The Viewpoint: MED-ARB & ARB-MED – The Way Ahead

Nandini Gore

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 as a mediator in seeking to facilitate a settlement between the parties, and as an arbitrator to determine the issues in dispute and issue a final and binding award.

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.

Our judicial system is burdened with a large number of cases pending before the lower courts, high courts and the Supreme Court. Many of the cases in the lower court are at the initial stages, and in many cases, the trial takes goes on for a long time.

In this scenario, our lawmakers should seriously think about evolving different ways/methods to see that the burden on the judicial system is lessened. There are many ADR options already in process, but it is always a welcome step to look at different variations of the mediation process that have emerged during the last ten years.

The development of Med-Arb reflects the larger societal trend that has increasingly linked judicial procedure with various forms of less formal, more expedient processes for resolving conflict.

Like the court process, arbitration has been subject to the same call for more expedient “alternatives” for resolving disputes. Having many of the formalities of court adjudication, arbitration is criticized as slow, expensive, formalistic and unnecessarily adversarial. At the same time, the growth of mediation in the 1970s and its extension to a wide range of commercial disputes resulted in the “growing interaction” of arbitration and mediation.

Med-Arb is a natural outgrowth of this trend and it provides a mediation ‘window’ available to the parties at any stage of arbitration. In a dispute resolution environment where mediation and arbitration often occur in sequential order, it makes sense to have the same neutral perform both functions, if feasible. This is particularly so when, in keeping with the law-centered model of mediation, the parties already expect the mediator to be adept at formulating optimal settlement strategies based on legal and technical norms and industry practice.

In this context, the mediator already has tremendous power of persuasion based on his expert authority to evaluate the likely outcome of the case if it went to trial, and his knowledge of how other cases in the same commercial sector have been settled in the past. Whereas in arbitration, the neutral has the ultimate degree of decision-making power by virtue of his authority to create a final and binding settlement.

In arbitration, the tribunal or arbitrator is neutral and has no additional knowledge of the dispute or the parties’ positions beyond the facts presented in the case. By contrast, a mediation process requires the parties to disclose additional information that would otherwise be private and confidential.

For this reason, the position taken in most international arbitration rules is that any mediation process should be kept entirely separate from arbitration or litigation proceedings, in order to maintain the neutrality and fairness of the proceedings. Due to such concerns about disclosing confidential information and the potential impact on the fairness of existing arbitration or litigation proceedings, Med-Arb is less commonly used in commercial law.

In Asia, however, Med-Arb is a familiar practice. Although parties in Asian jurisdictions will still commence formal arbitration or litigation proceedings at the beginning of a dispute as a strong message of their intent, the same parties are often willing to engage in informal or formal mediation processes, since the commercial culture tends to favour a negotiated settlement. Indeed, arbitral tribunals and courts in Asian and other civil law jurisdictions often strongly encourage settlement, and in particular mediation, during the course of the formal proceedings.

ADVANTAGES OF MED-ARB

• An arbitrator is usually familiar with the case, the parties, and their counsel representing them, and is therefore best placed to identify the most appropriate time in the proceedings to hold mediation.
• Med-Arb is an efficient way of reaching an early settlement either by bringing the parties closer together or by giving an early indication of the likely outcome of the formal proceedings, and thereby encouraging the parties to settle the matters or some of the matters out of many disputed matters.
• Any settlement which is 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.
• 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.
• Arb-Med can be structured in a way which is both effective and avoids breach of confidentiality. In this method, the neutral first sits as an arbitrator and prepares the award. The neutral then switches to mediation and attempts to bring about a settlement, and if the attempt is successful, the settlement agreement is made into an arbitral award by consent.
• The author feels that another method can be evolved where two arbitrators and co-mediators as neutrals can try and adopt the above mentioned process.
• Parties to an ongoing business relationship have a mutual interest in being able to resolve inevitable disputes expediently, privately, and in a fair, even-handed way, so that they can move forward. Med-Arb is an especially appealing option for disputes that the parties view as ‘irritants’ to a valuable commercial relationship (e.g. manufacturer-distributor, joint venture, or marketing relationship) that both sides see as “more important than the stakes involved in such disputes”.
• There are concerns as to whether one person can perform both roles. To address these, the neutral can try different methods like not holding private sessions in mediation. The neutral first sits as an arbitrator and prepares the award which he can do separately without revealing it to any party. If the attempt is successful, the settlement agreement can be made into an arbitral award by consent and the parts of the mediation that work can be added in the award.
• As far as laws that regulate, permit or engage mediation by arbitrators with the consent of the parties, mention can be made of the arbitration enactments of different countries in the international arena such as those in Australia, Brazil, China, Singapore, Hong Kong, and India and the rules of the World Intellectual Property Organization (WIPO).

Given the right circumstances, Med-Arb has some enormous advantages over mediation and arbitration alone. It is up to each of us as conflict resolution professionals to understand the options available to the parties.

We must understand as many of the intricacies involved as possible so that when we choose to use a specific model, hybrid or not, it fits and works. There are professional ways in the profession we practice, but each and every day, practitioners are finding new ways to break the rules, hold onto the standards they feel strongly about, and help parties get to the place they need to get to.

Nandini Gore is a Partner at Karanjawala & Co. She is a certified mediator at the Supreme Court of India.

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