29 February, 2016
Deputy Chief Executive Officer of the Singapore International Mediation Centre (SIMC), Eunice Chua, has been part of SIMC's executive team since its inception in November 2014. Prior to that Eunice served as Assistant Registrar of the Singapore Supreme Court, a Magistrate of the Singapore State Courts and Assistant Director of the Singapore Mediation Centre (SMC). Here, she gives her insights into how mediation in Asia is changing, and SIMC's contribution to that landscape with its innovative AMA Protocol.
Mediation is not new, but its weakness as a stand-alone ADR mechanism is acknowledged. As a result, Singapore's Attorney General (AG) VK Rajah recently indicated his view at the Regional Arbitral Institutes Forum Conference in Kuala Lumpur that the future belongs to hybrid dispute resolution mechanisms, which combine non-adversarial ADR processes, such as mediation or neutral evaluation, with arbitration or litigation. Is this a view that you share?
Yes, I do share the AG's view—there are indications that hybrid dispute resolution mechanisms are becoming more commonplace around the globe. A recently published study in the Harvard Negotiation Law Review surveyed Fortune 1000 companies about the types of ADR mechanisms they had used in the past three years. Interestingly, the results showed an increase in the use of ADR generally, especially mediation, which 98% of respondents indicated they had used. There was an 11% increase in the use of mediation-arbitration, reaching 51% of respondents.
The Harvard study is in line with the AG's views. When looking at these sources, we can see that companies are seeking out tailor-made dispute resolution mechanisms, and it is becoming clear that these forms of dispute resolution allow them to achieve more at a lower cost.
Do you think there is a difference in Western and Asian attitudes towards adopting such hybrid dispute resolution mechanisms?
From my experiences working in Asia, I do think that Asian companies can see the benefits that alternative and hybrid dispute resolution mechanisms can provide although they are not as commonly used as in western companies. Anecdotally, the big Asian companies have very hierarchical structures, and their risk-taking appetite is smaller. When you look at these large companies, bosses are traditionally more familiar with litigation. Also, amounts recovered through litigation can seem larger than amounts agreed in ADR, at least before the time and monetary costs of litigation are factored into the equation.
Western companies may not be entirely comfortable with how mediation has developed in Asia, because some Asian courts have directed disputes to be settled by mediation instead of litigation. Such mediation may be conducted in a very directive, interventionist manner, which Western companies may not be open to, nor understand.
SIMC and SIAC are promoting hybrid dispute resolution as another alternative. They have introduced the AMA Protocol. This Protocol allows parties to commence arbitration, suspend arbitration to attempt mediation, and either return to arbitration if meditation proves unsuccessful, or if settlement is reached, record the settlement as a consent award in the arbitration (Arb-Med-Arb). This assists with enforcement under the New York Convention.
Western companies that are wary of court-annexed mediation should try out ADR conducted by independent bodies such as SIMC and SIAC.
However, is it correct to say that there still seems to be resistance to utilising these hybrid dispute resolution mechanisms?
Yes. For example, some parties think that Arb-Med-Arb is cumbersome, adding another process to go through before a dispute can be settled, which leads to more cost.
Personally, I'm of the view that even if the parties do not reach a settlement through ADR, they still derive benefits from going through the process. A good mediator can get to the crux of the issues in the dispute, and help both sides get a clearer idea of what the other side is willing to accept. Parties can also speak more frankly with each other during mediation.
The value of ADR is empirically validated. The Singapore Government has also provided very strong support for ADR as many Asian governments do.
One of the greatest challenges we have in moving forward is how to change the mindsets of reluctant parties. This is going to take time.
What can hybrid ADR mechanisms offer that traditional methods such as litigation or arbitration cannot?
This question takes me back to my days as an Assistant Registrar in the High Court. I witnessed many litigation cases where procedure was, and still is, used to hinder the opposing parties' legal case. I think the procedural requirements in litigation, and sometimes arbitration, do get in the way of really getting to the heart of the dispute. You might win an interlocutory hearing but in the grand scheme of things it might not move the case forward towards a proper resolution.
In contrast, mediation under the AMA Protocol, for example, is not so concerned about procedural formalities. The focus is very much on what the parties need to move forward and what the ideal solution is. There is a strong emphasis on finding commercial business solutions.
You mentioned that parties to ADR get a better idea of what the other side is willing to accept, and this—in and of itself—creates value for them. But aren't parties also concerned that revealing how far they are willing to go could prejudice their case in court if the ADR fails?
Sure, it's a natural concern for parties involved in dispute resolution proceedings. But remember, mediation should not be seen as a legal process. It is not a trial run of your case before the mediator, because the mediator is not going to decide on the merits of the case, or steer parties to address legal issues. Rather the mediator's goal is to guide the parties
to an agreement, in an objective and impartial manner.
"Mediation should not be seen as a legal process. It is not a trial run of your case before the mediator."
Every word uttered during mediation is confidential, and cannot be admitted as evidence if the case goes to court. The parties' cases before the judge will not be affected.
Parties can also ask for private sessions with the mediator, so not all information needs to be revealed to the other party. The mediator is privy to certain important information that is intentionally kept away from other parties and that can help him or her to guide parties to an agreement.
Would you agree that the mediator's role as—and to be seen as—a figure of authority is very important?
Absolutely, particularly so in high-value international disputes. The mediator needs authority in order to build rapport and trust between parties. Without this trust, mediation cannot work.
Do you see SIMC playing an important role in ensuring that neutral parties who are respected figures serve as mediators?
Yes. SIMC has a strict policy in that all our mediators are required to be certified by the Singapore International Mediation Institute. On the one hand, this is a bit burdensome for mediators because they have to go through the certification process, but such a system assures SIMC's independence, and the quality of our mediators which is our strong selling point.
In your opinion, are there disputes that are inherently unsuitable for mediation?
Most disputes can be successfully mediated as long as parties agree to mediate, but being totally frank – yes, there are some situations where mediation might not be the best forum to resolve disputes for the parties. For example, if you have a party who wants a judge to make a public finding, or where parties want to set a precedent. Mediation is a confidential process, so it would not be able to help parties achieve those aims.
Another kind of dispute is where there is a severe power imbalance, such that there is no way for frank and serious negotiations to ever take place. However, those are rare and as long as both parties agree to mediate, that is good enough.
Under the Arb-Med procedure used by institutions such as the China International Economic and Trade Arbitration Commission (CIETAC), the arbitrator traditionally also sits as mediator. It is said that this gives the arbitrator useful information on parties' respective positions and the facts of the case, which in turn assists in the mediation process. The AMA Protocol procedure introduced by SIMC however engages a third party mediator who has limited background to the matter. This is often cited as an advantage in terms of the perceived impartiality of the mediator? Do you agree?
Yes, the AMA Protocol procedure does provide that advantage of impartiality.
The awards under the Arb-Med, and even Med-Arb procedures are sometimes challenged on the grounds of bias. Because each party can share information with the mediator privately, the other party is afraid that if the mediation later turns into arbitration or vice versa, the views of the arbitrator (who was previously the mediator) would be coloured by what he/she learnt beforehand.
There is a way around this. The parties can agree that there will be no private sessions with the arbitrator/mediator. But the downside of such an arrangement is that the value of the ADR process cannot be fully realised. The arbitrator/mediator is unable to build trust and rapport with the parties, which is crucial for mediation to succeed.
"The mediator needs authority in order to build rapport and trust between parties. Without this trust, mediation cannot work."
In contrast, the AMA Protocol ensures that the arbitration and mediation procedures are independent from each other. They are administered by two separate independent institutions, SIAC and SIMC. So the concerns that I just mentioned do not arise.
How do you see the AMA Protocol as being better than another hybrid dispute resolution process, for example Med-Arb?
One problem with the Med-Arb procedure is that the award may not be enforceable. Often, parties who have successfully mediated under Med-Arb try to record their settlement as a consent arbitral award. Under arbitration rules, this might not be possible because there was no real dispute to begin with.
Such a problem does not arise under the AMA Protocol. Because Arb-Med-Arb begins with parties commencing arbitration with SIAC, any later consent award resulting from a successful mediation can be enforced in the same way as an ordinary arbitration award. In fact, the AMA Protocol was conceived to solve the problem of unenforceable mediation settlements.
Does the AMA Protocol have its disadvantages?
Yes. But the disadvantage is very minor, if you consider the bigger picture.
A disadvantage I can see is that the AMA Protocol will cost more than Arb-Med or Med-Arb. This is because two separate institutions, SIAC and SIMC, are involved.
However, the corresponding advantages of involving these two institutions are the assurance that the arbitrator and mediator are independent from each other, that the arbitration and mediation are each properly and efficiently managed, and that the eventual outcome of the mediation or arbitration can be enforced. These are significant advantages. When the dispute involves a large sum of money, incurring additional costs becomes more justifiable.
Another area of concern for end-users is that further to the recent Court of Appeal decision in HSBC Institutional Trust Services (Singapore) v Toshin Development, parties who insert Arb-Med-Arb clauses into their contracts will be bound to first utilise these procedures before attempting litigation. The fear is that they will incur unnecessary cost and time complying with these requirements. Instead, they would prefer to let the dispute escalate, then assess whether the nature of the dispute is more suited for Arb-Med-Arb, other forms of ADR, or litigation. Do you see the inclusion of such clauses at the outset as important?
Definitely, it is important to include the clause at the outset. The start of the relationship is the best point in time to think about possible dispute resolution mechanisms.
You never know what form the dispute takes. It can be an escalation, or a sudden explosion. Parties to the dispute at that point of time may not be in the best frame of mind to think about what will properly solve their dispute, and Arb-Med-Arb may never cross their minds as a viable option.
There is very little to lose in agreeing to try Arb-Med-Arb. At most, you will lose a small fee. There is also an automatic 8-week limit for mediation under the AMA Protocol, so it does not have to lengthen the dispute resolution period by that much. However , you gain the real possibility of resolving your entire dispute in a short period and an enforceable outcome.
There does seem to be a need to encourage parties to try ADR mechanisms. How does SIMC plan to encourage the use of its AMA Protocol?
SIMC is very active in Singapore and the region already teams up with SIAC in terms of marketing efforts. Because SIAC is more established, it has a wider marketing base than SIMC. When SIAC organises events and roadshows, they help promote the AMA Protocol and spread the word about SIMC. SIAC also includes information about mediation when it sends out its first administrative letter to disputing parties following the filing of the Notice for Arbitration.
SIMC also plans to collect more statistics regarding the usefulness of Arb-Med-Arb and mediation, as it increases its caseload. These statistics will be helpful in convincing parties that Arb-Med-Arb may be a better dispute resolution method than litigation.
Do arbitrators themselves also play an important role in pushing parties to mediation?
Yes. But they are more constrained than judges in making such suggestions. Arbitrators tend to be more concerned about how people might view them. They may think that pushing parties to mediation may affect the awards that they grant.
In a sense, asking arbitrators to suggest mediation to parties under the AMA Protocol is to ask them to move away from the more comfortable status quo. But I do hope arbitrators can begin to see their role more holistically—not just as someone who conducts a hearing and writes an award, but someone who is there to help parties resolve a dispute. Sometimes, the dispute must be pushed to mediation which goes beyond legal rights and remedies, in order for the real problem to be resolved.
Another important stakeholder to ADR success is the legal adviser. Do you agree that if lawyers are not open to ADR, then it is unlikely parties will be receptive to including mediation or the AMA Protocol in a dispute resolution clause?
I agree that lawyers play a very important role in encouraging parties to try Arb-Med-Arb. Even in the mediation process itself, they play a crucial role. Mediators tell us that the best mediations they have conducted are those where the lawyers have done a lot of preparatory work, and have discussed what their clients really want and what they can give up. In such cases, the mediation plays out almost on its own.
I do like to think that most lawyers will not shy away from encouraging ADR just because they want to make money. Most lawyers know they may be paid less for a dispute that goes to ADR, but they also need to discharge their professional duties to their clients and seek to maintain a long-term relationship with them. ADR has also been around for a long time and no one has gone out of business because of it.
Given the AG's push for hybrid dispute resolution mechanisms, and the positive steps that the Singapore Government has taken in setting up and supporting SIMC, how do you see the ADR landscape changing in the next 5–10 years?
In five years' time, I foresee that Arb-Med-Arb clauses will become a common feature in many contracts. We have heard of people already starting to incorporate these clauses in their contracts, and there will be a knock-on effect as people get used to seeing them. SIMC will also increase its caseload as more of these clauses are used.
In 10 years' time, more effort will be put into negotiating dispute resolution clauses as ADR becomes more common. Lawyers will increasingly be called on to justify the dispute resolution clauses that they draft and the dispute resolution mechanisms they recommend. In-house counsel, especially those in larger companies, will also have to familiarise themselves with ADR methods.
We have been hearing from larger companies that their company policy is to have some form of early case assessment to determine the most efficient way to resolve disputes.
Another possible development could be the setting up of Asian international mediation institutions, to develop a culturally sensitive international mediation model in Asia. This would hopefully marry cultural differences between Asian and European mediation methods, and incorporate best practices from around the world. This would help make Asia, and hopefully SIMC and SIAC, the go-to destination for hybrid dispute resolution.
Something else to look forward to would be a New York Convention-equivalent for mediation. The US is pushing for such an equivalent, and the UNCITRAL commission approved in July 2015 work on the possible preparation of a convention, model priorities or guides and texts on the enforcement of settlement agreements resulting from international commercial mediation. A lot of issues will need to be worked out before such an instrument can be agreed upon. But the need is there. Currently, mediation relies heavily on voluntary compliance. There is no case law on going to courts to enforce a mediation agreement, and a New York Convention-equivalent for mediation would greatly increase the attractiveness of mediation as an ADR mechanism.
"Because Arb-Med-Arb begins with parties commencing arbitration with SIAC, any later consent award resulting from a successful mediation can be enforced in the same way as an ordinary arbitration award. In fact, the AMA Protocol was conceived to solve the problem of unenforceable mediation settlements."
"In five years' time, I foresee that Arb-Med-Arb clauses will become a common feature in many contracts. "
For further information, please contact:
Alastair Henderson, Partner, Herbert Smith Freehills
alastair.henderson@hsf.com
