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ALTERNATE DISPUTE RESOLUTIONMED-ARB PROCEDURES



WHAT IS MED ARB

Med-arb is a relatively familiar practice in civil law jurisdictions, where parties when in conflict try to avoid the expense and hassle of litigation by turning to one of the two common alternative dispute resolution processes: mediation or arbitration.

In mediation, the mediator also known as the neutral tries to bring the disputant parties to a consensus on their own. The role of the mediator is to engage the parties more deeply and efficiently in the issues at stake so that they can arrive at a sustainable, voluntary and a non-binding solution rather than imposing one on them.

In arbitration, the arbitrator or the neutral is responsible for resolving the dispute between the parties while serving as a judge. In arbitration the formalities of the court are lost but the role of the arbitrator remains the same as that of a judge.

Although mediation and arbitration both are well established processes for conflict resolution, they can have their own advantages and disadvantages, depending upon the circumstances. Mediation can end in impasse, an outcome that some disputants may want to avoid and on the other hand arbitration does not give the parties the autonomy to be involved in the decision-making process like in mediation. As a result of this mix of pros and cons involved in both the processes, disputants often consider going for the hybrid mediation-arbitration approach known as med-arb, which aims to provide the disputants, the best that mediation and arbitration have to offer.

Med-Arb gives parties the best that mediation and arbitration have to offer, by providing incentives to resolve the dispute promptly, efficiently and timely. Facing the prospect of an adverse, non-appealable determination in arbitration, parties have an incentive to resolve their disputes at mediation: the few studies examining Med-Arb have generally found that parties were considerably more motivated to settle the dispute in mediation because they wanted to avoid the loss of control over procedure that would come in the arbitration phase.


EVOLUTION OF MED-ARB

The development of med-arb is the result of the larger social trend which gradually started to link judicial procedure with various less-formal processes for resolving conflict, collectively known as the “alternate dispute resolution (ADR)”, which were more time and cost efficient. The rapidly increasing quantum of disputes in the 1970’s gave a boost to the trend of going for mediation and other mechanisms for promoting settlement. Litigators also came to “embrace the view that settlement is the ultimate goal” as statistics showed that more than 95% of the court cases were settled without trial.

Just like the court process and its many formalities, arbitration also attracted criticism for being slow, expensive, formalistic, and unnecessarily adversarial. The growth of mediation in the 1970’s and its extension to a wide range of commercial disputes resulted in the growing inter-linkage of the two processes. The American Arbitration Association (AAA) itself began promoting the inclusion of mediation along with arbitration in standard construction contracts. Various commercial companies concluded that “sequential combination of mediation and arbitration can certainly be a fair, efficient, and cost-effective process for resolving disputes.”


DIFFERENT FORMS OF MED-ARB

There can be different forms of med-arb procedure, pertaining to certain variations to cater to the varying nature of disputes:

  1. Overlapping Neutrals: in this method of med-arb two neutrals are appointed i.e. a mediator and an arbitrator to carry out the med-arb procedure. The arbitrator attends the joint sessions during mediation but is not allowed to attend the private sessions that the mediator has with the disputants individually. This method can be effective as the arbitrator would be aware of the broad issues of the parties from the stage of mediation itself but it can be very costly as two different neutrals are appointed.

  2. Plenary med-arb: in this method one single neutral is appointed to act both as the mediator as well as the arbitrator but he neutral is forbidden from conducting private caucuses with the disputants. Due to this restriction this form may turn out to be futile as the parties may not reveal important issues relating to the dispute in the joint sessions that they would have in the private session.

  3. Braided med-arb: in this method, only one neutral is appointed though the procedure is a bit different as the party’s may at any time interrupt the arbitration proceedings and continue with mediation proceedings, if they are willing to enter into a voluntary agreement. In such a case the neutral if free to provide suggestions and settlement proposals but at times these suggestions create a pressure on the parties when they turn into strong recommendations.

  4. Med-arb with optional withdrawal: Unlike all the other forms of med-arb, here the parties can opt-out of the arbitration process even if there is no settlement through mediation whereas in other forms it is mandatory for the parties to resolve their dispute through arbitration in case the mediation fails. But this power of voluntary withdrawal makes the entire process of med-arb ineffective as the assurance of finality is lost. And in case the mediation fails and the parties opt-out of arbitration they would have to start with a new dispute resolution mechanism from the crack which can be very costly and time taking.

All the above-mentioned forms of med-arb have their own pros and cons and thus it is very important for the parties to choose the form that is best-suited for resolving their dispute.


ADVANTAGES AND DISADVANTAGES

The advantages and disadvantages of med-arb can be both subjective and objective in nature depending upon factors like goals and values of the parties, as well as the personal goals and objectives of the third-party neutral. What one party may see as a strength of the med-arb process may be viewed as a flaw by the other.

Accordingly, the conflict professionals must follow two essential guides. First, they must give clients sufficient information and understanding of the procedure to make a well-informed decision and second, they must have “the skill and experience necessary for exercising this power righteously” and consequently avoiding ethical dilemmas like undue pressure or improper use of confidential information.


ADVANTAGES

The key advantages of med-arb are as follows:

  1. Finality: the med-arbiter has the absolute authority to pen a final and binding settlement. Moreover, irrespective of the fact whether the final product of a med-arb results entirely from mediation or both mediation and arbitration, it is considered as the result of the entire process of arbitral settlement, and is binding and enforceable as law.

  2. Flexibility: Flexibility is the inherent feature of the med-arb which allows the parties to fashion the procedure in a way that best fits the dispute at hand. Blankenship argued that thought med-arb may not suit all the disputes, it is a brilliant example of “adaptive ADR” where “the different forms of ADR become adaptable, combinable, reversible, and even discardable for the betterment of the parties and fast redressal of their dispute.” On the same line, Hoffman asserts that “ one of the reasons why one cannot place reliance on the generalized claims of superiority of one process of ADR over another is that the advantages of one process over another are largely situational, i.e. related to the specific circumstances of each case”

  3. Efficiency: this hybrid process can be efficient, in two important respects. First, if the mediation fails, the parties do not have to hire another neutral, who is unfamiliar with the case and prepare a full-blown arbitration. Second, in mediation the issues in dispute are frequently narrowed down and this forward approach can directly be carried over into the arbitration phase. Some studies of the med-arb process highly support the notion that it reduces costs and substantially increase the efficiency of the dispute resolution process.

  4. There is evidence that med-arb is being successfully in Asia. For example, a study of JCAA arbitrations from 1999 to 2008 showed a successful outcome in 25 cases out if 48 by this method of dispute resolution.


DISADVANTAGES

There are various potential drawbacks of med-arb, which the parties need to be aware about before choosing it as the process of dispute resolution:

  1. Coercion: since med-arb invests the mediator with the power to decide the suit, it gives him the power to pressure the parties into a settlement. This raise concerns as “what might appear to be a negotiated resolution may actually be an imposed one, thus deteriorating the degree of satisfaction and commitment.”

  2. Confidentiality: the second major concern is that the confidential information gained by the neutral during the mediation phase may be inappropriately used by the neutral during arbitration thus unnecessarily influencing the final decision. It is hard for the single neutral to disregard his knowledge and information about the party’s position, that he has gained during the mediation stage, while deciding the unresolved issue during the arbitration stage.

  3. Ethical issues: in cases where private caucuses are not expressly prohibited by the parties in their agreement, med-arb allows them to have ex-parte communication with their future arbitrator, which can be misused by the parties for revealing unfavourable about their opponent knowing that the other side will never know these conversations and cannot rebut them.

  4. Mediator-arbitrator neutrality: at times the mediator in the med-arb, consciously or unconsciously, controls the BATNA (the best alternative to a negotiated agreement), as the disputants or their advocates try to examine the clues about the neutral’s preferences or gain information about the award. Rather than determining the BATNA themselves, the parties attempt to determine the same from the clues given by the mediator.

  5. Parties use mediation as a preparation for arbitration: when the parties know that the dispute may later go for arbitration, they use mediation to gain the sympathy of the neutral, which affects the process and it makes it difficult for the neutral to give a decision free form any such influence.

  6. Parties hold back information: being aware of the fact that the mediation will be followed by arbitration parties often hold back information or are hesitant during the mediation phase fearing such information influencing the arbitrator at the later stage.

  7. Training and levels of experience: to carry out the hybrid process of med-arb efficiently it is important to find a neutral skilled and competent enough to run both the phases well, only then can the parties truly benefit from the combined process.


CONCLUSION

Clearly the potential pitfalls of med-arb outweigh the benefits that it offers, so in order to realize the best of this hybrid procedure both the conflict resolution professional and the parties need to be fully aware about the features and procedures of the process. Collective effort and cooperation of the members involved in the process can minimize the risks involved.

An ethical and competent med-arbiter can protect the parties considering med-arb, by fully informing the issues related with confidentiality and explaining them the relevant procedures and safeguards available to them to address such issues. For example, the right of either party to opt-out after the mediation phase even if no settlement was reached. For example, if at the very outset both the parties commit that they will always remain in joint session in the mediation and there would be no private caucuses, then the issue of confidential information inappropriately affecting the final decision diminishes.

Whether or not confidentiality would be an issue depends upon the particular circumstances of each dispute and the parties involved therein. “Mediation with muscle” is an in-built tool available to the med-arbiter, when the disputants give up their ability to “walk away” and such tactics can make the disputants feel unheard, thereby impinging on their sense of “justice being done”. Although, it is important to note that the imminent power of the med-arbiter to render a decision does not by itself mean that the mediation process was coercive or that the parties felt pressured. Therefore, the neutral must be competent, ethical and should be vigilant of the line between appropriate pressure to settle and inappropriate coercion.


SUBMITTED BY:

MS. DISHA


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