Combining Mediation and Arbitration in International Commercial Dispute Resolution

Dilyara Nigmatullina

• Publisher: Routledge
• Year: 2018
• eBook ISBN: 9781351068628
• Edition: 1
• Topic: Law
• Subtopic: Law Theory & Practice
• Index: Law

Securing fast, inexpensive, and enforceable redress is vital for the development of international commerce. In a changing international commercial dispute resolution landscape, the combined use of mediation and arbitration has emerged as a dispute resolution approach which offers these benefits. However, to date there has been little agreement on several aspects of the combined use of processes, which the literature often explains by reference to the practitioner's legal culture, and there is debate as to how appropriate it is for the same neutral to conduct both mediation and arbitration.

Identifying the main ways of addressing concerns associated with the same neutral conducting both mediation and arbitration (same neutral (arb)-med-arb), this book examines how effectively these methods achieve the goal of fast, inexpensive, and enforceable dispute resolution, evaluating to what extent the perception and use of the same neutral (arb)-med-arb depends on the practitioner's legal culture, arguing that this is not a 'one-size-fits-all' process.

Presenting an empirical study of the combined use of mediation and arbitration in international commercial dispute resolution, this book synthesises existing ways of addressing concerns associated with the same neutral (arb)-med-arb to provide recommendations on how to enhance the use of combinations in the future.

Part I

Introduction

1 Introduction

Everything changes and nothing stands still.¹ The dispute resolution landscape is no exception.² While initially, the international commercial arbitration community praised arbitration for its flexibility and expedition, this process has recently drawn criticism for becoming as slow and expensive as judicial proceedings, if not more so.³

A number of empirical studies provide evidence of the discontent of users with the international arbitration process due to the escalated costs and protracted proceedings. For example, in a 2006 survey conducted by the School of International Arbitration (SIA), Queen Mary University of London, expense and the length of time to resolve disputes were the two most commonly cited disadvantages of international arbitration.⁴ Participants of a 2010 study of the Corporate Counsel International Arbitration Group reiterated concerns over costs and delays in arbitration proceedings.⁵ A more recent 2015 SIA survey similarly found that cost is seen as arbitration’s worst feature, followed by, among others, lack of speed.⁶

Many factors have contributed to the growing concerns over the costs and delays of arbitration proceedings. These factors include counsel fees,⁷ fees of arbitrators and institutions,⁸ the procedures and methods employed,⁹ the limited possibility of appeal and minimal curial intervention,¹⁰ and parties’ fixation with involving the best arbitrators and lawyers in the process.¹¹

Despite concerns over costs and delays, arbitration seems to still be the preferred means for resolving international commercial disputes,¹² mostly because it is better adapted to the special environment of international commercial disputes than litigation.¹³ Neutrality and enforceability, rather than high speed and low cost, emerge as the true drivers behind the use of arbitration for international disputes.¹⁴ The selection of arbitrators with specialist competencies and the privacy afforded by the process might be others.¹⁵

As concerns over the effectiveness of international arbitration remain, the time is right for reforms in the field of international commercial arbitration.¹⁶ Reforms could focus on improving efficiency within the arbitration process and creating better conditions for settlement.¹⁷

It appears that, so far, the international arbitration community has concentrated on the former, rather than the latter.¹⁸ In recent years, arbitration institutions have introduced, for example, fast-track proceedings and emergency arbitration. There is probably no international arbitration institution that has not revised its rules to speed up the arbitration process.¹⁹ Despite these and other measures, there has been little visible improvement in recent years in the management of arbitrations,²⁰ while delays seem to be on the rise.²¹ The common call is to use stand-alone mediation and a combination of mediation and arbitration.²² This call is supported by recent empirical findings.²³

Increasingly disenchanted with lengthy and costly international arbitration, parties are choosing mediation as an alternative.²⁴ While arbitration is often referred to as the ‘new litigation’, mediation has now been coined the ‘new arbitration’.²⁵ Although the extent to which mediation is practised is not yet comparable to that of arbitration, it appears to be constantly growing.²⁶ Legislation on mediation has been enacted in an increasing number of jurisdictions.²⁷ Mediation institutes and training for mediators have proliferated.²⁸ Bustamante Vasconez even argues that mediation is becoming the best alternative to international litigation.²⁹

Parties benefit from mediation because it offers them the ability to control the process and tailor their own solution in a setting that helps preserve their relationship.³⁰ Mediation is also praised for outstanding settlement rates.³¹

Nevertheless, it appears that the mediation of many international commercial disputes does not constitute the quick, easy and inexpensive dispute resolution process that many commercial actors envision.³² Contributing to this is the increasing complexity of international commercial disputes and the involvement of many participants, which presents some additional challenges, non-existent in a two-party process.³³ Cheng even contends that there may be little or no difference in costs involved in international mediation and international arbitration.³⁴ According to Cheng, this is because the most expensive items in a dispute resolution budget are the fees of counsel and experts that are similar in international mediation and arbitration.³⁵

Researchers and practitioners in some countries argue that mediation is not a viable mechanism on its own and its likely future lies with integration in other dispute resolution mechanisms.³⁶ One of the most frequently cited impediments for more widespread use of mediation as a stand-alone method of international commercial dispute resolution is the lack of a coherent enforcement mechanism for international mediated settlement agreements.³⁷ As explained in the next paragraph, the combined use of mediation and arbitration offers parties a chance to remove this impediment.

The use of mediation and arbitration in combination is not new,³⁸ and its practice has ancient roots.³⁹ The combined use of mediation and arbitration (combinations), and particularly the combination where the same neutral⁴⁰ acts as a mediator and an arbitrator (same neutral (arb)-med-arb), may provide parties with a process that is faster and less expensive, as compared to arbitration used on its own.⁴¹ In addition, it allows parties to convert their mediated settlement agreement into a consent arbitral award that is, arguably, enforceable worldwide pursuant to the New York Convention.⁴²

Despite these and other advantages, dispute resolution practitioners around the world express different, and sometimes conflicting, views about a number of aspects of the combined use of processes. Commentators often explain this divide in views by reference to the practitioners’ legal culture.⁴³ In particular, no agreement exists on whether it is appropriate for the same neutral to act as both a mediator and an arbitrator in the same dispute.⁴⁴ In the same neutral (arb)-med-arb, caucuses become the most problematic issue. This is largely due to the danger that an arbitrator will appear to or actually lack impartiality and the risk that the process may offend the principles of due process.⁴⁵ As a consequence, the arbitrator and the award resulting from the same neutral (arb)-med-arb may be challenged. The pitfalls of enforcing international arbitral awards resulting from the same neutral (arb)-med-arb are illustrated by Gao Haiyan, a case to which some commentators attribute the recent emergence of the same neutral (arb)-med-arb as a ‘hot topic’ among practitioners.⁴⁶

This book investigates the value of combinations in international commercial dispute resolution. The current demands of international business for more efficient dispute resolution solutions and yet-untapped potential⁴⁷ of combinations justify this investigation.

Moreover, even though academic debate is ongoing about acceptable ways of combining mediation and arbitration, there is little evidence to suggest that practitioners actually use any combinations. The author has found no empirical research focused on the combined use of processes in an international commercial dispute resolution context. Existing empirical studies either explore how particular questions related to the combined use of processes are dealt with in certain jurisdictions⁴⁸ or constitute part of broad-based inquiries into the practice of international dispute resolution.⁴⁹ These do not provide significant insight into the dynamics of the combined use of processes as a discrete dispute resolution approach.⁵⁰ Commentators expressly recognise the lack of empirical research related to the combined use of processes⁵¹ and specifically invite researchers to conduct studies to remedy this deficit.⁵² Taking up these invitations, the author conducted an empirical study investigating the use of combinations in international commercial dispute resolution for the purposes of this book. Its results are presented in Part III.

The same neutral (arb)-med-arb is the central combination for this book for two reasons. First, as noted in Section 3.2, the same neutral (arb)-med-arb appears to be a combination with the most potential for the increased time and cost efficiency of dispute resolution, as compared to arbitration and other combinations. Second, as discussed in Section 3.3, the same neutral (arb)-med-arb is a combination that raises numerous concerns, particularly in some jurisdictions. The book aims to explore ways to address concerns associated with the same neutral (arb)-med-arb, which should allow parties to benefit from the time and cost efficiency of the process and an internationally enforceable result. In addition, the book sets out to examine whether the perception and use of the same neutral (arb)-med-arb varies depending on the practitioners’ legal culture. In particular, the book is going to address the following five questions:

1 What are the advantages and concerns associated with the same neutral (arb)-med-arb?

2 What is the influence of the practitioners’ legal culture on their perception and use of the same neutral (arb)-med-arb?

3 What is the current state of use of combinations, including the same neutral (arb)-med-arb, in international commercial dispute resolution, and how are they perceived?

4 How can the concerns associated with the same neutral (arb)-med-arb be addressed?

5 How can the use of the same neutral (arb)-med-arb and other combinations in international commercial dispute resolution be enhanced?

In terms of methodology, the book involved an analysis of primary and secondary legal sources comple...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Acknowledgements
• Table of Contents
• PART I: Introduction
• PART II: Theoretical foundations
• PART III: The empirical study
• PART IV: Solutions
• PART V: The way forward
• Bibliography
• Appendix 1: Definitions of combinations
• Appendix 2: Questionnaire on the combined use of mediation and arbitration in an international commercial context
• Appendix 3: Semi-structured interview schedule
• Index