29 February, 2016
SIMC supplements the array of international dispute resolution options available in Singapore. The new Protocol known as the Arb-Med-Arb Protocol (AMA Protocol), to be administered by SIMC in conjunction with SIAC, has the aim of promoting the use of mediation within the framework of international arbitration.
We consider the issues that hybrid dispute resolution procedures present, and how SIMC aims to tackle these through the AMA Protocol. We also set out a quick-reference flow chart, detailing the AMA procedure.
The concept of hybrid arbitration/mediation procedures is not a new one. Various prominent institutions including the International Centre for Dispute Resolution (ICDR), the International Chamber of Commerce (ICC), the Hong Kong International Arbitration Centre (HKIAC) and CIETAC all recognise and support the use of mediation as a precursor to arbitration or during the arbitral process. Indeed, the Singapore International Arbitration Act, (Cap. 143A) (IAA) itself already contemplates the use of conciliators / mediators during the arbitral process. Sections 16 and 17 of the IAA in particular provide that an arbitrator may also act as a conciliator during mediation proceedings provided that parties consent.
There have been several perceived issues with hybrid procedures in the past which have resulted in relatively low rates of adoption. We consider these below:
The parties undertake a mediation on the basis that, if it is not successful, the mediator will change roles and become an arbitrator of the same dispute.
The key perceived advantage of Med-Arb is that the arbitrator, being already familiar with the case from the mediation stage, should be well placed to settle matters in the dispute. Parties are also said to be motivated to 'go the extra mile' at the mediation stage, with the prospect of arbitration looming should parties fail to settle. There is also a costs saving element insofar as a separate arbitrator is not required to spend time getting acquainted with the dispute.
Empirical evidence suggests that Med-Arb is successful in parts of Asia. For example, the secretary general of CIETAC, Yu Jianlong, indicated that 20–30% of CIETAC's caseload is resolved by this method. A study of Japan Commercial Arbitration Association (JCAA) arbitrations from 1999 to 2008 showed a successful outcome in 25 cases out of 48, in which arbitrators assisted parties in reaching a settlement through negotiation and/or mediation.
There is a risk that the arbitrator's impartiality may be affected by overseeing a facilitative mediation. In particular, it may be difficult
for an arbitrator not to be influenced by supposedly "without prejudice" disclosures or proposals made by the parties during the course of settlement negotiations. The risk of a challenge to either the arbitrator or the award increases. Correspondingly, the desire to avoid the perception of bias may make a mediator reluctant to comment frankly and candidly with the weaknesses of each party's case, which greatly reduces the efficacy of the mediation process.
Whether this is in fact the case, there is a perception that parties are reluctant to discuss their respective positions openly with the mediator, if that mediator is also going to be the arbitrator and may go on to issue a final award against that party's interests.
Med-Arb also gives rise to potential issues of enforcement. The New York Convention applies only to awards arising out of "differences between persons". Insofar as a dispute has been effectively resolved by mediation, the lack of a current dispute at the time that arbitration is commenced for the purposes of converting such settlement into an award gives rise to doubts as to whether any resulting award would be enforceable under the New York Convention (or any other applicable enforcement regime).
The parties first go through some or all of the arbitration process, which is then adjourned to allow for mediation. If a settlement is achieved at the mediation, no award is made. If no agreement is reached at the mediation within an agreed time limit, the arbitral tribunal issues an award in the usual way. There have been instances where arbitral awards have been written by the tribunal and put under seal, for it only to be released to the parties where mediation is unsuccessful.
Given the time and costs involved in undertaking the arbitration first and then mediating, this process is more suitable for disputes that turn on relatively short questions not requiring extensive documentation or evidence.
The risk of losing the arbitration is intended to encourage the parties to adopt a reasonable approach to settlement at the mediation.
The parties have a better understanding of their strengths and weaknesses, making settlement more likely.
The same arbitrator/mediator bias issues apply as for Med-Arb, should the mediation be unsuccessful.
Where the arbitration takes significant time and resources, there is arguably little advantage in the parties attempting to mediate at a very late stage, both in terms of costs and maintaining a working business relationship.
THE AMA PROTOCOL IN A NUTSHELL
The new model AMA Protocol allows a party to commence arbitration under the auspices of SIAC, and then proceed to mediation quickly under the SIMC, then to resume arbitration if the mediation fails.
In practice, parties will, as they would in a regular arbitration, commence proceedings under the AMA Protocol by filing with the Registrar of SIAC a Notice of Arbitration. The Registrar will inform SIMC of the arbitration within four working days from its commencement (or, if the parties have not adopted the AMA Protocol at the outset, from the agreement of the parties to refer to their dispute to mediation under the AMA Protocol). After the filing of the Response to the Notice of Arbitration, and the subsequent constitution of the tribunal, the tribunal will stay the arbitration for mediation at SIMC. SIMC will fix a date for the commencement of mediation at SIMC, which will be conducted under SIMC's Mediation Rules.
Unless the Registrar of SIAC in consultation with SIMC extends time, the mediation must be completed within eight weeks of the Mediation Commencement Date.
Several key factors set the AMA Protocol apart from other hybrid procedures mentioned earlier:
- speed and certainty of the process
- associated reduction in the risk of enforcement
- impartiality of arbitrators and mediators, and assurance of institutional support.
Parties to the AMA Protocol have their mediation/arbitration administered by and under the respective rules of SIMC and SIAC, with the option of appointing an internationally recognised mediator/arbitrator from SIMC and SIAC’s respective panels. Perhaps uniquely in the context of the traditional understanding in Asia of the Arb-Med process (where arbitration and mediation proceedings are generally understood to be conducted by the same person), the default position under the AMA Protocol provides for the arbitrator(s) and mediator(s) to be separately and independently appointed by SIAC and SIMC respectively. This is likely to lead to increased confidence in the process as parties can be assured that their respective positions in the arbitration will not be affected by the mediation.
If the mediation is successful, parties may formalise the terms of the settlement in the form of a consent award in the arbitration. A consent award is generally accepted as an arbitral award and, subject to any local legislation and/or requirements, is enforceable in the approximately 150 New York Convention member states. The non-justiciable elements of any mediated settlement (for example, settled disputes that fall outside the scope of the arbitration agreement and hence the tribunal’s jurisdiction) would need to be recorded in a separate settlement agreement (which would not be enforceable under the New York Convention). Parties who cannot settle their disputes through mediation may continue with the arbitration proceedings.
Parties can avail themselves of the AMA Protocol in Singapore by incorporating the model Arb-Med-Arb clause (Model Clause) into their contracts referring disputes to SIAC and SIMC for arbitration and mediation. The Model Clause reads:
All disputes, controversies or differences (“Dispute”) arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration in Singapore in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (“SIAC”) for the time being in force. The parties further agree that following the commencement of arbitration, they will attempt in good faith to resolve the Dispute through mediation at the Singapore International Mediation Centre (“SIMC”), in accordance with the SIAC-SIMC Arb-Med-Arb Protocol for the time being in force. Any settlement reached in the course of the mediation shall be referred to the arbitral tribunal appointed by SIAC and may be made a consent award on agreed terms.
It is worth noting that the Model Clause contains a very bare reference to arbitration. In the absence of express agreement by the parties, SIAC's Arbitration Rules (which the Model Clause incorporates by reference) deal with key matters such as the number of arbitrators, the seat of the arbitration and the language of the proceedings. Parties should consider supplementing the Model Clause with bespoke drafting to reflect parties' intention on other aspects of the arbitration, such as the language and seat of the arbitration.
Parties who have already commenced arbitration at SIAC may also, at any stage of the arbitration, refer their dispute to SIMC for mediation. The arbitration will be stayed by the tribunal pending completion of the mediation process.
Although the AMA Protocol does not specifically refer to this, it is also open to the parties to elect to refer their dispute to SIMC for mediation first, and if mediation does not result in settlement, proceed to arbitration.
AMA PROTOCOL WITHIN SINGAPORE'S ADR FRAMEWORK
The AMA Protocol is the latest move to encourage the use of ADR in Singapore. The pro-ADR stance is well illustrated in the decision in International Research Corp PLC v. Lufthansa Systems Asia Pacific Pte Ltd and anor  SGCA 55. There, the Singapore Court of Appeal upheld a multi-tiered dispute resolution clause requiring parties to escalate any dispute for negotiation as a precondition to arbitration and stressed that "[w]here the parties have clearly contracted for a specific set of dispute resolution procedures as preconditions for arbitration, those preconditions must be fulfilled". Insofar as the use of the Model Clause represents a clear intention by parties to engage in mediation as a precursor to arbitration, it is likely to be upheld by the Singapore courts.
Further measures can be taken to ensure the viability and popularity of the AMA Protocol in Singapore. For one, the input of legal advisers is generally recognised as a decisive factor in determining whether parties consider mediation as an option. The Singapore International Mediation Institute (SIMI) also launched in November 2014 primarily as a professional standards body for mediators and to increase awareness of ADR, will play an important role in making practitioners aware of the benefits of, and providing training on, mediation.
Arbitrators will also play an important role in directing the minds of parties to arbitration to the possibility of mediation during the arbitration process. Aside from SIAC arbitrations, the ICC, the ICDR and the American Arbitration Association (AAA) (amongst others) all make provision in their arbitral rules for encouragement and facilitation of mediation during the arbitral proceedings (in some cases, with different person(s) sitting as mediator(s)).
The AMA Protocol represents another boost for ADR in Asia, and an example of dispute resolution institutions honing arbitration and mediation practice. It is further evidence of Singapore’s commitment to staying ahead of the curve as a leading one-stop dispute resolution venue. Having said that, whether the AMA Protocol will mature into a dispute resolution option of choice will significantly depend on the parties' awareness regarding the benefits of mediation and, once mediation is entered into, the quality of the mediations conducted by SIMC.
For further information, please contact:
Alastair Henderson, Partner, Herbert Smith Freehills