ICDR Offers Concurrent Mediation/Arbitration Clause

By Andersen, Steven K. | Dispute Resolution Journal, November-January 2008 | Go to article overview

ICDR Offers Concurrent Mediation/Arbitration Clause


Andersen, Steven K., Dispute Resolution Journal


ICDR DEVELOPMENTS

Mediation is said to be widely accepted by attorneys who counsel companies that engage in international commerce and the outside counsel they retain to represent them in connection with disputes. 1 Yet there appears to be a vast difference between the number of lawyers who advise clients concerning the benefits of mediation and those who actually mediate regularly. This disparity could be due in part to challenges encountered while negotiating an agreement to mediate. The challenging issue negotiators face is whether to agree to mediate before or after a dispute arises.

This article discusses a new clause developed by the International Centre for Dispute Resolution (ICDR) that makes it possible for parties to agree to mediate disputes at the same time that they agree to arbitrate. The new clause is not the same as the conventional "step" clause that is negotiated at the time of a deal. In the conventional clause, the parties agree to use one or more dispute resolution processes to resolve disputes that could arise out of, or in connection with, the transaction. The term "step" means that one process must be completed before the next one begins. Earlier steps call for one or more non-binding processes (e.g., mediation or negotiation) with the last step being a binding process (e.g., arbitration). The binding process is used only if earlier steps fail to produce a voluntary settlement.

Some practitioners like a two-step clause with mediation as the first step and arbitration as the second. Others prefer to have three steps, with negotiation by the parties' corporate executives as the first step, followed by mediation, and then arbitration if necessary.

To maximize the effectiveness of a step clause, it is necessary to prevent one party from delaying a step to prevent the next step from occurring. The ICDR's standard step clause does this by calling for mediation to be completed within 60 days of service of the demand for mediation

In the event of any controversy or claim arising out of or relating to this contract, or a breach thereof, the parties hereto agree first to try and settle the dispute by mediation, administered by the International Centre for Dispute Resolution under its International Mediation Rules. If settlement is not reached within 60 days after service of a written demand for mediation, any unresolved controversy or claim arising out of or relating to this contract shall be settled by arbitration in accordance with the International Arbitration Rules of the International Centre for Dispute Resolution.

But some practitioners say it is perilous to wait that long to start arbitration, while others contend that mediation is better held after the arbitration process has begun. Some practitioners oppose time limits altogether.2

There are also practitioners who prefer to have a plain arbitration clause, leaving the parties to decide whether to mediate after a dispute arises.3 While this sounds plausible in theory, in practice it is not always that easy. Experience shows that there are many hindrances to reaching an agreement to mediate (or agreeing on anything else, for that malter) after a dispute arises. Often the parties are so entrenched in their positions that contemplating an amicable resolution seems completely out of the question to them. Equally as often, neither side wants to be the first to agree to mediate, believing that to do so would signal weakness.4 In addition, it can be difficult to achieve a post-dispute mediation agreement with a party that has not mediated before because it has no reason to have confidence in the process. Other convenient excuses not to enter into a mediation agreement after a dispute has arisen include differences in the parties' culture, language and legal systems.

The Solution-A Concurrent Clause

To remove some of the impediments to reaching an agreement to mediate, the ICDR developed the "concurrent arbitration/mediation clause. …

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