ICC Bulletin

Message from the President

Back in 1922, the Rules established conciliation as a step prior to arbitration, stating that ‘[o]bservation of the working of arbitration in countries where this method of procedure now exists, leads to the belief that a great many disputes could be settled by conciliation, without recourse either to the Courts or to arbitration properly so called’ with its four first articles being dedicated to ‘conciliation as distinct from arbitration’.³

Today, many arbitration clauses provide for mediation or conciliation as a mandatory pre-arbitral step. Although these clauses can generate procedural difficulties and need to be carefully drafted,⁴ they may allow to avoid a long and costly arbitration, and above all to preserve the continuity of the business relationship between the parties, or to terminate such relationship in a peaceful way, thereby preserving the potential for future business. It is also important to consider that, in mediation, the parties are able to go beyond their entrenched legal positions and to openly discuss their underlying interests. Such openness is made possible by the confidentiality that is one of the fundamental underpinning principles of mediation, as confirmed by Article 9 of the ICC Mediation Rules.

Mediation is eminently flexible. It can be agreed as a pre-arbitral step, or it can lead to a stay of the arbitration, or else it can be conducted in parallel with the arbitration. Likewise, although these clauses are fraught with difficulties, it is open to the parties to agree to arb-med, i.e. a process in which the arbitrators will act as mediators.⁵

In all cases, any information exchanged in the mediation remains totally confidential, and is not produced in the arbitration.

The number of ICC Mediation cases is increasing every year, with a record 37 ICC Mediation cases introduced in 2018.⁶ Although the Mediation Rules allow for either mediation or conciliation as dispute resolution techniques, recent figures show that parties are prioritizing mediation as their preferred method. Alongside mediation, ICC has seen an increase in the use of its other ADR services: Expertise, Dispute Boards and DOCDEX (documentary credit dispute resolution expertise).

ICC Mediation cases include high value, complex disputes. The amounts in dispute in cases referred to the Centre in 2018 ranged from US$ 250,000 to US$ 860 million, the average being over US$ 50 million. Such amounts are often related to major infrastructural projects, EPC and supply agreements. Similar to ICC Arbitrations, the most represented economic sectors in ICC Mediations are energy, construction and industrial equipment.

These significant mediation disputes are treated expeditiously and involve costs that are minimal compared to the interests at stake. On average, the entire mediation process takes approximately 4 months and the Mediator’s fees and ICC charges tend not to exceed US$ 10,000 per party. Of course, for mediations involving low amounts in disputes, the cost is much less, so that it remains economical to attempt a mediation as opposed as to embark into litigation. In half of the ICC Mediations (51%) filed from 2014 to 2017, a settlement was reached between the parties.⁷ And even when the mediation is not successful, engaging into the process may have benefits anyway, for it allows the parties to test the strength of their arguments and to better understand their chances of success in arbitration.

Mediation is of particular relevance in certain parts of the world. Such is undoubtedly the case in Asia, where ‘parties’ overall relationships are typically valued more than any single contract between them’.⁸ The ICC Belt and Road Commission has particularly stressed that ‘for Chinese parties, the overriding objective when resolving a dispute is generally to preserve the commercial relationship, on a basis that both sides can accept’; ‘[a]s a facilitative process, mediation assists the parties to achieve this, with minimal conflict’.⁹

Unfortunately, there are still too many instances in which the parties embark into litigation with no sufficient consideration of the potential benefits of conciliation or mediation. Arbitral tribunals should, in appropriate circumstances, be more proactive in encouraging the parties, at the outset of the arbitration, to consider settlement negotiations or mediation.

While, in large and complex cases, experienced in-house counsel will in most instances have at some point discussed the potential benefits of settlement negotiations, this is not so when smaller companies or individuals engage into litigation. Too often do we see cases introduced for amounts in respect of which it is clearly uneconomical to arbitrate. The ICC has introduced, in 2017, its expedited rules in an effort to improve the costs/benefit analysis of cases involving monetary claims of less than 2 million USD. Yet, many arbitration claims involve amounts in the hundreds of thousands of dollars, or even less than 100,000 USD, with the aggravating circumstance that in such instances, the clauses at times provide for three arbitrators. In 2018, 120 cases involved claims of less than 500,000 USD, of which 20 involved claims below 100,000 USD. It is clear that, in such instances, there is something to be done to avoid uneconomical disputes to be pursued.

This is all the more so that mediation is entering into a new and extremely promising era. The United Nations Convention on International Settlement Agreements Resulting from Mediation, known as the Singapore Convention on Mediation, was opened for signature on 7 August 2019 and has so far been signed by 51 countries,¹⁰ including the USA, China, India, Saudi Arabia, Nigeria, Switzerland and Singapore. The Convention ensures the international recognition and enforcement of mediation and settlement agreements under certain conditions, including that the settlement agreement is signed by all parties and evidence is provided that a mediation took place. The settlement agreement must also be in writing and result from an international commercial mediation. The Convention therefore establishes an international framework allowing to eliminate the uncertainties and difficulties concerning the enforcement of settlement agreements. It also ensures that binding mediation agreements be enforced subject to Article 5 of the Convention which sets forth the grounds for refusing to grant relief. The existence of a predictable international legal framework for the enforcement of settlement agreements is a great encouragement to the parties to engage into mediation.

As part of its effort to encourage mediation, the ICC has established multi-tiered model clauses that provide for either optional or mandatory mediation. It is highly recommended to use these clauses, which will avoid the considerable procedural difficulties that can arise from defective mediation arrangements. Also, appointments of ad hoc mediators are made free of charge by the Centre in ICC Arbitrations. Parties are further incentivized to use mediation by the fact that half of the amount paid towards ICC administrative costs in mediation will be transferred to arbitration, in case the parties do not reach a settlement. Likewise, when parties decide to have a mediation window in an ongoing arbitration, the filing fee paid in the arbitration will be transferred towards ICC Mediation costs.

As a way of promoting mediation and ADR more broadly, the Centre holds regular informative presentations and trainings. Similarly, the Centre organizes the ICC Mediation Competition every year, the largest and most successful mediation event in the world. The Competition attracts international Mediators and university teams from around the globe, promoting ICC Mediation educationally and practically. ICC Mediation is present on social media, Facebook and Twitter, where statistics on Mediation, Expertise, Dispute Boards and DOCDEX are published, as well as the Centre for ADR’s latest updates. Finally, the ICC DRS App launched in September 2019 is a pioneering tool that combines essential ICC Dispute Resolution Services resources, putting them in one place to allow professionals to access them on the go at all times.¹¹

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