The competitive world teaches us to accept the mantra "You get what you pay for". In dispute resolution the mantra tends to be logically transformed to "The more you pay the better your chance of winning". This paper endeavours to chart a course through the conundrum of least expenditure for greatest advantage. Experience of life tells us that the 80/20 rule applies to dispute resolution just like everywhere else but numerical rules require numerical measurement and we are not sure whether an 80 percent chance of winning or an 80 percent of the amount claimed is what is possible with the 20 percent of expenditure.
The scheme of things that follows is based on a Med-Arb agreement that is quoted as a precedent. The precedent will need amending to suit the circumstances of a particular dispute and experience as it is gained. We are no more experienced in Med-Arb than most of the other writers on the topic.
In addition to our Med-Arb precedent there are two other arbitration agreements on this site that may be made between the parties under the Arbitration Act 1996. The Act provides many facilities for as yet untried procedures in arbitration of which perhaps the most important is the possibility of an arbitrator being able to accept an appointment on an agreed fixed price basis. We describe how we see Med-Arb proceeding under an agreement and the Arbitration Act 1996 by means of a scenario.
Scenario
We define a dispute arising when one party feels
it necessary to consult the contract and contract documentation to check up on
their rights. If the contract is proceeding well if does not much matter what
the contract says, customer satisfaction is the governing criteria. A wise
supplier will of course need to keep half an eye on the contract to avoid the
situation of a satisfied customer but an unsatisfied contract and a contract
claim originated by an eagle eye.
The first step in the dispute resolution process is a telephone call. Subsequent steps involve meetings and in the vast majority of cases an amicable agreement on how to proceed is reached. We are concerned here with those cases where DIY negotiations do not satisfactorily resolve the dispute.
Sooner or later solicitors will be consulted. Certainly a solicitor should be consulted before a Med-Arb agreement is signed. Naturally as lawyers solicitors tend to advise on their clients' rights under the law. Mediation is concerned with following the interests of the parties and most readily can be thought of as an endeavour to reduce the time it takes to get the dispute over - although obviously not at any cost. Our approach is towards an agreement that is good business. In our own way we prefer to regard dispute resolution as just a rather unusual piece of business that needs to be brought to a successful conclusion. Success is only measured in one place and that is on the bottom line of the profit and loss account. Remember to take into your reckoning the loss of business because of the distractions of the dispute.
Mediation
Mediatiom is well described almost everywhere else. A
leading point is that all meditations are different so we concentrate on the
qualities needed for the Mediator who is to turn into an Arbitrator.
The first point to be clear about is to ensure that you do not appoint someone who will either ensure that you string the mediation out in order to expand his fees, or worse, to subtly ensure that you do not agree so that he can have another bite at the fee cherry as arbitrator. Clearly you need someone tough who will beat the parties with the threat of an arbitration without for a moment indicating the decision he will reach if called upon to do so.
Not revealing his own present inclination on the merits is difficult at the mediation stage for a Mediator-Arbitrator. Mediators customarily point out the financial and other consequences of not agreeing to the parties they are helping to come together for a settlement. No Mediator will in any event make any suggestions at all to the parties as to what they may agree on. That must continue and the Mediator has to make it clear that he will come to the Arbitration with a fresh mind on the merits and truly regard any proposals for settlement that he has heard as without prejudice to the evidence on which he must base his decision as an arbitrator.
Experience shows that it is almost impossible to carry on a mediating session longer than two days. In fact such a deadline imposes pressures on the parties that appears to strengthen the possibility of a settlement as it nears its end. Whether the threat of a subsequent arbitration increases that pressure or offers a welcome relief will vary from case to case. We suspect that the external pressures that are never voiced in the mediation sessions have a lot to do with the stress that is generated.
Presumably the parties would not have put their signatures to a Med-Arb agreement if they did not have some expectation of not being able to agree in the mediation so we will continue our scenario to an arbitration. The arbitration scenario contains various possibilities and these should as far as possible be narrowed down to an agreed set either in the Med- Arb agreement or mediated on in the final stages of the mediation. We regard the ability to mediate the arbitration procedural rules with the arbitrator while he is still the mediator as one of the great hidden strengths to be exploited in a Med-Arb agreement. It is pleasant to be able to disagree without being disagreeable. The litigator's approach of "war" in an adversarial battle requires commensurate resources and that is not the idea of Med-Arb at all.
Arbitration The point at which the mediation switches to being an arbitration needs to be clearly defined by agreement between the parties. From that point neither party can communicate with the arbitrator in the absence of the other and all written communication must be copied both ways. Any continuing settlement discussions must be kept from the arbitrator. Each party should submit a sealed offer at some stage as a matter of form even if the envelope only contains a blank sheet of paper.
It is important that the arbitration starts from a common base of evidence between the parties and the arbitrator. In the mediation many things will have been said; any and everything in the arbitrator's mind and notebook is knowledge he has received. While some things like the lowest figure a party might settle for or a further third party contract that is dependent on the outcome of the proceedings are not relevant evidence at all, everything that is evidence must be brought out into the common base.
Desirably the mediation will have been able to refine the issues in dispute. The frank exchanges in the mediation should have been able to get rid of those points in dispute that are not of serious concern or moment to the parties. If it has been possible to agree the points in issue in one form or another they should be able to be passed from the mediation to the arbitration.
The points of issue documentation is of great help to the arbitrator in what must be his first task. That is to set out the evidence relevant to the points of issue as he understands it. This detailing of the evidence may take the form of an "Arbitrator's Report to the Parties" which would be somewhat akin to an expert witness' report but without expressing any opinions or conclusions. It is a question of the arbitrator emptying his mind and if he subsequently realises that he is aware of other evidence then he should produce a supplementary report.
It has to be recognised that the arbitrator will have an active mind on this evidence and he should be prepared to respond to a form of cross-examination by the parties to explore what else he knows. This examination is also an opportunity to put the Arbitrator right on any matters that he has not properly understood. Of course anything the arbitrator puts in his report to the parties can be controverted by anyone, even those who allegedly are the source of the evidence from the mediation. For those that would shy off the concept of an arbitrator's report to the parties we have two answers. Firstly the arbitrator will not have learnt very much of the dispute in two days of mediation where most of the time will have been spent exploring a settlement acceptable to and in the interests of the parties and secondly natural justice requires that any party should have the opportunity to challenge evidence put before an arbitrator whatever its source.
It will be apparent that an "Arbitrator's Report to the Parties" is a great time and cost saver. If the arbitrator has written down what he knows an advocate is surely saved the time of telling the arbitrator the same thing in three different ways to make sure that he has grasped what is regarded as an important point.
Hearing With the issues settled and the basic evidence set out and to some extent agreed, advocates' opening speeches would appear to be unnecessary. From his knowledge of the matter the arbitrator may well have been able to set out at the end of his Report the questions that he sees need to be answered by evidence. The parties should concentrate on these but are of course free to bring forward other questions and evidence that they think relevant. The questions that the arbitrator asks will give an indication of the way the arbitrator's mind is working and enable the parties to concentrate on the evidence that will move the arbitrator's mind in the direction they wish. It may not be necessary to hold a hearing in any adversarial sense.
From his knowledge of the dispute the arbitrator is well placed to give a direction as to the maximum amount that each party may recover by way of costs if the Award is in their favour. Putting the arbitrator in a position where he can realistically make such a cost control direction is, in our view, more than adequate justification of whatever potential hazards may be seen of entering into a Med-Arb agreement. There is an additional benefit that if an arbitrator knows that he is going to make a maximum cost recovery direction he is in a position to assess the business risk of accepting appointment as arbitrator for a fixed fee. The arbitrator's fee could be either a fixed sum or as a fixed percentage of the largest sum he has directed may be recovered by any party if they win.
Conclusion There is a wind of change blowing though the 800
years of development of the adversarial system of resolving disputes. We would
not have been able to stay as a computer businessman for over thirty years if
change was as disturbing to us as it appears to be to most people. Despite all
this we still find people more interesting than machinery. We conclude by
looking at the more interesting possibilities of Med-Arb. It goes without saying
that the choice of an individual as Mediator-Arbitrator is crucial. But then so
is the selection of someone as arbitrator. But most arbitrators are appointed
blind with hardly any more knowledge of their chemistry than of an unknown judge
to be. A Med-Arb agreement changes that. It is even possible to have a "fake"
mediation just to find out what the individual is like. If the parties agree
that they do not like what they see, give the arbitrator notice and find someone
else or even start again. The parties may decide what they want from an
arbitrator and use competition to see that they get it.