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Med-Arb and Arb-Med-Arb as means for the resolution of commercial disputes

Med-Arb, a combination of mediation and arbitration, aims to provide the informal and more collaborative approach of mediation, together with the structure and certainty of an arbitration proceeding. Advantages of Med-Arb include flexibility, cost and time-effectiveness, and an enhanced possibility to maintain the business relationship between the parties pending the resolution of the dispute.

The “pure” Med-Arb mechanism involves the nomination of a Neutral who will act as mediator in the first instance and, if mediation fails, as arbitrator in the second instance. A general Med-Arb mechanism simply allows a combination of mediation and arbitration without necessarily having the same Neutral acting in both instances.

The “pure” Med-Arb mechanism, where the same person who acted as mediator subsequently judges the dispute as arbitrator, may however present certain risks. Mediation typically involves private caucuses between each party and the mediator, and if the mediator later becomes the arbitrator, the use of information acquired in these caucuses, on which the party not present was unable to debate, may amount to a breach of due process. Similarly, the mediator-turned-arbitrator may be effectively influenced by information that would otherwise be inadmissible before the arbitral tribunal.

The Med-Arb mechanism has been embraced by arbitration institutions such as the ICC, which provides a Model Clause for general Med-Arb: “In the event of any dispute arising out of or in connection with the present contract, the parties shall first refer the dispute to proceedings under the Mediation Rules. If the dispute has not been settled pursuant to the said Rules within [45] days following the filing of a Request for Mediation or within such other period as the parties may agree in writing, such dispute shall thereafter be finally settled under the rules of Arbitration of the ICC by one or more arbitrators appointed in accordance with the said Rules of Arbitration.”[1] Therefore, under the Mediation Rules, parties must expressly opt for the Med-Arb mechanism for it to be available to them.[2]

In Singapore, the SIAC-SIMC Arbitration-Mediation-Arbitration Protocol 2014 provides an effective illustration of how an Arb-Med-Arb clause can work. The Protocol provides that following a dispute between the contracting parties, an arbitral tribunal is constituted and it immediately stays proceedings pending the outcome of mediation between the parties. If the mediation is successful, the arbitral tribunal issues an award based on this agreement and if it fails, the arbitral tribunal resumes and takes charge of the dispute.[3] Since its inception in 2014, three cases have applied this Protocol based on party agreement.[4]

Any settlement reached in the Arb-Med-Arb procedure is subsequently recorded as a final award of the arbitral tribunal. This is an advantage of the Arb-Med-Arb over the Med-Arb procedure, in which, if the parties reach a mediated settlement before the beginning of an arbitration, the agreement cannot have the form, and therefore the enhanced enforceability of an arbitral award. However, in several national laws the enforcement of agreements reached in the context of mediation is facilitated.

Author:  LLB arbitration team

[1] 2014 ICC Mediation Rules, Model Clause D.

[2] Clause D, Mediation Clauses, International Chamber of Commerce: https://iccwbo.org/dispute-resolution-services/mediation/mediation-clauses/

[3] SIAC-SIMC Arb-Med-Arb Protocol: http://simc.com.sg/siac-simc-arb-med-arb-protocol/

[4] Arb-Med-Arb : The Future of Dispute Resolution, Wei Ming Tan : http://simc.com.sg/arb-med-aeb-the-future-of-dispute-resolution/