Facilitating Settlement in Arbitration: A Shift Towards Amicable Resolutions
Streamlining resolution in arbitration proceedings: Should the court intervene to expedite matters?
The landscape of arbitration is evolving, with a growing emphasis on facilitating settlements between parties. This approach aims to foster agreements that can save time, resources, and potentially, relationships. Here's a look at some of the current techniques being employed:
- Incorporating Mediation into the Arbitral Process: By including a mediation window within the procedural timetable, parties can explore amicable resolutions before proceeding with arbitration. However, tribunals typically require the agreement of both parties before setting up a mediation window.
- Hybrid Mediation-Arbitration (Med-Arb): This process combines mediation and arbitration. Parties first attempt to resolve issues through mediation. If mediation fails or some issues remain unresolved, the mediator can assume the role of arbitrator and render a binding decision, or an arbitrator can take over the case.
- Preliminary Views: Arbitral tribunals can provide non-binding preliminary assessments of the issues in dispute. This helps parties evaluate their prospects realistically, encouraging them to consider settlement.
- Settlement Conferences: Arbitrators may chair settlement conferences to facilitate negotiations. These conferences are subject to "settlement privilege," meaning any discussions cannot be referenced in subsequent awards if the conference does not lead to a settlement.
- First Case Management Conferences and Mid-Stream Conferences: These can be used to discuss settlement options and facilitate communication between parties.
Several key arbitral institutions have adopted rules to facilitate settlement:
- ICC Rules: The ICC Rules empower arbitral tribunals to encourage settlement actively, with 42% of cases resolved before a final award in 2023.
- CIETAC Arbitration Rules: These rules also support a proactive stance on settlement, similar to the ICC.
- DIS Arbitration Rules: These rules obligate tribunals to discuss settlement possibilities with parties.
- LCIA, SIAC, and HKIAC: These institutions historically have taken a more conservative view regarding settlement facilitation. However, a significant proportion of cases are still resolved through settlement, with the HKIAC reporting 57% of arbitrations concluded in 2023 being resolved this way.
This shift towards settlement reflects the increasing recognition of its value in arbitration, both in terms of efficiency and cost savings. It's worth noting that tribunals are increasingly comfortable in guiding parties towards considering settlement options, but they are generally reluctant to set down a mediation window unless both parties agree.
The fundamental tenet of international arbitration—that tribunals are independent, impartial, and neutral—remains unchanged. However, some parties (particularly respondents) may not have a detailed understanding of their prospects at the first case management conference and may be unwilling to engage meaningfully with settlement proposals.
The ACICA Arbitration Rules require the tribunal to discuss settlement options at the preliminary meeting. Other forms of mid-stream conferences, such as the "Kaplan hearing," developed by arbitrator Neil Kaplan, can also be used to facilitate settlement discussions.
However, in-house counsel may express concerns about arbitrators who raise settlement issues later in the proceeding, fearing a lack of neutrality. This underscores the importance of maintaining the balance between encouraging settlement and preserving the impartiality of the tribunal.
Finance plays a crucial role in allowing businesses to engage in arbitration, as it enables them to cover the costs associated with the arbitral process.
Businesses can also benefit from the amicable resolutions fostered by the growing emphasis on settlement techniques in arbitration, reducing potential financial losses and maintaining relations with their counterparts.
