable to have ex parte communications with mediators - before they are selected and during the pendency of negotiations. Interview mediators before you select them.


Planning is key. You should almost always have fairly extensive meetings with the mediator prior to the session, getting them up to speed, sharing your perspective, any potential client issues, and goals for the negotiation. In conversation with the mediator and your client, you should develop a negotiation plan in advance of the session.


If you are writing a brief, talk to the mediator about what will help them. This is not an exercise in litigation advocacy. Generally, the mediation brief should include your perspective on the facts and the law, negotiation history (if there is none - why not), goals for the mediation, what you need from the mediator, and perhaps a sample memorandum of understanding - what you might accomplish in an ideal world at the end of the mediation.


Conclusion


It is true that every case is not a good fit for mediation. In the context of international arbitration, the possibility of mediation may raise concerns relating to consent awards and other jurisdictional issues. But enough is written and said with frequency on the potential pitfalls of mediation. That was not intended as my focus here. This post describes the benefits of exploring facilitated settlement in arbitration proceedings, including techniques for arriving at the mediation negotiation table. As these opportunities arise, parties and counsel can consider the most appropriate techniques under the circumstances.




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