This article is a review of the seminar “Mediation in Arbitration: Who should be doing what?” Organised by 20 Essex Street and the Singapore International Mediation Centre (SIMC), the seminar was held on 8 May 2015 at Singapore’s Maxwell Chambers. The speakers were Mr David Owen QC, an arbitrator and mediator on the SIMC panel of mediators and the SIAC panel of arbitrators, and Mr Michael Lee, an experienced arbitrator and barrister. The speakers shared developments and perspectives on the interaction between mediation and arbitration, and on how a hybrid of these forums can potentially offer an efficient and effective mechanism for the resolution of complex commercial disputes. Kenny Yang, Associate Mediator of the Singapore Mediation Centre and Samuel Seow, Rajah & Tann Asia, report.
“Mediation is no longer a child and is now more like a teenager in the dispute resolution world. As with any teenager, relationships matter. Mediation’s relationship with other form of dispute resolution is now increasingly important.”
The above description of mediation by speaker David Owen QC highlights some practical issues that alternate dispute resolution professionals face today. Mediation and arbitration have each, in their own right, become popular alternatives to court litigation. Increasingly however, lawyers have encountered sophisticated clientele who may insist on “more than one item on the menu” and demand a combination of elements from both processes within their dispute resolution arsenal.
While most jurisdictions (including Singapore) have implemented legislative frameworks to encourage mediation within the litigation process, the intersections of arbitration and mediation remains murky territory. Are arbitrators empowered to take a more active role in encouraging parties to mediate? How far should arbitrators go in promoting mediation? Can arbitration proceedings be stayed in favour of mediation? These are but some of the issues that arise in trying to reconcile the two forms of alternative dispute resolution.
The Dispute Escalation Clause
David Owen QC observed that the traditional method of marrying mediation and arbitration is to include such processes within a multi-tiered dispute resolution clause, otherwise known as a “dispute escalation clause”. Typically, such a provision would oblige parties to enter into mediation as a precondition to commencing arbitration proceedings. This has the advantage of nipping certain disputes in the bud. By avoiding the tedious process of arbitration, parties save considerable time and costs.
An example of a three tier dispute escalation clause providing for (a) negotiation; (b) mediation; and (c) arbitration is as follows:-
If any dispute between the parties shall arise out of or in connection with this agreement, the following provisions shall apply.
1. Either party shall refer any such dispute by notice in writing to the other party’s representatives. Following such referral, representatives from both parties shall negotiate in good faith the resolution of the dispute.
2. If the dispute is not settled by the respective representatives within fourteen (14) days of the referral, either party may submit a request to mediate at the Singapore Mediation Centre (SMC) in accordance with SMC’s Mediation Procedure in force for the time being. The mediator shall be appointed by the SMC.
3. In the event that the dispute is not resolved within twenty-one (21) days of the commencement of mediation proceedings, either party may commence arbitration proceedings…”
The speakers shared some problems commonly associated with such dispute escalation clauses.
A perennial issue is the evaluation of whether genuine attempts have been taken by either party in attempting to resolve the dispute amicably. As mediation is premised on a threshold level of open communication and cooperation, either party’s recalcitrance would easily jeopardise the effectiveness of the mediation process.
Further, even if either party clearly demonstrates a failure to conduct negotiations or mediations in good faith, the remedies available to the counterparty may be highly limited. Any court order compelling a party to conduct negotiations or mediations in good faith would evidently be of limited practical utility and may perversely even result in further deterioration of the relationship between the parties.
Additionally, depending on the drafting of the dispute escalation clause, it may be difficult to ascertain when the right to commence arbitration has crystallised. A vaguely drafted dispute escalation clause may lead to downstream complications in commencing arbitration. For example, should it be a simple requirement for a “good faith mediation” to occur prior to the commencement of arbitration, questions as to whether a genuine “good faith” mediation attempt has been made may lead to implications on the arbitrator’s jurisdiction.
A simple solution to this would be to include a time-limit on mediation proceedings within the dispute escalation clause. In the absence of a mediated settlement, and where the time-limit has expired, parties would gain the right to commence arbitration.
Another issue raised by the speakers relates to the inflexible nature of most dispute escalation clauses. In the speakers’ experience, parties are often at their most stubborn during the early stages of a dispute. Mediation at such an early stage may be doomed for failure. Worse, having been scarred by a failed mediation attempt, parties may be disinclined to attempt mediation later, even if the chances of success may be significantly better when parties have a clearer view of the strength and weaknesses of their case.
In order to grant mediation the best chance for success, it is imperative to consider one’s optimal window of opportunity to enter into mediation. Most dispute escalation clauses do not accommodate for such flexibility in commencing or resuming mediation during the arbitration process.
Therefore, Mr David Owen QC suggested that parties might wish to consider dispute resolution clauses that did not commit them to mediating at the outset, as a precondition to arbitration, but gave them flexibility before or during the arbitration process to decide when it would be most appropriate to embark upon mediation.
The Hybrid Procedure
A possible solution is the hybrid procedure now offered by various institutions. Sometimes referred to as “Arb-Med-Arb”, this procedure allows parties to commence arbitration and at a later point, where parties have a clearer view of the strength and weaknesses of their case attempt mediation for a fixed period. This finite time period for mediation is said to grant parties clarity in managing the dispute. Where this period has lapsed with no successful mediation settlement, parties may revert to arbitration proceedings.
The Singapore International Arbitration Centre (SIAC) – Singapore International Mediation Centre (SIMC) Arb-Med-Arb Clause is one example of this. Jointly administered by the SIAC and SIMC, parties can commence arbitration proceedings at the SIAC with an 8-week mediation period at a later stage, under the auspices of SIMC. Parties wishing to take advantage of this dispute resolution mechanism may consider incorporating the following Arb-Med-Arb Clause in their contracts:-
“All disputes, controversies or differences (“Dispute”) arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration in Singapore in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (“SIAC”) for the time being in force.
The parties further agree that following the commencement of arbitration, they will attempt in good faith to resolve the Dispute through mediation at the Singapore International Mediation Centre (“SIMC”), in accordance with the SIAC-SIMC Arb-Med-Arb Protocol for the time being in force. Any settlement reached in the course of the mediation shall be referred to the arbitral tribunal appointed by SIAC and may be made a consent award on agreed terms.”
Where a mediation settlement has been reached in the 8 week period, SIMC informs SIAC of the settlement and parties may request for a consent order to be recorded. Where a mediation settlement has not been reached, arbitration proceedings resume.
It was pointed out during the seminar that such a procedure could lack flexibility as to when mediation was to occur, but, on the other hand, offers a route map through the two processes of mediation and arbitration.
The Arbitrator as Mediator
An interesting question raised by the speakers was whether, within such Arb-Med-Arb procedure, it is permissible or advisable for the arbitrator to also act as the mediator. Under the SIAC-SIMC Arb-Med-Arb Protocol, the arbitrator and the mediator will be separate persons independently appointed by SIAC and SIMC respectively, under the applicable rules of each institution. The SIAC-SIMC Arb-Med-Arb Protocol states that the arbitrator and mediator will generally be different persons. However, parties are free to decide otherwise.
Having an arbitrator act as mediator raises the issue of impartiality and due process. Mediation encourages open and frank communication, with the understanding that all discussions and disclosures are made without prejudice to any ensuing proceedings. Additionally, private caucuses within mediation are traditionally seen as an opportunity for either party to freely discuss confidential issues or concerns with the mediator.
Such transparency is integral to the mediator being able to discern the interests of the parties and to facilitate a successful mediation outcome. The knowledge that the mediator would later sit as an arbitrator (should parties fail to settle) is likely to foster reluctance to reveal weaknesses in one’s case whether in private caucuses or within mediation process itself.
Further, having a mediator turn arbitrator may leave any ensuing award vulnerable to challenges by disgruntled parties (usually the party that loses the arbitration). Such parties may allege a breach of natural justice or public policy, ostensible on the basis that the arbitrator acted on confidential or private information obtained in the course of his/her stint as mediator.
David Owen QC highlighted the difficulties identified above, and also proposed several safeguards if one party is adamant on having an arbitrator also acting as mediator. One simple safeguard is to do away with private caucuses. This of course, would not mitigate the damage of any confidential information revealed by any party in the course of joint sessions.
Another option is to have both parties waive their right to challenge any ensuing award on the basis that the arbitrator previously served as a mediator on the same dispute.
One other related safeguard is to implement a veto mechanism – a neutral agrees to act as a mediator, on the basis that he/she may act as arbitrator subsequently if a settlement is not reached; the mediation then proceeds, but upon the conclusion of the mediation phase, if a resolution has not been reached, either party may exercise their veto right to have the mediator barred from acting as an arbitrator thereafter, on a “no questions asked” basis.
This would allow the parties to gauge for themselves at the close of the mediation phase if they are comfortable with the mediator continuing as an arbitrator, taking into account all that transpired during mediation. In the absence of any party exercising their right to veto, the mediator would be permitted to proceed to act as an arbitrator (with suitable waivers having been agreed precluding any challenge to this course of action).
Court and Arbitrator Intervention for Mediation
In most jurisdictions, courts are increasingly supportive of mediation. Many jurisdictions have implemented systems that compel or at least encourage parties to attempt mediation prior to formal court proceedings. For example, in Singapore, there exists a range of tools to encourage conciliation, from cost sanctions to disciplinary proceedings against lawyers who have not properly advised their clients of alternative dispute resolution methods. The justification behind such a framework is that the curial system must be sensitive to managing the limited public resources available to the courts.
At the same time, a stay of court proceedings to allow for mediation may, in certain instances, be inappropriate. The tension between the goals of alternative dispute management and “sensible case management” were recently discussed by the English Technology and Construction Court in CIP Properties (AIPT) Ltd v Galliford Try Infrastructure Ltd & Ors  EWHC 3546 at :-
“A sensible timetable for trial that allows the parties to take part in ADR along the way is a sensible case management tool. A stay or a fixed ‘window’ is likely to lead to delay, extra cost and uncertainty, and should not ordinarily be ordered. The same applies, a fortiori, if the stay or the ‘window’ proposed is opposed by a significant party to the litigation. It has to be recognised that the requirements of ADR, on the one hand, and sensible case management to lead up to a prompt trail date, on the other, can sometimes be at odds: what is appropriate for one process may not be appropriate for the other. At a [case management conference], I take the view that, to the extent that there is such a clash, sensible case management must come first.”
While it is clear that the court may order parties to mediation, the speakers also discussed a somewhat more controversial topic: whether arbitrators are similarly empowered to direct disputants to mediation. It is clear the arbitrator’s role is more circumscribed than that of a judge, as the arbitrator is appointed to the limited role of adjudicating a matter between specific parties and not in order to send the parties off to a third party mediator. Any direction from the arbitrator for the parties to undergo mediation may be seen as a dereliction of such responsibility. To what extend then can the arbitrator encourage the parties to attempt mediation and/or stay proceedings in favour of mediation? These are some questions that have yet to be fully resolved by the courts, or at least as a failure to progress the resolution of the dispute with appropriate speed and efficiency.
Mr David Owen QC suggested that an arbitrator might take account of mediation in broad terms in setting a procedural timetable, or making adjustments to the timetable, but that the arbitrator should not normally build into the timetable a lengthy “mediation window” and should not normally impose a significant stay of proceedings in favour of mediation. The normal expectation would be that the parties would seek to resolve their dispute in parallel with progressing arbitration, and that the parties should themselves decide when, and how, to mediate, without the arbitrator forcing them to the mediation table.
Mr Owen also suggested that the arbitrator could, in a more general sense, encourage parties to mediate, where the case called out for settlement, provided the arbitrator acted in a balanced and restrained manner, making it clear that he/she was not partial and was not pre-judging issues.
He pointed to the practice, in jurisdictions such as Switzerland and Germany, of arbitrators discussing settlement possibilities with the parties during case management meetings, and suggested that the practice could be followed more widely – provided that arbitrators expressed themselves carefully, and did not pre-empt matters for decision in the arbitration.
The seminar has highlighted pertinent issues concerning the relationship between mediation and arbitration, which are seldom discussed in detail. These issues, if not dealt with properly, can lead to problems in the course of mediation and arbitration, resulting in the escalation of costs dissatisfied parties and potential difficulties in using the two processes effectively. This may defeat the purpose of both mediation and arbitration. As increasingly sophisticated clients demand the best of both worlds, or at least the best chance to use both mediation and arbitration in an effective manner, it is thus imperative that legal counsels, arbitrators and mediators are aware of these issues and find some ways to offer the advantages of both forms of dispute resolution to parties while avoiding the potential pitfalls along the way.
This article may be cited as follows: Kenny Yang and Samuel Seow, “Seminar Review: “Mediation and Arbitration: Who Should be Doing What””, International Arbitration Asia (20 June 2015) <http://www.internationalarbitrationasia.com/articles/seminar-review-mediation-and-arbitration-who-should-be-doing-what/>.
 Singapore International Arbitration Centre, The Singapore Arb-Med-Arb Clause available at http://www.siac.org.sg/model-clauses/the-singapore-arb-med-arb-clause. Singapore International Mediation Centre, What is Arb-Med-Arb available at <http://simc.com.sg/arb-med-arb/.
Note this is a revised version of the article which first appeared on 20 June 2015.