The middle man
7 April 2003
At its most straightforward, mediation-arbitration is a process in which the mediator in an unsuccessful mediation changes role to act as arbitrator and proceeds to make a binding determination on the dispute.
Provision for mediation-arbitration appears in the rules and guidelines of a number of international arbitration/ADR institutions and is used in a number of other jurisdictions including Canada, Australia, China and the US. So why is it, given that UK lawyers are being encouraged to offer the full panoply of ADR procedures, that mediation-arbitration barely gets a mention here?
One of the most popular mediation models adopted in this jurisdiction is facilitative mediation, in which the mediator helps the parties find a basis of compromise that they can both accept. Key to the process is the ability of the mediator to gain the trust of the parties so that each side is sufficiently confident to engage in a frank dialogue with the mediator in relation to its grievances, concerns and commercial objectives.
A practice adopted by the majority of mediators is that of caucusing, a form of shuttle diplomacy in which the mediator spends time alone with each side. By means of such contact, the mediator is able to glean information that might not otherwise be disclosed and control development of the negotiations. Underwriting this procedure is the common understanding that information disclosed to the mediator is disclosed on a strictly confidential basis, is not to be disclosed to the other party save with the express consent of the disclosing party and, to the extent that it is disclosed, may not be relied upon by the other party in any subsequent judicial proceedings. Such understanding is nearly always reflected in express terms embodied in the mediation agreement and/or institutional rules within which the mediation is being conducted.
Mediation-arbitration drives a coach and horses through these very delicate layers of checks and balances. If there is a possibility that the mediator will ultimately have to assume the role of arbitrator, caucusing and the receipt of confidential information by the mediator take on a potentially sinister aspect and give rise to a number of issues.
At a general level, parties may become inhibited from disclosing all material factors. For example, they may assume that any expression of concern about their position will be interpreted as a lack of confidence in their case, which will be taken into account by the mediator-turned-arbitrator if the dispute proceeds to arbitration.
Comments made or information imparted to the mediator by one party on a confidential basis may include not only admissions of concern in relation to that party's position, but also attacks on the other party's case. Where the party making the attack will not agree to the comments being made known to its opponent, or where the mediator feels that disclosure of the remarks may be counter-productive in the mediation, the information may assume a dangerous quality in any arbitration that follows. The mediator-turned-arbitrator cannot forget what they have been told - they may believe it to be important, yet they are unable to disclose the information to the other side to give it the opportunity of commenting upon the assertions made.
The serious concern is that the procedures that are designed to aid the mediation element of the process, namely the frank disclosure of information and the building of trust by means of private meetings with individual parties, may present a dissatisfied or losing party with scope to challenge any subsequent arbitration award and to seek removal of the arbitrator pursuant to the provisions of the Arbitration Act 1996. The underlying complaint would be that the arbitrator might fail to act fairly and impartially, or might fail to give each party a reasonable opportunity to put its case, or that circumstances exist that give rise to justifiable doubts as to impartiality - in the hands of a clever lawyer, the possibilities are numerous.
In assessing the risk of limiting open dialogue between a party and the mediator, those with experience of commercial mediation may question whether such a dialogue actually takes place anyway. It is without doubt a desirable concept, but, in practice, a sophisticated party will often 'negotiate' with the mediator by disclosing only as much of its hand as it thinks will assist the mediator to aid its cause.
The remaining concerns identified cannot be so easily dismissed. Simple solutions involve some modification of the process. The mediator-arbitrator can agree to mediation without caucusing, parties can be given the right to opt out or to call for the appointment of a new arbitrator at the end of a failed mediation, or the arbitrator may be asked merely to provide a non-binding 'advisory' opinion. Such approaches, although diluting many of the benefits of mediation-arbitration, may be appropriate in certain circumstances, but they do not really grapple with the underlying issues. More radical solutions are likely to comprise a mixture of contractual, institutional and perhaps statutory provision.
It ought to be possible for dispute resolution institutions to devise procedural safeguards that will minimise any unwelcome side-effects of the procedure. For rules governing the use of confidential information there are a range of possibilities. A number of foreign jurisdictions have introduced legislation requiring the arbitrator's disclosure to all parties of any information obtained during the mediation stage that they consider material applicable to the arbitration proceedings.
Can natural justice concerns be addressed directly by the parties' express agreement to acknowledge and accept any shortcomings in the process in return for the benefits of a one-stop resolution procedure? The provisions of the Arbitration Act cannot be excluded, but if a challenge is made, what weight, if any, should a court give to such express acknowledgment by the parties in determining issues of natural justice - yet another example of the tension between party autonomy and public policy.
A client with a dispute to resolve will not be interested in any of these questions. He will be looking for the procedure that will best suit his particular problem and that will deliver a resolution of that problem by the quickest and cheapest route. The key to effective delivery for dispute lawyers and institutions alike will be the ability to offer flexible procedures that can be tailored to suit the parties' needs. There is going to be a mixing and matching of dispute resolution procedures as we adopt a more imaginative approach. We should not shy away from dealing with legal or procedural obstacles that, if resolved, may give clients the choice they seek.
Carol Mulcahy is a partner at Berwin Leighton Paisner