Introduction

In this century the market has globalized more and more and as a result of the growth of
international business, the number of international transactions has increased and gained a
significant importance in the last decades. Even if a transaction or a contract is planned well, still
it is possible to face some disputes. Parties should consider this possibility beforehand and
therefore there is a considerable need for including dispute resolution mechanisms in a
commercial contract.1

The main forms of commercial dispute resolution are; negotiation, arbitration, litigation and
alternative dispute resolution mechanisms such as conciliation, mediation and mini-trials.

International commercial arbitration is the process of resolving business disputes between or

among transnational parties through the use of one or more arbitrators. It requires the agreement
of the parties, which is usually given via an arbitration clause that is inserted into the contract or
business agreement. The parties can specify the forum, procedural rules, and governing law at
the time of the contract. The decision is usually binding.

International commercial arbitration has long been the preferred means of resolving complex
business disputes in the cross-border context. However, the international corporate community
has become somewhat disenchanted with that particular mechanism because of concerns about
rising costs, delays, and procedural formality. As a result, parties are looking for other means of
resolving international commercial disputes. One of the more popular alternatives is mediation.2

International mediation

International mediation is widely understood as a voluntary and a non-coercive form of conflict

management, which is highly practical within the intricate dynamics of international relations,
dominated by the principles of preservation of actors and independence.3

Article 3(a) of the EU Directive provides a useful definition of mediation as follows:

Mediation means a structured process, however named or referred to, whereby two or more
parties to a dispute attempt by themselves, on a voluntary basis, to reach an agreement on the
settlement of their dispute with the assistance of a mediator. This process may be initiated by the
parties or suggested or ordered by a court or prescribed by the law of a Member State.

Mediation represents an extension and continuation of parties own conflict management efforts.
In other words an extension of the negotiation processes itself. When an outside party enters the

1https://www.lawteacher.net/free-law-essays/commercial-law/advantages-and-disadvantages-of-international-
commercial-arbitration-commercial-law-essay.php
2 http://openscholarship.wustl.edu/law_journal_law_policy/vol45/iss1/7/
3 http://theheartofeurope.ideasoneurope.eu/2014/10/15/mediation/
conflict in order to modify, alter, or influence the dynamics of previous relations between
conflicting sides. At the same time mediators play a crucial role in formulating specific legally
non-binding solutions or procedures for the purpose of ending hostilities or a crisis, or even
suggest options for resolving a dispute. International mediation refers to activities conducted by
various international actors with the aim of managing international conflicts on interstate and
intrastate levels. Just as disputants in these conflicts can be both state and non state actors,
outside parties that could be motivated to mediate these conflicts can be just as diverse and
numerous. They include representatives of neighboring states, of global powers states of medium
and small relative size, representatives of global and regional, international organizations, global
NGOs, such as religious organizations or interest and advocacy groups.4

Adopted by UNCITRAL on 24 June 2002, the UNCITRAL Model Law on International

Commercial Conciliation (2002) provides uniform rules in respect of the conciliation process to
encourage the use of conciliation and ensure greater predictability and certainty in its use. To
avoid uncertainty resulting from an absence of statutory provisions, the Model Law addresses
procedural aspects of conciliation, including appointment of conciliators, commencement and
termination of conciliation, conduct of the conciliation, communication between the conciliator
and other parties, confidentiality and admissibility of evidence in other proceedings as well as
post-conciliation issues, such as the conciliator acting as arbitrator and enforceability of
settlement agreements.5

UNCITRAL Model Law on International Commercial Conciliation (2002) provides scope of

application and definitions under Article 1(3) as follows:

For the purposes of this Law, conciliation means a process, whether referred to by the
expression conciliation, mediation or an expression of similar import, whereby parties request a
third person or persons (the conciliator) to assist them in their attempt to reach an amicable
settlement of their dispute arising out of or relating to a contractual or other legal relationship.
The conciliator does not have the authority to impose upon the parties a solution to the dispute.

Guide to Enactment and Use of the UNCITRAL Model Law on International Commercial
Conciliation (2002) provides that:

In preparing and adopting model legislative provisions on international commercial

conciliation, the United Nations Commission on International Trade Law (UNCITRAL or the
Commission) was mindful that such provisions would be a more effective tool for States
modernizing their legislation if accompanied by background and explanatory information. The
Commission was also aware of the likelihood that the model provisions would be used in a
number of States with limited familiarity with conciliation as a method of dispute settlement.
Primarily directed to executive branches of Governments and legislators preparing the

4 Ibid
5 http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/2002Model_conciliation.html
necessary legislative revisions, the information provided in this Guide should also provide useful
insight to other users of the text, including commercial parties, practitioners, academics and
judges.

Arbitration, Mediation, Conciliation Distinguished

It further lays down that the term conciliation is used in the Model Law as a broad notion
referring to proceedings in which a person or a panel of persons assists the parties in their
attempt to reach an amicable settlement of their dispute. There are critical differences among the
dispute resolution processes of negotiation, conciliation and arbitration. Once a dispute arises,
the parties typically seek to resolve their dispute by negotiating without involving anyone outside
the dispute. If the negotiations fail to resolve the dispute, a range of dispute settlement
mechanisms is available, including arbitration and conciliation.

It also lays down that an essential feature of conciliation is that it is based on a request addressed
by the parties in dispute to a third party. In arbitration, the parties entrust the dispute resolution
process and the outcome of the dispute to the arbitral tribunal that imposes a binding decision on
the parties. Conciliation differs from party negotiations in that conciliation involves third-person
assistance in an independent and impartial manner to settle the dispute. It differs from arbitration
because in conciliation the parties retain full control over the process and the outcome, and the
process is non adjudicatory. In conciliation, the conciliator assists the parties in negotiating a
settlement that is designed to meet the needs and interests of the parties in dispute. The
conciliation process is an entirely consensual one in which parties that are in dispute determine
how to resolve the dispute, with the assistance of a neutral third party. The neutral third party has
no authority to impose on the parties a solution to the dispute.

Further, it also lays down that in practice, proceedings in which the parties are assisted by a third
person to settle a dispute are referred to by expressions such as conciliation, mediation, neutral
evaluation, mini-trial or similar terms. Various techniques and adaptations of procedures are used
for solving disputes by conciliatory methods that can be regarded as alternatives to more
traditional judicial dispute resolution. The Model Law uses the term conciliation to encompass
all such procedures. Practitioners draw distinctions between these expressions in terms of the
methods used by the third person or the degree to which the third person is involved in the
process. However, from the viewpoint of the legislator, no differentiation needs to be made
between the various procedural methods used by the third person. In some cases, the different
expressions seem to be more a matter of linguistic usage than the reflection of a singularity in
each of the procedural method that may be used. In any event, all these processes share the
common characteristic that the role of the third person is limited to assisting the parties to settle
the dispute and does not include the power to impose a binding decision on the parties. To the
extent that alternative dispute resolution (ADR) procedures are characterized by the features
mentioned in this paragraph, they are covered by the Model Law. However, the Model Law does
not refer to the notion of ADR since that notion is unclear and may be understood as a broad
category that includes other types of alternatives to judicial dispute resolution (for example,
arbitration), which typically results in a binding decision. To the extent that the scope of the
Model Law is limited to non-binding types of dispute resolution, the Model Law deals only with
part of the procedures covered by the notion of ADR

Article 33 of the UN Charter provides a useful list of the range of mechanisms available for the
settlement of international disputes. These include: negotiation, enquiry, mediation,
conciliation, arbitration, judicial settlement, resort to regional agencies or arrangements, or other
peaceful means. These options differ from one another in three key ways: some result in more
binding outcomes, some are political processes whereas other are more legal, and some offer the
disputing parties greater control over structure and outcome. Addressing some of these
characteristics, the Energy Charter Conference (ECT) Guide describes mediation as:
a process in which a neutral third party, a mediator, meets with the disputing parties and
actively assists them in reaching a settlement based on their business interests and risk
assessments or policy considerations and not only their legal positions.

Mediation is frequently likened to conciliation. In fact, both the ECT Guide and Permanent Court
of Arbitration (PCA) Conciliation Rules specifically use mediation and conciliation
interchangeably. While these two forms of dispute settlement are similar, they are not entirely
identical. One key difference is their level of institutionalisation, and the extent to which the third
party is empowered to suggest terms of settlement. Mediation is easier to distinguish from
arbitration and judicial settlement:

Mediation is typically facilitative, rather than evaluative: the mediator does not issue a
binding decision, with the disputing parties instead retaining control over the process and
its outcome. Parties might, however, opt for evaluative rather than facilitative
mediation and so vest more power in the mediator to settle the dispute.

Mediation is an interests-based rather than a rights-based This feature makes

mediation particularly appropriate for disputes involving long-term investments or
investors embedded within a host State. As the ECT Guide observes, a key advantage of
mediation is that it offers parties the possibility of retaining or even improving their
relationship (Section 12). Mediation is also not subject to standing or jurisdictional
requirements and so may be more inclusive of a broader range of participants.

Mediation is likely to be less formal, placing emphasis upon communication between the
parties. The ECT Guide, for example, recommends that the teams of individuals engaged
in mediation proceedings be kept as small as possible in order to maximise engagement
(Section 5.3). These features of mediation mean that it is likely to be both quicker and
cheaper than arbitration. This is recognised in Article 8.20(4) of CETA, which provides
 that parties shall endeavour to resolve investor-State disputes taken to mediation within
60 days from the appointment of the mediator.6

Characteristics of Mediation

Mediation is a process of conflict management, related to but distinct from the parties' own
negotiations, where those in conflict seek the assistance of, or accept an offer of help from, an
outsider (whether an individual, an organization, a group, or a state) to change their perceptions
or behavior, and to do so without resorting to physical force or invoking the authority of law. The
essential characteristics of mediation are highlighted below:

1. Mediation is an extension of the parties' own efforts to manage their conflict. Where they
fail, a third party (mediator) is called in.

2. Thus, mediation involves the intervention of an outsider; an individual, a group or an

organization into a conflict between two states or other actors.

3. This intervention is non-coercive, non-violent, and ultimately non-binding.

4. Mediators enter a conflict, whether internal or international, in order to affect it, change
it, resolve it, modify or influence it in some way. Their overriding interest is to reduce
violence and achieve a peaceful outcome.

5. Mediators bring with them, consciously or otherwise, ideas, knowledge, resources, and
prestige. These are used throughout the process to advance the cause of conflict
resolution.

6. Mediation is a voluntary form of conflict management. This means the adversaries in an

intractable conflict choose whether to begin or continue mediation or not, and they retain
their control over the outcome (if not always over the process) of their conflict, as well as
their freedom to accept or reject any aspects of the process or the ultimate agreement.

7. Mediation operates on an ad hoc basis only. Once completed, a mediator departs the
arena of the conflict.

All these features make mediation very attractive to parties in an intractable conflict. Mediation
is practiced widely in international relations. It has many advantages that may appeal to parties in
a bitter conflict. As described above, it is ad hoc in nature, non-coercive, and voluntary, which

6 http://kluwerarbitrationblog.com/2016/09/29/the-rising-interest-in-the-mediation-of-investment-treaty-disputes-
and-scope-for-increasing-interaction-between-mediation-and-arbitration/
makes it less threatening than other possible conflict management options. It is non-evaluative
and non-judgmental and it is particularly suited to the reality of international relations, where
states and other actors guard their autonomy and independence quite jealously. It offers both
parties the prospects of a better outcome without necessarily having any direct meetings with a
sworn enemy. It is also a process that leaves the ultimate decision on any outcome to the parties
themselves. These aspects of mediation make it a very attractive method for dealing with
intractable conflicts.7

Incentives of mediation over arbitration

One advantage of mediation in the international commercial context is that the parties have an
opportunity to develop a creative outcome. In addition, mediation is an informal proceeding,
and thus, may be quicker and less expensive if the parties settle. Furthermore, the parties may
schedule mediation on a regular basis. Moreover, the parties may discuss their positions, and
thus, generally feel that their concerns and positions are heard and dealt with fairly, regardless of
the outcome.8

Another advantage of mediation is that it may resolve virtually any type of conflict. Conflicts are
often based on individuals' perceptions that their counterparts are not upholding their duties
and responsibilities. By imposing a neutral third party, mediation may often dispel and change
these perceptions and lead to a quick resolution of the dispute. Once the parties believe that
their positions have been accurately heard and discussed, tensions often diminish and a new
receptivity develops, thus opening the parties' minds to a creative and consensual solution.9

Mediation is also a more cathartic process than adjudicative type processes. One of the greatest
advantages of mediation is that the parties discuss the issues confidentially. Furthermore, the
parties have complete control of the mediation. Moreover, mediation creates a "win-win"
atmosphere and allows for the use of creative solutions generated during the mediation. With all
these advantages, mediation often results in settlement, thereby reducing the large volume of
arbitration and litigation.10

Mediation may also change an adversarial relationship into a cooperative one, potentially
improving the relationship between the parties. Even if mediation does not lead to a resolution,
the parties are no worse off because they may still take advantage of arbitration or litigation.
Moreover, they have had the opportunity to narrow the disputed issues and structure the

7 http://www.beyondintractability.org/essay/med-intractable-conflict

8 http://digitalcommons.lmu.edu/cgi/viewcontent.cgi?article=1404&context=ilr
9 Ibid
10 Ibid
framework for future negotiations. Consequently, parties who wish to maintain a harmonious
business relationship and to preserve their contractual and commercial ties often prefer
mediation.11
Conciliation is being increasingly used in dispute settlement practice in various parts of the
world, including regions where until a decade or two ago it was not commonly used. In addition,
the use of conciliation is becoming a dispute resolution option preferred and promoted by courts
and government agencies, as well as in community and commercial spheres. This trend is
reflected, for example, in the establishment of a number of private and public bodies offering
services to interested parties designed to foster the amicable settlement of disputes. Alongside
this trend, various regions of the world have actively promoted conciliation as a method of
dispute settlement, and the development of national legislation on conciliation in various
countries has given rise to discussions calling for internationally harmonized legal solutions
designed to facilitate conciliation. The greater focus on these methods of dispute settlement is
justified particularly because the success rate of these methods has been high; in fact, in some
countries and industrial sectors, it has been surprisingly high.12

Preamble (6) of the European Directive provides a useful description as to what mediation is and
its advantages. It reads as follows:

(6) Mediation can provide a cost-effective and quick extrajudicial resolution of disputes in civil
and commercial matters through processes tailored to the needs of the parties. Agreements
resulting from mediation are more likely to be complied with voluntarily and are more likely to
preserve an amicable and sustainable relationship between the parties. These benefits become
even more pronounced in situations displaying cross-border elements.

Arbitration has long been the favorite of the ADR family. Mediation, however, has established an
increasingly relevant position for itself when it comes to resolving (international) commercial
disputes quickly, cost-efficiently, and successfully. Efforts to render mediated settlement
agreements enforceable persist and will likely further bolster mediation as an independent and,
possibly, even superior alternative to arbitration. Yet, as a closer analysis suggests, mediation,
just as arbitration, has its place and purpose. Commercial mediation offers many advantages,
such as, in particular, a broad scope of application, flexibility of procedure, compatibility with
other dispute resolution methods, time and cost-efficiency, and confidentiality. For all these
benefits, many commercial agreements even require efforts to mediate before arbitration may be
commenced. The statistics are also straightforward. According to the International Chamber of
Commerce (ICC), over three quarters of its mediation cases are settled successfully on
average in only 4 months and for about just 1 % of the amount in dispute. A simple analysis of

11 Ibid
12 http://whoswholegal.com/news/features/article/29214/growth-international-mediation-commercial-disputes
costs, risks, and benefits easily explains why mediation was chosen for amounts in dispute
ranging from below US$ 20,000 to well above US$ 500 million.13
Mediation is a cost-effective and fast ADR mechanism when compared to litigation or
arbitration. It is a consensual process whereby the parties are not forced to settle. The process is
flexible, confidential and the parties are in ultimate control of the decision to settle.14

Mediation is a time-and-money-saving alternative for commercial dispute resolution and

arbitration proceedings, which allows parties to mutually resolve their problems. Mediation can
give you the chance to continue conducting your business, as opposed to court trials where a
hostile approach is more usual. Solutions reached in mediation must be satisfying for both
parties: its a case of looking for the classic win-win situation.15

Arbitration is a consensual process only when the parties initiate it. After that, it is adjudicative.
Mediation, by contrast, is consensual both in the procedure and in the outcome.16

Mediation provides flexibility, since the role of the conciliator is only to facilitate a dialogue
between the parties and not to make a decision, there is no need for procedural guarantees of the
type that exist in arbitration, such as the prohibition of meetings by the conciliator with one party
only or an unconditional duty on the conciliator to disclose to a party all information received
from the other party. The flexibility of conciliation procedures and the ability to adapt the
process to the circumstances of each case and to the wishes of the parties are thus considered to
be of crucial importance.

Confidentiality is fundamental to mediation. Parties are less likely to have full and frank
discussions if the content might become public. Almost all mediators will insist on a
confidentiality agreement which will place the parties and the mediator under binding obligations
to keep all information exchanged during the process confidential. It is also usual that the process
is "without prejudice" so if the mediation does not result in a settlement, neither party will be
able to use the information in court proceedings.17

In a nutshell, mediation offers the following incentives:

13 http://kluwerarbitrationblog.com/2016/10/06/mediation-on-the-heels-of-arbitration-competition-or-peaceful-
coexistence/

14 http://www.lexology.com/library/detail.aspx?g=416b9435-39bb-4fa7-a3b0-1039f0007e7f
15 https://poland.taylorwessing.com/en/international-mediation

16 http://kluwermediationblog.com/2015/10/21/the-uncitral-convention-on-enforcement-of-conciliated-settlement-
agreements-an-idea-whose-time-has-come/
17
http://www.brownrudnick.com/uploads/117/doc/Brown_Rudnick_Litigation_European_Mediation_Directive_Friel_
Toms_1-20110.pdf
 1. Mediation is relatively inexpensive. Seeing a case through trial is an expensive
proposition.

2. Mediation is relatively swift. There is no dearth of mediators ready and willing to assist
parties whose goal is to try to settle a matter. A quick web search will result in hundreds
of mediators and mediation websites, some specializing in certain types of cases and
some more experienced and able than others. Mediation does not run by a clogged court
schedule and sessions can be easily scheduled any time at the mutual convenience of the
parties and the mediator, and can take place in a variety of locations.

3. Mediation is relatively simple. There are no complex procedural or evidentiary rules

which must be followed. While most would agree that a general rule of fairness applies,
the maximum penalty a party can impose for foul play is to walk away from the
mediation and take his chances in court.

4. Mediation allows the parties to revise and adjust the scope of their conflict. In a trial,
initial pleadings and rules of procedure limit the issues which a party can raise. In
mediation, as circumstances change so can the topics up for discussion. This increased
flexibility makes it easier for negotiators to act as problem-solvers instead of adversaries.

5. Mediation allows for flexible solutions and settlements. The relief available in court is
usually based on pecuniary damages, and equitable relief is hard to come by. In
mediation, however, the parties can agree to a settlement requiring, or restraining, action
by one party which was not originally envisioned as something beneficial to the other
party.

6. Settlements reached in mediation are more agreeable to both parties than court
judgments. Because any settlement arrived at through negotiation is necessarily agreed to
voluntarily by both parties, obligations under the agreement are more likely to be fulfilled
than obligations imposed by a court.18

Obstacles to International Commercial Arbitration

International commercial arbitration is a legalistic, adversarial process whose purpose is to

decide on the respective rights and obligations of the parties to the dispute, not to help them
change their attitudes and behavior to resolve their conflict. Essentially it is private litigation.
The failure of arbitrators to decide a dispute according to the applicable law is ground for
invalidating such award by the courts.

Arbitrating a dispute is not, however, a painless, inexpensive, quick solution. Like litigation in
the courts, it is costly, may take years to conclude, and invariably results in a final rupture of the
18 https://nationalparalegal.edu/public_documents/courseware_asp_files/ADR/MediateHow/AdvantageMediate.asp
parties' business relationship. Even when an arbitral tribunal makes an award in favor of one of
the parties, the losing side may then proceed to challenge it in the courts, thus delaying or even
preventing a final resolution of the dispute. For example, one arbitration between Egypt and
foreign investors took five years in its first phase and resulted in legal and administrative costs of
nearly $1.5 million dollars. (International Chamber of Commerce Court of Arbitration, 1983)
But thereafter, the arbitral award was appealed in the courts and the case was rearbitrated in
another forum. The parties finally settled the matter through negotiation fourteen years after the
dispute began.

The prospect of such a costly, lengthy and potentially destructive process does encourage the two
sides to negotiate a settlement of their dispute. For example, approximately two-third of all
arbitration cases filed with the International Chamber of Commerce Court of Arbitration are
settled by negotiation before an arbitral award is made. Third persons, whether called mediators
or otherwise, could in theory help parties embroiled an international business dispute settle their
conflicts without the intervention of an arbitrator's decision.

Generally speaking, an arbitrator's efforts, however minimal to facilitate settlement, tend to have
the effect of persuading the parties that if they allow the dispute to be arbitrated they will not
achieve all that they hope. Such efforts by arbitrators have a predictive effect. When arbitrators
strongly encourage settlement, they are actually saying to the claimant company that it probably
will not receive all that it claims, and they are also telling the respondent that if the case goes to
an award it will have to pay something. The strategy of arbitrators who seek to play a mediating
role is to give the parties a realistic evaluation of what they will receive or be required to pay in
any final arbitration award.

International commercial arbitration is an expensive process for the parties as they must pay the
fees and expenses of the arbitrators. Additionally, it may be necessary to pay the administrative
fees and expenses of an arbitral institution. These costs will be subject to an increase if there is
more than one member of the tribunal or if an arbitral institution is involved. In addition to
arbitration fees, there may be the expenses of hiring rooms for meetings and hearings instead of
using the public facilities of the courts of law. On the other hand, the awards of arbitration are
final decisions; it is unlikely to be followed by a series of costly appeals to superior courts. 19
Due to busy arbitrators, counsel and clients from different counties, it may be difficult to
schedule hearing dates and the need to agree on most procedural steps makes the pace of this
procedure slower. However, again, as there is a limited scope for recourse against the award, this
situation may save time in the end by avoiding the possibility of appeals.20

19 https://www.lawteacher.net/free-law-essays/commercial-law/advantages-and-disadvantages-of-international-
commercial-arbitration-commercial-law-essay.php

20 Ibid
With increasing recognition of the disadvantages of arbitration, some companies are beginning to
turn to more explicit forms of mediation to resolve business disputes. Increasingly, when a
dispute can be quantified, for example the extent of damage to an asset by a partner's action or
the amount of a royalty fee owed to a licensor, the parties will engage an independent third party
such an international accounting or consulting firm to examine the matter and give an opinion.
The opinion is not binding on the parties but it has the effect of allowing them to make a more
realistic prediction of what may happen in an arbitration proceeding.

Generally, in institutional conciliation, a party to a dispute may address a request for conciliation
to the institution. If the institution concerned secures the agreement of the other disputant, it will
appoint a conciliator. While the conciliator has broad discretion to conduct the process, in
practice he or she will invite both sides to state their views of the dispute and will then make a
report proposing an appropriate settlement. The parties may reject the report and proceed to
arbitration, or they may accept it. In many cases, they will use it as a basis for a negotiated
settlement. Conciliation is thus a kind of non-binding arbitration. Its function is predictive. It
tends to be rights-based in its approach, affording the parties a third person's evaluation of their
respective rights and obligations. Conciliators do not usually adopt a problem-solving or
relationship building approach to resolving the dispute between the parties. The process is
confidential and completely voluntary. Either party may withdraw from conciliation at any time.

Despite the predictability of enforcing international arbitral awards, some aspects of arbitration
continue to cause difficulty. Arbitration is a quasi-adjudicative procedure, whereby the disputing
parties present both law and facts to a third-party decisionmaker, or arbitrator, who makes an
award based on those presentations. International disputes present special problems for
adjudicative-type processes because the disputes often involve more than one national legal
system. Accordingly, without cooperation between the parties concerning a mutually acceptable
forum and choice of law, there is often no predictable place where parties may obtain
compulsory jurisdiction, and there is no certainty about the law applicable to the dispute. In
addition to the problems regarding choice of forum and law, many international businesses often
perceive adjudicative type processes as too lengthy, costly, and combative. Furthermore,
adjudicative-type processes present practical problems involving the voluntary settlement
authority of the parties, as well as the preservation of other rights and remedies.21

Other potential disadvantages of adjudicative-type processes include: lack of control over the
outcome, the general adversarial nature of the process, and'the inflexible and judgmental
character of the result. These processes lay blame upon one of the parties instead of creating a
face-saving way out of the dispute. These problems are particularly prevalent when attempting to
preserve amicable, long-term relationships.22

21 http://digitalcommons.lmu.edu/cgi/viewcontent.cgi?article=1404&context=ilr
22 Ibid
People are simultaneously frustrated and disenchanted with adjudicative-type processes such as
litigation and arbitration. The international community, and specifically international commercial
entities, are seeking dispute resolution mechanisms that minimize procedural and ancillary
issues, open dialogue between disputing parties, facilitate the development of mutually
acceptable resolutions, and maintain cordial business relations.23

International Commercial Mediation - A Better Alternative Method Of International Commercial

Dispute Resolution

One dispute resolution method that achieves many of the goals stated above is mediation, or
third-party intervention. Linda C. Reif, Assistant Professor at the University of Alberta in
Edmonton, Canada, believes that "the international community should make greater use of
conciliation [mediation] as a pathway to the settlement of economic and business disputes, rather
than automatically taking the more complex arbitration route to dispute settlement.24

Mediation is perhaps the dispute resolution method most readily transferable to the international
setting because parties may use it to resolve disputes that involve not only questions of
law and fact, but also "non-arbitrable" or "non-justiciable" issues that an adjudicative-type
process cannot settle. Such issues include intangible feelings, personal interests, and emotional
concerns. Whereas a court or arbitral panel is neither equipped to handle nor interested in these
issues, a mediator may explore these issues to perhaps bring about a quicker and more creative
resolution. Sometimes the difference between disputes and settlements may be attributed to the
parties' principles and interests, rather than their bargaining positions. An apology, a recognition
of hurt feelings, or a promise to avoid certain problems in the future may often lead to a
resolution. Adjudicative-type processes do not explore parties' principles and interests because
the processes are based strictly on presentations of law and fact. Mediation, however, explores a
wider and more practical range of issues, and thus is a better alternative method of dispute
resolution.25

UNCITRAL Model Law on International Commercial Conciliation (2002)

Article 1(4) provides that a conciliation is international if:
(a) The parties to an agreement to conciliate have, at the time of the conclusion of that
agreement, their places of business in different States; or
(b) The State in which the parties have their places of business is different from either:
i. The State in which a substantial part of the obligations of the commercial
relationship is to be performed; or

23 Ibid
24 http://digitalcommons.lmu.edu/cgi/viewcontent.cgi?article=1404&context=ilr
25 Ibid
 ii. The State with which the subject matter of the dispute is most closely connected.
Article 1(5) lays down that if a party has more than one place of business, the place of business is
that which has the closest relationship to the agreement to conciliate. However, if a party does
not have a place of business, reference is to be made to the partys habitual residence.
clause 8 and 9 deal with applicability and non-applicability respectively. Clause 8 provides that
subject to the provisions of clause 9 of this article, this Law applies irrespective of the basis upon
which the conciliation is carried out, including agreement between the parties whether reached
before or after a dispute has arisen, an obligation established by law, or a direction or suggestion
of a court, arbitral tribunal or competent governmental entity. On the other hand clause 9 lays
down that this Law does not apply to cases where a judge or an arbitrator, in the course of
judicial or arbitral proceedings, attempts to facilitate a settlement.
Article 2 lays down that regard is to be had to the international origin and to the need to promote
uniformity in the application and the observance of good faith of the Law. In addition, it also
mentions that questions concerning matters governed by this Law which are not expressly settled
in it are to be settled in conformity with the general principles on which this Law is based.

Article 4 provides that conciliation proceedings in respect of a dispute that has arisen commence
on the day on which the parties to that dispute agree to engage in conciliation proceedings. If a
party that invited another party to conciliate does not receive an acceptance of the invitation
within thirty days from the day on which the invitation was sent, or within such other period of
time as specified in the invitation, the party may elect to treat this as a rejection of the invitation
to conciliate.

Article 5 lays down that there shall be one conciliator, unless the parties agree that there shall be
two or more conciliators. Clause 2 points out that the parties shall endeavour to reach agreement
on a conciliator or conciliators, unless a different procedure for their appointment has been
agreed upon. Further, clause 3 provides that the parties may seek the assistance of an institution
or person in connection with the appointment of conciliators.

Article 6 lays down provisions regarding conduct of conciliation wherein clause 1 provides that
The parties are free to agree, by reference to a set of rules or otherwise, on the manner in which
the conciliation is to be conducted. Clause 2 held that failing agreement on the manner in which
the conciliation is to be conducted, the conciliator may conduct the conciliation proceedings in
such a manner as the conciliator considers appropriate, taking into account the circumstances of
the case, any wishes that the parties may express and the need for a speedy settlement of the
dispute.

Article 7 provides that the conciliator may meet or communicate with the parties together or with
each of them separately.
Article 8 mentions that when the conciliator receives information concerning the dispute from a
party, the conciliator may disclose the substance of that information to any other party to the
conciliation. However, when a party gives any information to the conciliator, subject to a specific
condition that it be kept confidential, that information shall not be disclosed to any other party to
the conciliation.

Article 9 provides that unless otherwise agreed by the parties, all information relating to the
conciliation proceedings shall be kept confidential, except where disclosure is required under the
law or for the purposes of implementation or enforcement of a settlement agreement.

Article 10 lays down provisions regarding admissibility of evidence in other proceedings. It

provides that

1. A party to the conciliation proceedings, the conciliator and any third person, including those
involved in the administration of the conciliation proceedings, shall not in arbitral, judicial or
similar proceedings rely on, introduce as evidence or give testimony or evidence regarding any
of the following:

(a) An invitation by a party to engage in conciliation proceedings or the fact that a party was
willing to participate in conciliation proceedings;

(b) Views expressed or suggestions made by a party in the conciliation in respect of a possible
settlement of the dispute;

(c) Statements or admissions made by a party in the course of the conciliation proceedings; (d)
Proposals made by the conciliator;

(e) The fact that a party had indicated its willingness to accept a proposal for settlement made
by the conciliator;

(f) A document prepared solely for purposes of the conciliation proceedings.

Article 11 lays down that he conciliation proceedings are terminated:

(a) By the conclusion of a settlement agreement by the parties, on the date of the agreement;

(b) By a declaration of the conciliator, after consultation with the parties, to the effect that further
efforts at conciliation are no longer justified, on the date of the declaration;

(c) By a declaration of the parties addressed to the conciliator to the effect that the conciliation
proceedings are terminated, on the date of the declaration; or

(d) By a declaration of a party to the other party or parties and the conciliator, if appointed, to the
effect that the conciliation proceedings are terminated, on the date of the declaration.
Lastly, Article 14 contains that if the parties conclude an agreement settling a dispute, that
settlement agreement is binding and enforceable . . . [the enacting State may insert a description
of the method of enforcing settlement agreements or refer to provisions governing such
enforcement].

Issues in mediation
The mounting global preoccupation with mediation, reflected in a growing array of institutions,
programs, laws and regulations; an international evangelical movement; and mounting impetus
for an international convention promoting the recognition and enforcement of mediated
settlement agreements; should be accompanied by collective reflection, dialogue and
discernment regarding present trends.
(1) Divergent perceptions and practice: Throughout the modern mediation era there has been
debate over the roles and practices of mediators. Mediations global growth has heightened the
debate, and data from studies like the Straus Institutes recent survey of members of the
International Academy of Mediators indicate considerable variation in mediators default
practices. Some practices vary from region to region. California mediators are more likely to
begin mediation in caucus, meeting privately with the parties in separate rooms, and also to
caucus throughout mediation. Mediators practicing outside the U.S. are much less likely to do so,
and U.S. mediators practicing outside California tend to fall somewhere in between the other
groups. Furthermore, mediators practicing outside the U.S. are more likely to tell parties that all
information shared during caucus will be confidential unless they instruct the mediator to share
it; California-based mediators are more likely to tell parties that they will share any information
learned during caucus with the other party as they see appropriate, unless instructed not to share
it.26
Divergence is also evident in the realm of mediator evaluation and opinion-giving. Mediators
practicing in California are especially likely to develop and propose potential agreements the
parties might all accept as part of a potential settlement, to tell parties [their] predictions of
how not settling might affect them, including what [they] think may result if the case proceeds to
court or arbitration, or assess, and share [their] opinion regarding, the legal strength of
arguments made by parties and/or counsel. As a group, non-U.S. mediators are much less likely
to offer evaluations. Even within regions, of course, the preferred practices of mediators vary
greatly. Moreover, many mediators stress the importance of tailoring their approaches to specific
circumstances, to remain flexible in their approach. Experience also indicates that mediators
practices often change over time.27

26 http://kluwerarbitrationblog.com/2016/06/02/the-international-evolution-of-mediation-a-call-for-dialogue-and-
deliberation/

27 Ibid
A failure to appreciate the diverse spectrum of approaches that prove beneficial in mediation may
cause law- or policy-makers to regulate mediation in a way that unduly restricts flexibility and
predictability. Although mediation is just emerging in Brazil, the Brazilian Congress recently
passed legislation that sets rigid limits on mediation practice. The law establishes detailed
requirements for contractual mediation provisions, including minimum and maximum period
for the completion of the first mediation meeting, the site of mediation, and criteria for choice
of mediator. It formally distinguishes mediation from conciliation, thereby raising questions
regarding the ability of mediators to engage in evaluation. Furthermore, it requires that
information provided by a party in a private session [caucus] will be confidential, and the
mediator cannot reveal it to others, except as expressly authorized.
(2) Lawyers and mediation: The U.S. experience suggests that as attorneys garner experience
with mediation, they play more assertive roles in shaping the process for good or ill. They may
work strategically with the mediator to ensure that the negotiation dance proceeds in a way
that best protects their clients interests while exploring trade-offs and, occasionally, options for
value creation. But attorneys may also contribute to mediation dysfunction by actively
misleading the mediator regarding the prospects for settlement and ensuring that the day of
resolution is postponed. The vast majority of respondents to the IAM/Straus Survey indicated
that attorneys at least sometimes use mediation as a means of dragging out litigation. Moreover,
some mediators are expressing growing concern about lawyers taking control of the mediation
process, limiting joint sessions and insisting that all communications go directly through them.
As one California respondent to the Survey put it:
Other sources suggest a disconnect between business users and counsel when it comes to
commercial mediation. Perspectives obtained at a 2014 London convention on mediation
indicated that while many users favor the use of mediation early in the life of disputes, their
external counsel are less enthusiastic. Over three-quarters of business users registered support
for early resort to mediation, while less than half of legal advisors agreed. Two-thirds of users
supported using dispute resolution provisions that required mediation prior to arbitration or
litigation, but few advisors embraced that view. There were also significant disparities in
perceptions regarding the need to reduce costs and risks in international dispute resolution
goals often tied to mediation. Many business users conceded that the ineffective use of ADR was
attributable to the failure of in-house counsel and senior management to effectively express their
needs to outside counsel.
Mediation experience also entails consequences for law practice. While one might expect
mediation experience would give attorneys more confidence in their negotiation skills and
thereby lessen the need for mediation, it appears instead that over-reliance on mediators has
made some U.S. litigators more reluctant to negotiate outside mediation! There are also concerns
regarding the impact of diminished trial rates (attributable, it is said, to mediated settlement) on
the ability of young lawyers to assess their own chances in court.28

28 Ibid
As mediation becomes an important element of a justice system and related law practice, lawyers
exert their own kind of gravitational pull on mediation; conversely, mediation changes the
practice of law. More reflective, deliberate practice should include meaningful discussions
between client and counsel regarding the use of mediation and their respective roles in that
process.

(3) The influence of culture and legal traditions: Culture is particularly relevant to mediation
practice because it shapes the way people view conict and how they deal with disputes within
the justice system. Culture shapes the way one perceives the world. Culture in conict resolution
forms ones knowledge (what is a dispute and what is not), values
(what is worthy and meaningful), norms (what are the acceptable behaviours) and styles inman
aging disputes or conict. Conict often involves the perceived or actual incompatibility of
norms and values, or processes in regards to the following goal issues: content, identity,
relationships, and conict process or procedure. Culture can affect parties preferences and
agendas. Culture is a complex yet powerful construct in our society. It consists of unwritten rules
and patterned ways of thinking, feeling and reacting, acquired and transmitted mainly by
languages or symbols. Every social unit consists of multiple cultures; these cultural groups are
dened by a range of factors: different age groups, gender, language spoken, ethnicity, spiritual
beliefs, values and educational upbringing.29
The Western modern mediation model, founded on the primacy and autonomy of individuals,
differs markedly from older traditions where mediation is oriented toward social hierarchy,
societal harmony and obedience to authority. In China, mediation has a rich history dating back
more than two millennia. Submitting disputes to a village elder or authority figure for the
purpose of promoting or restoring harmony was consistent with Confucian precepts, and the
practice remains an important mechanism for maintaining the social order in China today. These
stark differences present challenges for those who promote structures for international mediation.
Community mediators in the Peoples Republic of China (PRC) as a part of local government,
may resolve neighborhood disputes by investigating, conversing separately with those involved,
and proposing a solutiona highly directive but effective approach to keeping the peace in a
high-context and hierarchical society. Mediation is also housed within institutions of public or
private justice, where judges and arbitrators mediate if the parties so agree. These approaches
tend to be far different from the U.S. and other countries where mediators are insulated from the
judicial process due to concerns about preserving party autonomy and the integrity of judicial
decision making.30
Recognition and enforcement of mediation

29http://www.academia.edu/243509/Culturally_sensitive_mediation_The_importance_of_Culture_in_mediation_ac
creditation
30 Ibid
At this point in time, the international framework for conciliation includes two UNCITRAL
instruments: the Conciliation Rules (1980), and the Model Law on International Commercial
Conciliation (2002). It does not include a convention that would assure a uniform approach to
enforcement of the settlement agreements. In order to promote mediation and solidify the
enforceability of settlement agreements, efforts by the United Nations Commission on
International Trade Law (UNCITRAL) are currently taking place to find a solution.

In 2002 the UNCITRAL Model Law on International Commercial Conciliation (the

Conciliation Model Law) was adopted by resolution of the UN General Assembly with a
recommendation that:

all States give due consideration to the enactment of the Model Law, in view of the
desirability of uniformity of the law of dispute settlement procedures and the specific needs of
international commercial conciliation practice.

By way of support to this non-adjudicative dispute settlement method the necessity to provide
for an enforceable settlement agreement is set out at Article 14 of the Conciliation Model Law
(Enforceability of settlement agreement) which reads:

If the parties conclude an agreement settling a dispute, that settlement agreement is binding
and enforceable [the enacting State may insert a description of the method of enforcing
settlement agreements or refer to provisions governing such enforcement].

In the Guide to Enactment of the Conciliation Model Law, the drafters recognised the wide
variation within different legal systems for possible enforcement mechanisms, stating:

In the preparation of the Model Law, the Commission was generally in agreement with the
general policy that easy and fast enforcement of settlement agreements should be promoted

The ICSID Convention, Regulation and Rules include a conciliation procedure. The procedure
provides for the appointment of a Conciliation Commission of one, three or more conciliators.
The Commission may make oral or written recommendations to the parties at any stage of the
proceedings, in order to bring about agreement. Amongst other matters it may recommend that
the parties accept specific terms of settlement or that they refrain from specific acts that might
aggravate the dispute.31

The World Intellectual Property Organisation (WIPO) includes an Arbitration and Mediation
Center which promotes the resolution of international commercial disputes between private
parties through ADR mechanisms. Just over half of the cases administered by the Center are

31 http://www.probyn-miers.com/perspective/2016/06/enforcement-of-international-commercial-mediation-
settlement-agreements/
mediations; and 68% of their cases involve parties based in different jurisdictions. Cross-border
enforcement of mediated settlement agreements is therefore a critical issue. WIPO provides its
own WIPO mediation rules, and offers an escalation clause providing for WIPO mediation
followed by WIPO expedited arbitration if required.32

Also of note is the Hague Conference on Private International Law (the Convention on the
Choice of Court Agreements (2005) and the Judgements Project, where a Working Group is
addressing the recognition and enforcement of judgments to facilitate cross-border trade. It is
expecting to be able to submit a finalised text during 2016 for a convention to apply to the
recognition and enforcement in one contracting state of a judgement given in another contracting
state, relating to civil or commercial matters.33

In the European Community, cross border enforcement is supported by EC Directive

2008/52/EC. In particular, the European Directive advises in its introductory guidance that:

Mediation should not be regarded as a poorer alternative to judicial proceedings in the sense
that compliance with agreements resulting from mediation would depend on the goodwill of the
parties. Member States should therefore ensure that the parties to a written agreement resulting
from mediation can have the content of their agreement made enforceable. It should only be
possible for a Member State to refuse to make an agreement enforceable if the content is
contrary to its law, including its private international law, or its law does not provide for the
enforceability of the content of the specific agreement And

The content of an agreement resulting from mediation which has been made enforceable in a
Member State should be recognised and declared enforceable in the other Member States in
accordance with applicable community or national law.

Within the five broad areas covered by the EU Directive, member states were obliged to ensure
mediation settlement agreements were enforceable as if they were Court judgments. EU Member
States were required to bring into force the laws, regulations and administrative provisions
necessary to comply with the Directive before 21 May 2011.34

By way of general overview, the options for enforcement of a settlement agreement typically will
be:

Enforcement as a contract, via a further court procedure.

enforcement via specific statutory provisions recognising the settlement agreement as

equivalent to an arbitration award, where such legislation exists; or
32 Ibid
33 Ibid
34 Ibid
 Enforcement via an arbitration award.

UNCITRAL Developments

UNCITRAL is probably best known in dispute resolution circles for its Model Law on
International Commercial Arbitration and its Arbitration Rules. However it also has a
significant role in conciliation, since its publication in 1980 of its Conciliation Rules and
in 2002 of its UNCITRAL Model Law on International Commercial Conciliation with
Guide to Enactment and Use.

UNCITRAL document Modern Law for Global Commerce 2007 addressed, inter alia,
the issues of enforcement as a contract or as an arbitral award. It was in this context that
in 2014 the US Government proposed that the UNCITRAL Working Group II should
consider the issue of enforcement of international settlement agreements resulting from
conciliation proceedings. It was recognised that the lack of a harmonised enforcement
mechanism was a disincentive for businesses to proceed with conciliation.

In July 2015, during a session of UNCITRAL that took place in Vienna, WGII reported to
UNCITRAL a summary of its findings, its concerns and recommendations. UNCITRAL
approved giving WGII a mandate to work on the topic of enforcement of settlement
agreements resulting from international commercial conciliation. The mandate given by
UNCITRAL to the WGII was broad enough to include different possible forms of work,
namely, (i) a guidance text, (ii) a model legislative provisions, and most importantly (iii)
a convention. However most importantly, WGII has a mandate to prepare a convention on
the enforceability of international commercial settlement agreements resulting from
mediation/conciliation (Convention). This is the core of the aforementioned Proposal
and is supported by the international community including the International Mediation
Institute (IMI). The idea of the Proposal is based on the successful role played by the
1958 United Nations Convention on the Recognition and Enforcement of Foreign
Arbitral Awards (NY Convention) in the development, promotion and use of
international arbitration worldwide. A total of 156 countries are signatories to the NY
Convention of which 14 are countries in the Middle East, including Bahrain, Egypt,
Jordan, Oman and the United Arab Emirates.35

The UNCITRAL Working Group II has met since at the 64 th session on arbitration and
conciliation 1-5 February 2016 in New York City. Pertinent points arising from the
meeting, inter alia are:

Providing guidance to create a legal instrument for direct enforcement of an

international commercial settlement agreement resulting from conciliation.
35 http://www.lexology.com/library/detail.aspx?g=416b9435-39bb-4fa7-a3b0-1039f0007e7f
 Considering the notions of international and of commercial.

Consumer, family and employment law matters will be explicitly excluded.

Settlement agreements reached during judicial or arbitral proceedings but not recorded in
a judicial decision or an arbitral award will fall within the scope of the instrument.

Regarding defenses to enforcement and applicable law, the Working Group has
considered: incapacity, coercion and fraud; subject matter of the settlement agreement not
capable of settlement; subject matter of the settlement agreement contrary to public
policy; contrary to the terms and conditions of the settlement agreement; validity of the
settlement agreement; the settlement agreement is not binding, is not final, has been
subsequently modified or the obligations therein have been performed; enforcement of
the settlement agreement would be contrary to a decision of another court or competent
authority.

The Working Group also considered whether the conduct of a conciliator could have an
impact on the validity of the settlement agreement and its enforceability.36

There is no doubt that the WGII will have many challenges to cover when preparing the
Convention and the other aspects of its work. These include, amongst others:

What a settlement agreement will need to contain to be recognized under the

Convention.

Whether the Convention will apply to settlement agreements reached through direct
negotiations between the parties.

Whether the Convention will apply to any settlement agreement reached through a
process that includes a neutral third-party, regardless of being mediation, conciliation,
neutral-evaluation or another form of ADR.

Whether the Convention will apply to all settlement agreements or only those that
involve international parties (i.e. parties from two different states).

Whether it should cover disputes involving a governmental body or administrative

authority.

The grounds for refusing enforcement of a settlement agreement.37

36 Ibid
It is too early to predict what the WGII efforts will lead to given the complex set of concerns that
need to be addressed by the group. There should however be confidence that these concerns will
be resolved and that a solution will be produced in the near future. The creation of the NY
Convention faced similar challenges, including initial opposition from the delegation of the
United States of America, but these challenges were overcome and the NY Convention has
become possibly one of the most successful instruments created by the United Nations.38
If the Convention is created and taken up with the same enthusiasm as the NY Convention, it
will (i) create a strong international legal framework for mediation, that will (ii) encourage more
parties to use this mechanism and (iii) result in many more disputes being settled without the
time and expenses of litigation and arbitration, leading to (iv) greater and more effective access
to justice.39
Despite all the benefits mediation has to offer, parties may be reluctant to commit to it because
the status of agreements reached in mediation (that is, mediated settlement agreements or
MSAs) is uncertain. Mediation is not supported by a framework of multilateral conventions
and treaties, model laws, and domestic rules akin to that which exists for international
commercial arbitration, and by virtue of which arbitral awards are recognised and enforceable in
most of the major trading nations in the world. In the absence of such a system, it is difficult to
enforce MSAs across national borders. National legislatures and courts generally determine the
status of MSAs, and there is considerable diversity in the approach adopted. While high
compliance rates are claimed for MSAs, and in fact, most settlements are self-executory, there is
a small but significant number of cases9 where a party breaches the terms of an MSA (leaving
the other side to consider enforcement options) or alternatively seeks to have the MSA set aside.
For the parties involved in this small number of cases, the question of MSA enforceability is
vitally important. It is also important to anyone considering the use of mediation. 40
Several international institutions have taken baby steps towards the establishment of a system
which provides certainty and a unified solution as to how [MSAs] might become
enforceable. The United Nations Commission on International Trade Law (hereinafter
UNCITRAL) and the European Union (hereinafter EU) have been at the forefront of these
initiatives. In 2002 UNCITRAL promulgated its Model Law on International Commercial
Conciliation (hereinafter MLC). In the lead up to its release, UNCITRAL suggested as one
possibility, the creation of a system where settlement agreements signed by the parties would be
binding and enforceable as an arbitral award. This option was eventually rejected, in part
because of lack of consensus by its constituents, and UNCITRAL adopted instead what it called

37 http://www.lexology.com/library/detail.aspx?g=416b9435-39bb-4fa7-a3b0-1039f0007e7f

38 http://www.lexology.com/library/detail.aspx?g=416b9435-39bb-4fa7-a3b0-1039f0007e7f

39 http://www.lexology.com/library/detail.aspx?g=416b9435-39bb-4fa7-a3b0-1039f0007e7f

40
the smallest common denominator approach, leaving the matter of enforcement to the law of
each enacting state. Some years later the EU released a Directive on Mediation (Directive
2008/52/EC), which arguably has been more successful than the MLC in establishing uniformity
of treatment of MSAs by member states. The Directive envisages enforceability of MSAs
through a number of avenues, such as courts and other competent authorities, using a number of
forms of settlement including contracts and special deeds. However, like the MLC, the EU
Directive ultimately leaves the exact mode of enforcement to member states. The Directive also
creates wide exceptions. The enforcement provision does not apply where the content of the
mediated agreement is either contrary to law of the member state in which the agreement is
sought to be enforced or where that law does not provide for its enforceability. 41
While UNCITRAL and the EU have been supportive regarding the idea of a system which
affords special protection and recognition to MSAs, the MLC and EU Directive, described by
one author as the primary international legal instruments on mediation, both fall short of
establishing uniform standards in relation to the enforceability of mediated agreements.
Alexander suggests that the diversity in regulation of the enforceability of mediated agreements
is likely to continue within the frameworks of both the EU and UNCITRAL legal instruments on
the topic. Currently there are no comprehensive systems providing for crossborder enforcement
of MSAs. The various methods by which MSAs might be enforced are discussed next.42

Current Methods of Enforcing MSAS

a. Enforcement as A Contract
b. Enforcement as A Court Consent Order
c. Enforcement as A Consent Arbitral Award

Why Mediation and MSAS Warrant Special Treatment

a. Promoting Uniformity, Predictability & Certainty in Dispute Resolution

b. Encouraging Settlement
c. Improving the Quality of the Dispute Resolution Process and Outcome
d. Providing Incentives for Compliance
e. Regulating and Reviewing Mediation

Suggestions

Integrating Mediation with Arbitration: Med-Arb

41 https://poseidon01.ssrn.com/delivery.php?
ID=73300411011608612510906607001410909005206401803108602003109606808808500809211709609612402
10200120980020610670270251230681261210510660010810680851060641160900790960070790450060120031
22093102127101066120095073092088003065099083026103113003116003096109&EXT=pdf
42 Ibid
The practice of combining the mediation and arbitration processes is known as both med-arb
and arb-med, depending on which process was initiated first. This process involves the same
person acting both (i) as a mediator in seeking to facilitate a settlement between the parties, and
(ii) as an arbitrator to determine the issues in dispute and issue a final and binding award. Med-
arb is the melding of two well-established processes for conflict resolution into one hybrid
process. Mediation and Arbitration are used in conjunction with one another and, in the truest
form of med-arb, the same third-party neutral plays the role of both mediator and arbitrator.43

Should arbitrators be permitted to serve as mediators of the disputes they might ultimately
determine? Instinctive reactions to this question are likely to be coloured by a partys legal
background and cultural expectations. To those from common law traditions, the idea of
combining the roles of mediator and arbitrator is rather alien, whereas in civil law jurisdictions,
this is a relatively well-accepted practice.44
The key advantages of combining mediation and arbitration are usually said to be the following:

An arbitrator or judge will already be familiar with the case, the parties and their counsel,
and so should be well-placed to help settle the matters in dispute. An arbitrator or judge is
also often best-placed to identify the most appropriate time in the proceedings to hold a
mediation.

It can be an efficient way of reaching an early settlement, avoiding substantive hearings

and the significant legal fees these incur either by bringing the parties closer together
(under the facilitative approach) or by giving an early indication of the likely outcome of
the formal proceedings, and thereby encouraging the parties to settle.

Any settlement reached during med-arb can subsequently be recorded in the form of a
final award by the tribunal, which would then benefit from the enforcement regime under
the New York Convention.

A mediation under the facilitative approach can be particularly beneficial where there is
an on-going business relationship which the parties would like to preserve. Indeed, a
mediated settlement can cover issues outside the scope of the immediate dispute, and can
therefore have a positive outcome on the relationship between the parties going forward.

43http://www.mediate.com/pdf/V2%20MED ARB%20The%20Best%20of%20Both%20Worlds%20or%20Just%20a
%20Limited%20ADR%20Option.pdf
44 http://kluwerarbitrationblog.com/2011/02/15/mediator-arbitrators-the-perfect-match-or-no-love-lost-a-valentines-
day-blog/
 There is evidence that med-arb is being used successfully in Asia. For example, in a
recent interview with the Global Arbitration Review, the secretary general of the China
International Economic and Trade Arbitration Commission, Yu Jianlong, said that 20 to 30
per cent of CIETACs caseload is resolved by this method each year. Similarly, a study of
JCAA arbitrations from 1999 to 2008 showed a successful outcome in 25 cases out of 48
in which arbitrators assisted the parties in reaching a settlement (See JCAA newsletter
No.22).45

Balanced against these are a number of potential drawbacks to med-arb / arb-med. There is a
(certainly perceived) risk that overseeing a mediation may threaten an arbitrators impartiality.
For example, it may be difficult for a mediator-arbitrator not to be influenced by the private
communications he hears where a caucusing technique is adopted. Alternatively, if legislation
dictates that a mediator-arbitrator must disclose all confidential information gathered during the
mediation to the other parties, one of the key advantages of this form of ADR (i.e. that parties are
free to discuss issues openly with the mediator) may be lost. On the other side of the enforcement
coin, arbitral awards that are rendered following failed settlement efforts may be challenged on
public policy grounds if the losing party contends that there was a lack of due process during the
mediation. A recent preliminary decision of the Hong Kong courts illustrates this exact danger.
In Gao Hai Yan and another v Keeneye Holdings Ltd and others HCCT 41/2010, enforcement of
an arbitral award rendered in the PRC was challenged on the basis that a member of the tribunal
and the General Secretary of the Xian Arbitration Commission had held an ex parte meeting with
one of the parties to the arbitration.46
It is clear that there is room in international arbitration for arbitrators to serve as effective
mediators of their disputes and vice-versa. However, guidelines addressing matters such as
acceptable procedures (e.g. to ensure that due process is delivered), and the extent of disclosure
following failed settlement proceedings, would be of assistance particularly where this practice
is less widely accepted at present.

45 http://hsfnotes.com/arbitration/2012/02/28/med-arb-an-alternative-dispute-resolution-practice/
46 Supra 22