27. Mai 2020
While the world is waiting for the Singapore Convention (UN Convention on International Settlement Agreements Resulting from Mediation) to come into force, many arbitration institutions have enhanced their rules to allow for more flexibility in the use of mediation.
To date, the Singapore Convention has only been ratified by Singapore, Qatar, Saudi Arabia and Fiji, so it will be a number of years before it comes into force. Once it has, this will allow settlements by mediation to be enforced in a number of countries. Just as the New York Convention (The Convention on the Recognition and Enforcement of Foreign Arbitral Awards) is vital for international arbitration, the Singapore Convention will be a boost for international mediation.
For the time being, recent developments show that a combination of arbitration and mediation brings even more advantages. The mechanism is simple: one party files a request for arbitration, and as soon as the tribunal is constituted, the arbitration proceedings are stayed and the matter is referred to mediation.
If the mediation is successful, the arbitration tribunal is called in to record an award by consent – that is, to set out in the award what the parties have agreed in the mediation settlement. However, if the mediation fails to come up with a settlement, the arbitrators (who are essentially on stand-by) are called in to start the proceedings proper.
The most obvious advantage of Arb-Med-Arb is timing. Many dispute resolution clauses make it mandatory for the parties to seek an amicable solution before referring the matter to arbitration. Some go further and require that arbitration can only be applied for once a mediation process has failed. If the respondent's aim is to drag out proceedings, this is their world.
Not so in Med-Arb-Med, where the tribunal is already in place and can start work much faster if mediation fails. If the dispute resolution clause foresees a maximum period for the mediation – often something like 60 days – that is the additional time added to the resolution, no more.
If a settlement is reached by mediation, this agreement will be made enforceable under the NY Convention, as it will be recorded in an arbitration award that qualifies under the NY Convention.
Many arbitration rules set out that the arbitrators should try to reconcile or settle the matter. This is fine, so long as these are facilitated settlement talks.
However, as soon as mediation comes into play, the tools of mediators are different. They can have ex-parte meetings, in which they may get to know more about each of the parties than an arbitrator would.
For example, in classic Med-Arb mechanisms, it is often set out that the arbitrator should first try to mediate the case. The knowledge they gain of the parties may therefore affect their impartiality. In Med-Arb-Med proceedings it is clear that tribunal and mediator should be different, thus maintaining the impartiality.
Finally, let's look at consistency. As the meditation in Med-Arb-Med proceedings will be conducted by the same institution as the arbitration, their rules will provide for the same confidentiality as well as the same choice of law and venue, the procedures will be aligned (eg for challenges etc), and the same case managers at the institution will be dealing with the matter.
It was the Singapore International Arbitration Centre (SIAC), together with the Singapore International Mediation Centre (SIMC), that was the first to introduce Med-Arb-Med proceedings in 2014 as part of their rules, including an AMA protocol of some 15 articles. Other institutions have followed since, usually with less of a protocol but rather on the basis of an extended arbitration clause in the contract.
For instance, two institutions most used for arbitration in Austria, ICC and VIAC have published model clauses that reach the anticipated effect; the clause suggested by VIAC to be added to a standard arbitration clause reads:
"Furthermore, the parties agree to jointly consider, after due initiation of the arbitration, to conduct proceedings in accordance with the Mediation Rules (Vienna Mediation Rules) of the Vienna International Arbitral Centre (VIAC) of the Austrian Federal Economic Chamber. Settlements that are generated in such proceedings shall be referred to the arbitral tribunal appointed in the arbitration. The arbitral tribunal may render an award on agreed terms reflecting the content of the settlement (Article 37 paragraph 1 Vienna Rules)."
And let's not forget, even if the contract itself omits such a clause, there's always the option to agree on Arb-Med-Arb before one party files the request for arbitration. More often than not, it's in the interest of both parties to do so, for the reasons set out above.