On 4 July 2017 the CIArb London Branch was delighted to present its 14th Annual Mediation Seminar, once again hosted by Clyde & Co LLP, entitled 'Med-Arb/Arb-Med: A sweet mix or toxic fusion?'
The seminar was chaired by Jon Turnbull (Clyde & Co LLP), who introduced the impressive panel of speakers comprising Irvinder Bakshi (KSB, London Branch Chairman), Simon Nesbitt QC (Maitland Chambers) and Jasbir Dhillon QC (Brick Court Chambers).
The speakers focused on med-arb, where the same individual is appointed as both mediator and arbitrator in respect of a dispute.
Irvinder Bakshi began by highlighting the similarities between mediation and arbitration before considering some of the differences between the processes and potential difficulties that may arise at difference stages of the process.
Posing a number of questions, she raised a number of concerns in respect of med-arb:
- How can parties be sure that the neutral’s approach in the arbitration is not influenced by confidential information arising in the mediation?
- What if one party is not seriously interested in settling the dispute and is using the mediation as a fishing expedition?
- What if the neutral hears concessions during the mediation that were reasonable and should arguably have been accepted?
- What if it becomes apparent that the neutral cannot act impartially as arbitrator?
In concluding, Irvinder Bakshi noted that although for 30 years it was incumbent on a potential med-arb neutral to point out that it was undesirable for them to fulfil both roles, a neutral can now act as mediator and arbitrator if a waiver is given.
The neutral should still resign as arbitrator if they doubt that they involvement in the mediation allows them to so act. The test to be applied, she suggested, should be objective – the danger is that an aware arbitrator may resign, while an unaware arbitrator fails to do so. The realisation of either risk poses potential for delay and increased costs.
Seeking to persuade attendees of the benefits of med-arb, Simon Nesbitt QC highlighted the relative popularity of med-arb in some parts of the world, in particular mainland China and Japan.
He addressed the potential advantages to be gained in terms of speed of resolution – there is no need to commence the arbitrator appointment if the process of mediation fails so time is saved; the benefits of the same neutral being involved at both stages, having obtained an understanding of the dispute; flexibility, in circumstances where both mediation and arbitration offer benefits; and finality, because if a mediated settlement cannot be reached then the parties know that arbitration will follow.
Providing practical advice to parties considering med-arb, Simon Nesbitt QC recommended that parties set out the ‘ground rules’, documenting their clear agreement that they understand that they are embarking on a med-arb process and that the same person will act as mediator and arbitrator, accepting that they will do so impartially.
Parties should also expressly confirm that if the arbitration proceeds they have agreed in advance that the identified mediator will also act as arbitrator and that the mediator will act in a purely facilitative role to avoid any concerns arising in respect of pre-judging or coercing the parties while acting as mediator.
Agreement should also be reached on the treatment of confidential and without prejudice information received by the mediator and in the event that either party becomes uncomfortable with the appointed neutral, a build in opt-out should be included in the agreement to allow a new neutral to be appointed.
Simon Nesbitt QC concluded that although there were challenges to the use of med-arb it should not be dismissed out of hand.
Jasbir Dhillon QC concluded by addressing challenges to an arbitral award, or its enforcement, that may arise when such award was made by a med-arbitrator.
Before embarking on med-arb parties must be satisfied that an arbitral award resulting from the process will be enforceable notwithstanding any challenge that may be made as a result of the involvement of the same neutral in two capacities – the activities of the arbitrator as mediator may, in some jurisdictions, prevent enforcement of an award on public policy grounds.
Providing an overview of the position in different jurisdictions, Jasbir Dhillon QC noted that common law jurisdictions often consider arbitration and mediation to be incompatible or approach the arb-med process with scepticism as to whether the result award complies with standards of procedural fairness.
In contrast, Germany, Japan and mainland China regard med-arb as consistent with the requirements of procedural fairness. The question of enforceability will depend on the particular facts and the court in which enforcement is sought.
The session concluded with a lively question and answer session, following which Paul Rose (London Branch Vice Chairman) extended the thanks of the London Branch to the speakers and Clyde & Co LLP. A reception for the speakers and attendees was generously provided by Clyde & Co LLP.