INTERNATIONAL ARBITRATION 1/3LY
MED - ARB : A NEW HOPE? MED-ARB IS A FORM OF ARBITRATION IN WHICH THE ARBITRATOR STARTS OFF A S A MEDIATOR, (AN INDEPENDENT THIRD PART Y WHO AT TEMPTS TO BROKER A DE AL BET WEEN THE PARTIES) BUT IF MEDIATION FAILS, HE BECOMES AN ARBITRATOR AND IMPOSES A BINDING DECISION. MED-ARB IS QUITE COMMON IN CHINA , HOWE VER, AT PRESENT, IS NOT WIDELY USED IN THE UK OR THE US A . The advantages of Med-Arb for a gas price reopener are obvious: • Med-Arb recognises the unique nature of a price reopener process, and offers the opportunity to conclude deadlocked negotiations with amutually-acceptable negotiated solution. Instead of there being a sudden break between the contractually-imposed but time-limited price renegotiation process and the commencement of arbitration, there is a smooth progression fromnegotiation to mediation to arbitration. • The costs of the arbitration process, and its uncertain imposed award, incentivise the parties to agree a settlement, and they are assisted to do so by the skills of the mediator who is experienced in “getting the deal across the line”. • The fact that the same party acts asmediator and arbitrator avoids duplication of process, resulting in a saving of costs if there is no settlement and thematter proceeds to arbitration. • The parties are able to explain their position to themediator in amore informal and commercial context, allowing themediator/arbitrator to get a better idea of the full picture andmake his award accordingly.
MED - ARB : THE DRAWBACKS THERE IS A KE Y CONCEPTUAL PROBLEM WITH MED-ARB WHICH MIGHT MAKE PARTIES HESITATE BEFORE AGREEING TO IT. THE SUCCESS OF MEDIATION WILL OF TEN DEPEND UPON HOW OPEN THE PARTIES C AN BE WITH THE MEDIATOR. Themediator is bound by duties of confidentiality not tomention to the other party anything which is said to him in confidence, so a party can tell him facts whichmight be relevant to the settlement of the dispute – e.g. details of their financial position andwhy they need to achieve a certainminimumprice – safe in the knowledge that the other side will not become aware of those facts. This places amediator, who subsequently has to rule on the dispute as an arbitrator, in a difficult position: he cannot base his decision on factswhich have been communicated to him in the absence of the other party being given an opportunity to comment andmake submissions on them. That would be a breach of procedural fairness. So the parties have to trust themediator/arbitrator to dismiss fromhismind everything which he has been told in confidence in themediationwhen hemakes his award. If they do not do so – and it is somewhat naïve to expect amediator/arbitrator not to be influenced by some of the things he has heard - theymight not be openwith themediator in themediation, and by holding back information they endanger the effectiveness of themediation. One can get round this issue in a number of ways, all of which could perhaps more accurately be described as Arb-Med-Arb: • One could have a different party conduct themediation, as is common in litigation in England&Wales and as happens where parties adopt the Singapore International Mediation Centre - Singapore International Arbitration Centre protocol. However, this can add to the cost of resolving the reopener request, because the parties have to run two distinct processes, either in parallel or in tandem. • One could run the arbitration and have amediator sit in on themerits hearing, and then hold themediation before the award ismade. Themediationwould then be fast-tracked, as themediator will be fully up-to-speed on the case. If there is no settlement the award is handed down in the usual way, but if there is, it can be encompassed in the award instead of the arbitrator’s decision on the merits. However, thismeans incurring the costs of the arbitration followed by the (potentially reduced) costs of themediation. • One could have the same individual as arbitrator andmediator, but hold the mediation after themerits hearing and after the arbitrator/mediator has prepared his draft award. If settlement is not possible, he hands down his award there and then, uninfluenced bywhat he has heard in confidence. Again, however, thismeans incurring the costs of a full merits hearing and amediation.
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