Mediation – the new “international arbitration” for our generation?

By Anna-Maria Tamminen, a Managing Associate at Hannes Snellman in Helsinki, Finland

I had the pleasure of attending the meeting of the ICC Commission on Arbitration and ADR in Paris in mid-April. At the meeting, Ms. Hannah Tümpel, the former Manager of the ICC’s ADR Centre gave a powerful talk entitled “Some Thoughts on the Future of ADR”. According to Hannah, there is keen demand among the members of the ICC for wider use of mediation and we, as dispute resolution lawyers, should embrace that demand instead of continuing to debate how to curb time and costs in arbitration.

Hannah made the case for mediation in a convincing way – mediation is faster, it maintains the client relationships better, parties generally comply with the terms of settlement agreements voluntarily and clients are generally happier for staying in business rather than staying in the dispute resolution business.

Hannah did, however, see one main obstacle to the development of mediation as an alternative dispute resolution tool to be: us lawyers.  In Hannah’s view, many of us lawyers lack skills and training in mediation, we do not focus on the benefits that can be achieved through mediation and we do not negotiate payment structures with our clients, which would incentivize us to successfully settle cases in mediation. Instead, the predominantly “Anglo-Saxon, white, male, over 50” group of dispute resolution lawyers generally offers services that can be compared to complex and risky surgery, when a few sessions of physiotherapy could do.

Although I am certain that Hannah’s speech was meant to provoke debate, and in Hannah’s words – she hoped that “the gods of diplomacy” would be with her – I could not help thinking that maybe we, as the younger generation of dispute resolution lawyers, should listen carefully to what she had to say.

After all, the case for acquiring mediation skills is strong.

First, it is hard to see why any rational client who could settle a conflict quickly and efficiently in mediation would want to drag out the dispute, let its staff spend weeks or months supporting an arbitration case or take the risk of receiving an unfavourable award if that client is in the position to mediate a case. Unless of course, the business relationship was already destroyed, the party had endless resources and it was a 100% certain that it will prevail and be able to recover its costs. All of which does not happen all that often.

Second, mediation is not the same as party-lead negotiation. Before the client comes to us, the client’s managers at different levels have already tried to negotiate with the counterparty to find an amicable solution. Both parties have usually tried to convince the other party of why they are right before one party decides to enforce its rights through arbitration. What the parties have often not engaged in, however, is facilitation of those negotiations by a mediator. Someone who tries to add to the pie, instead of just dividing it. This can, in my experience, make all the difference. Asking a client to engage in mediation is not the same as simply prolonging the negotiations before the arbitration phase.

Third, the increasing demand for mediation is demonstrated both by the multi-tiered clauses we see in contracts and other developments seen in institutional rules. The ICC has combined its mediation rules with the arbitration rules and most arbitral institutions have recently updated their mediation rules. SIAC has introduced the Arb-Med-Arb procedure, which “is a process where a dispute is first referred to arbitration before mediation is attempted. If parties are able to settle their dispute through mediation, their mediated settlement may be recorded as a consent award.” If successful, the dispute is settled faster and the parties still have the possibility of enforcing the outcome as an award if a party does not voluntarily comply. If the mediation does not result in a settlement, the parties can still revert to arbitration. In other words, SIAC has offered the parties the best of both worlds.

Fourth, from a dispute resolution lawyer’s perspective, encouraging a client to mediate a case, should not be bad for business in the long run.

Clients come to us to reach favourable outcomes – their management expect wins but more importantly, they expect a dispute to do as little damage to their business as possible. If we as lawyers can secure a fast resolution to their dispute, which also upholds their business relationship, we are more likely to set ourselves up for repeat business than we are in a protracted dispute, which either ends unfavourably for the client or for which the client does not recover its costs. Of course, a long arbitration can last years, and a mediation may be over in a day, so one can argue that the earning potential does not incentivize a focus on mediation. Unless, of course, we were to rethink the fee structure. Who says that clients would not be willing to pay a lawyer more for quickly settling a dispute rather than taking the risk of paying a fixed hourly rate for the next three years?

Similarly, being involved in mediation gives the lawyer a chance to better understand his or her client’s business. In arbitration, a lawyer’s job is to look for the best arguments and evidence to support the client’s case. In mediation, the lawyer has to work together with the client to find solutions that could be beneficial to both parties and thereby facilitate a settlement – in other words, to think of the client’s business. One could think that an improved understanding of the business of one’s clients would result in more, rather than less, business.

Finally, a better understanding and an increased use of mediation should not endanger the future of international arbitration in any way. These last few days all arbitration related outlets have been filled with news about the set aside decision in the Yukos case. There will always be cases where mediation will not work and rights will have to be enforced in arbitration, and payment of arbitral awards will have to be sought through the courts. So even if our first love in the dispute resolution field is and remains arbitration, maybe we, as the not-only-Anglo-Saxon, not-only-white, not-only-male and certainly not-over-50 group of lawyers should consider embracing the idea of mediation as not only an alternative but an addition to arbitration.

We could start by attending mediation training and sharing successful experiences and best practices on fora such as Young ICCA. Who knows, as used as we are to the adversarial approach and defending our client’s rights tooth and nail, we might even find our inner mediator and enjoy the facilitation of a settlement.

After all, the scene of international disputes is fast moving. Only a few decades ago, very few people thought that they would be working in the field of international arbitration. Maybe twenty years from now the “international arbitration” scene will include an international mediation scene.

Think about it. Maybe you want to appear on that scene.

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