ICC SME LABS #1: ICC Mediation

25 February 2021, online

Ana Virginia Bauder;
Mediator – Director, Mediate&Co, London

Dania Fahs (Deputy Director, MENA, International Court of Arbitration, Abu Dhabi) moderated and inaugurated the series for the 9th ICC MENA Conference, which too place on 24-25 February 2021), to emphasise the importance of mediation as an efficient and cost-effective solution for amicable dispute settlement between the parties. The panel of the first workshop featured Ana Virginia Bauder (ADR Consultant - Director at Mediate&Co, London; CEDR Mediator & Trainer), Alya Ladjimi (Manager, ICC International Centre for ADR, Paris), Diana Paraguacuto-Mahéo (Partner, Foley Hoag LLP, Paris) and Asli Yilmaz (Counsel, ICC International Court of Arbitration, Paris).

How do SMEs and start-ups – especially those without in-house legal counsel – manage their commercial disputes? And should mediation be their first choice given that it offers users the opportunity to resolve their disputes in an affordable and efficient way?

Definition of mediation

Alya Ladjimi started by defining ‘mediation’ in accordance with the ICC Commission of Arbitration and ADR, as described in the ICC Mediation Guidance Notes:

[M]ediation is a flexible settlement technique, conducted privately and confidentially, in which a mediator acts as a neutral facilitator to help the parties try to arrive at a negotiated settlement of their dispute. The parties have control over both the decision to settle and the terms of any settlement agreement.1

Ms Ladjimi explained that a mediation starts with a request, filed individually or jointly by the parties. Parties can choose to include a mediation clause in their contract in advance of a dispute,2 or propose such process once a dispute has arisen, before or after initiating litigation or arbitration.

Parties can agree on many aspects of the mediation, from the language to the mediator, and how long the sessions would last. Mediation is conducted privately as the sessions are not public and all the information disclosed in advance and during the meetings with the mediator and between the parties is confidential. Sessions can be held jointly with the mediator and the parties, or with the parties meeting separately with the mediator.

The mediator acts as a neutral facilitator and not as a decision maker, such as a judge or an arbitrator. The only decisions the mediator makes are in relation to the process and the mediator will not give legal advice at any stage – regardless of whether the mediator has a legal background. The parties, not the mediator, have control over the decision or the outcome even though the mediator works closely with the parties to assist them, by broadening their perspective and focusing on the future, in order to help them reach a solution that works for them. If the parties reach a decision, it will generally be binding when put in writing and signed by all parties.

Advantages of mediation

In turn, Diana Paraguacuto-Mahéo explained that mediation should be considered for all types of disputes. Even if it is not a ‘one size fits all’ type of solution – mediation should always at a minimum be considered because its advantages are so large, and far outweigh any risks. The advantages of mediation are essentially its main features:

  • Flexibility. Mediation is a process that is flexible by nature. It does not have the formalities that any other process has. Parties can shape it to their needs: they can choose the language, the mediator’s style, whether evaluative, facilitative, or a combination of both, as well as the location and whether to meet in person or remotely, on the platform of their choice.
  • Confidentiality. The confidentiality allows the parties to openly discuss without having any information being used against them in a future process. Parties could resume their litigation or arbitration without compromising their position if the mediation does not end up being productive. This mechanism allows the parties to preserve relationships, given that it is an assisted negotiation, not an adversarial process. Therefore, the parties can build bridges and look for solutions that focus on their interests and meet their needs, which is crucial for SMEs in particular when there is an interest in preserving future business relationships.
  • Cost-effective. A low cost, but not low quality, solution, with a potential for a high value outcome. The administrative costs are contained and legal fees can be limited. Moreover mediations last less than three months, and some last just one day,3 allowing the parties to fully and finally resolve their dispute on their own terms, as opposed to any other processes.

Creative Solutions: expanding the pie

Ana Bauder shared how these advantages enable the parties to reach much better solutions than any other process. Whilst it is common practice in mediation for businesses to maintain good relationships, it is true that this is not always possible to achieve. Nevertheless, parties can still reach a very positive and successful outcome settling a dispute which may involve splitting or dissolving their business.

Ms Bauder described a case, in which three partners had been running a healthcare business successfully for some years before they started to have some trust issues. One was alleged not to be completely transparent with the other two partners about some new patients. There were also some questionable fees, which were allegedly not appropriately accounted for or distributed in accordance with the partnership agreement. As the lack of trust had started to have a detrimental impact on the business, one of the partners threatened litigation. However, at the suggestion of the counsel for another partner, all three partners agreed to go to mediation. After a few phone calls and the exchange of some documents in advance of the mediation, the parties were able to meet and reach a settlement after just one day of mediation. All parties were represented by counsel, which is ideal because that allows parties to have a better and more realistic approach. Parties ultimately agreed that two of the partners would continue the business and buy out the third partner, and that the third partner would be able to continue practising in the same area, keep his patients, and start right away despite the non-compete clause.

Through their hard work in just one day of mediation, the parties were able to reach a creative solution which met everyone’s needs. They were able to maintain their personal, professional and commercial reputation, and keep the business going. They saved time and money by avoiding years of litigation, and the parties remained in control at all times of the outcome. In other words, it was a win-win scenario for all parties involved.

Mediate when direct negotiations fail

As Ana Bauder described, parties engaged in direct negotiations quite often find themselves on complete opposite ends of the spectrum in their demands and claims, and are generally not able to show all their cards. Whereas when they negotiate with the assistance of an experienced mediator, thanks to the confidentiality and the skills of this third neutral party, the parties can open up and disclose their needs, priorities and interests, giving place to a much more fruitful negotiation. By mediating, they are maximising their opportunities to obtain a better result than by negotiating directly or leaving it to a third party to make a decision on their behalf.

Mediation attendees

As Diana Paraguacuto-Mahéo pointed out, determining who should attend is key for any mediation. All parties should consider who should attend a mediation, and when they will attend.

For example, while counsel are essential for formalizing the agreement reached by the parties during the process and potentially provide legal advice in advance of the mediation, their place at the table is not strictly necessary.

Instead, a key representative of the company must attend, since it is the company’s dispute and only that company is really able to assess its actual needs and interests. Ideally, such representative should: (i) be someone not too emotionally attached to the dispute, but with good knowledge of the company; (ii) have sufficient authority to speak on behalf and be prepared to negotiate on behalf of the company; (iii) be prepared to listen and be open to adapt to what is discussed during the mediation sessions; (iv) have credibility and notoriety, and a broad power to settle the dispute.

The parties’ legal counsel will be key for the preparation of the parties in advance of the mediation, and expected to be quite active towards the end when drafting a settlement agreement, if one is reached. Overall, each party should be represented by a team consisting of individuals of equivalent role, and relationship to the dispute to that of the other side’s, in order to ensure an equal footing during the negotiations and maximise their chances for a settlement.

Planning a strategy in advance

A successful mediation requires careful preparation. Besides putting together the right team, parties should, preferably with counsel, define their negotiation strategy – one that goes beyond assessing the chances to win in court or arbitration. Parties need to know in advance their non-negotiable bottom lines and have a clear idea of what would be a realistically good outcome.

Parties need to find ways to use the mediator to maximise their opportunities to expand the pie and get a win-win out of their dispute. To do so, parties should discuss with the mediator in advance on what information should be provided and when, and, if the mediator is good enough to earn their trust, parties can allow the mediator’s discretion to share information to the other side when most suitable.

Pre-arbitral ADR stepped clause

Asli Yilmaz highlighted the high number of multi-tiered arbitration clauses that include a pre-arbitral step for negotiation, mediation or other ADR processes, which may be mandatory, suggestive or recommended, depending on the wording of the clause.

Ms Yilmaz indicated that unless the ICC Court determines there is no prima facie arbitration agreement (in matters referred to it by the ICC Court Secretary General), the issue of whether there is a pre-arbitral step and whether it has been complied with, or the issue of jurisdiction generally, will be decided by the arbital tribunal. Where the tribunal finds that the pre-arbitral step was mandatory but that claimant had not complied with it, it may suspend the proceedings and invite the parties to mediate their dispute or otherwise comply with the multi-tiered clause.

The online conference opening poll revealed an audience with a majority of non-lawyers, 60% of which had experience with resolving disputes through mediation and more than 91% were in favour of using mediation as a mean to resolve a dispute. Let’s hope that, with such insightful presentations on how SMEs should consider – and benefit from – mediation, participants will feel more encouraged and comfortable to mediate their future disputes.

ICC SME LABS #2: ICC Expedited Arbitration

16 March 2021, online

Mehveş Erdem
Associate, Erdem&Erdem Law Office, Istanbul

The second SME LAB focused on the main features of ICC Expedited Procedure Provisions (EPP), which are aimed to ensure a quick and affordable dispute resolution mechanism for SMEs and start-ups.

Following welcoming remarks by Sami Houerbi (Director for Eastern Mediterranean, Middle East &Africa, ICC International Court of Arbitration), Asli Yilmaz (Counsel, ICC International Court of Arbitration) presented the EPP’s main features and ICC’s experience. Kimberley Christiansen (Principal, Support Legal, United Arab Emirates), Mahmut Özlü (Former Chairman, Turkish SME), Mehveş Erdem (Associate, Erdem&Erdem, Istanbul) and Nasser Ali Khasawneh (Partner, Head of Technology, Media, Telecoms Sector, Chairman, Middle East Eversheds Sutherland, United Arab Emirates) addressed SMEs’ concerns and expectations in the context of dispute resolution, and how ICC Expedited Arbitration is particularly well-suited for SMEs.

ICC Expedited Procedure Provisions (EPP)

The presentation kicked off by highlighting ICC’s experience in fast-track arbitration, minimising costs and increasing efficiency.

Asli Yilmaz first explained the EPP’s scope of application, i.e. the temporal conditions (i.e. contract signed after 1 March 2017 and 1 January 2021), monetary thresholds (i.e. dispute of USD 2 million under the 2017 Rules and new threshold of USD 3 million introduced with the 2021 ICC), safeguards (i.e. the opt-out options) as well as the ‘opt-in’ option upon agreements of the parties. Main features of expedited procedure include the removal of the terms of reference, a mandatory case management call, a six-month time limit to deliver the final award, a wide discretion of the tribunal to decide the case on documents only, and a 20% reduced fee scales. It was also mentioned that the Court had the discretion to appoint a sole arbitrator notwithstanding the parties’ agreement for a three-member tribunal.

Ms Yilmaz then shared some statistics: there have been 291 requests to opt-in EPP since the establishment of the EPP. Among the 291 requests, parties agreed to opt-in in 77 cases and 166 cases have applied the EPP automatically. In 12 cases, parties agreed to opt-out. Since 1 March 2017, 247 cases (93 cases were ongoing) were administered in total and the average amount in dispute is USD 715,000.4 Statistics on the constitution of the arbitral tribunal, final awards, document production phase and hearings were also provided. It was highlighted that while many of the EPP matters use the monetary value as the threshold point, ICC has seen EPP cases up to USD 100 million.

In terms of which disputes and sectors are better suited for EPP, the common idea of the speakers was that most disputes can be resolved through EPP unless the dispute requires extensive expertise, factual and expert witness evidence such as complex construction cases.

EPP in action: Real life examples of specific disputes involving SMEs and start-ups

In this session moderated by Ms Yilmaz, the audience was polled on whether arbitration or litigation is preferred (91% of the participants answered in favour of arbitration) and whether the audience had any experience with expedited or fast track arbitration (34% answered ‘yes’).

Kimberley Christiansen highlighted that the SMEs do not have the resources or the luxury to analyse dispute resolution mechanisms. In her experience, SMEs highly focus on time, cost, enforceability and confidentiality. Mahmut Özlü further noted that SMEs concern after selecting ICC was whether the treatment they would face from ICC and the arbitrator as an SME would differ from the treatment towards the opposing party, being a multi-national company and an (experienced) user of ICC Arbitration. However, Mr Özlü stated that such concerns were due to SMEs lack of knowledge of the ICC Arbitration process.

Speakers discussed the increase of users wishing to apply the EPP. Specifically, Mehveş Erdem pointed out that the increase is directly related to the awareness of the users, which can be attributed to the advisors who are becoming more comfortable in recommending expedited procedures as their experience in the process has grown over the years. Nasser Ali Khasawneh also highlighted the importance of awareness and spreading the word of the benefits of using the EPP, especially as there is a presumption today that arbitration is expensive – and a resulting tendency to go to court assuming that it will be less costly.

Speakers discussed whether an expedited case is a ‘normal’ arbitral process that is condensed in a shorter time frame. Mr Khasawneh emphasised that the expedited procedure is essentially regular arbitration with adapted features making it less costly and quicker. Some users usually involved in complex cases are also pleased with the expedited procedure, which in terms of costs is comparable to the courts. Ms Erdem added that practitioners should be open minded and should not opt out EPP.

The possibility of increasing the monetary threshold and whether there is a danger in equating a ‘simple’ case with a ‘small claim’ case was further discussed. It was emphasized that quantum is a good indicator of case complexity but not an absolute one; a simple and/or small claim should not be confused. EPP is made for cases that certainly require due process and attention but still suitable because of their level of complexity.

Another poll showed of the audience’s preference for a sole arbitrator (77% of the audience) over a three-member arbitral tribunal. In this respect, speakers addressed the growing tendency to select sole arbitrators especially as a tool to lower the costs. Ms Christiansen put forth some unspoken concerns of users, from the civil law or the common law, who might prefer a three-member arbitral tribunal comprising at least one arbitrator of the same legal background. Ms Erdem further added that some users believe that if they appoint their own co-arbitrator, such co-arbitrator will guard their interest, she added that as advisors they have been fighting against this misinterpretation which sometimes drives parties to lean towards three-member tribunals.

Mr Özlü then shared his experience as a SME former chairman. He highlighted that while he had no prior knowledge of EPP, his advisors – after considering the amount in dispute and the priorities to solve the dispute quickly and in a less costly manner – recommended ‘opting in’ to EPP, which was agreed by the opposing party. Mr Özlü pointed out that despite all the guerrilla tactics they encountered, the case was concluded in 10 months. He noted that he was pleased with the EPP experience and that it was fast and reliable.

The speakers finally addressed whether a hearing should take place in the context of EPP. It was agreed that the necessity and relevance of a hearing would be determined according to the complexity of the case and that practitioners should not insist on having a hearing, if not necessary. As in any other proceedings, the qualities and diligence of the arbitrator, and the cooperation between parties, are key to the success of the expedited procedure.

ICC SME LABS #3: Using Experts for Cost Efficient and Effective Dispute Resolution

28 April 2021, online

Victoria R. Orlowski
Of Counsel, Gibson, Dunn & Crutcher, New York; President of the Standing Committee, ICC International Centre for ADR

The third part of the SME Lab focused on why ICC’s Expert Rules and the services ICC offers thereunder are a great option for SMEs and start-ups.

Often, issues or disputes arise concerning specific questions, such as share valuation when a co-founder exits a start-up or who is liable for project delays for new technology. Rather than initiating a long and costly dispute resolution process – or going to court, which often is a non-starter – parties may choose to resort to someone with specialized knowledge to determine the issue in a quick and cost effective manner. Unlike arbitration, which addresses legal issues, expert determinations most often concern facts and do not necessarily require the involvement of attorneys or external counsel. Expert determination can be used in any kind of dispute and is one of the most flexible and cost-effective methods to overcome disagreements or other issues that arise. The ICC Expert Rules offer three different levels of services: non-binding proposals of experts, appointment of experts and administration of expert proceedings. Through its Expert Rules, ICC provides options and procedures that are flexible, confidential, and cost-efficient, a crucial combination for SMEs. And, while ICC expert proceedings function efficiently as standalone dispute resolution procedures or to support them, they also can be seamlessly combined with other ICC dispute resolution offerings, including mediation and arbitration.

Taking part in the lab, Victoria R. Orlowski (Of Counsel, Gibson, Dunn & Crutcher, New York; President of the Standing Committee, ICC International Centre for ADR) was joined by Dania Fahs (Deputy Director, MENA, ICC International Court of Arbitration, Abu Dhabi), Alya Ladjimi (Manager of the ICC International Center of ADR (the ‘ICC Centre’), Paris) and David Laliberté (Executive Director of Legal at Digital14, Abu Dhabi).

After a warm introduction by Dania Fahs, who set the stage for the discussion and adeptly moderated the panel, Alya Ladjimi presented the ICC Expert Rules and the services the ICC offers thereunder, specifically non-binding proposals of experts, appointment of experts and administered expert proceedings. To request the Centre’s services under the Expert Rules, ICC has a form for parties to complete, which makes filing requests simple. Regarding the proposal of experts, Ms Ladjimi explained that the ICC Centre can propose experts unilaterally, without an agreement between the parties. Using the Centre as a neutral party to identify experts is a cost efficient way to find experts with unique qualities. Moreover, using the Centre’s proposal service is a smart option when negotiating with a counterparty concerning an expert or neutral that is to be jointly selected – particularly when negotiations are at loggerheads. Proposing a neutrally selected expert or neutral to the other party that meets the requirements of the case may efficiently and effectively unblock the proceedings. With a proposal, parties may consider the expert and have the discretion of whether or not to use that expert. By contrast, with an appointment, while the process is similar to a proposal, the ICC Centre goes the next step and appoints the expert or neutral, officially putting them in place. Accordingly, an agreement is required for the ICC Centre to appoint an expert. When the ICC Centre proposes or appoints an expert, the Centre conducts a bespoke search for the expert that meets the parties’ requests and requirements, rather than relying on a predetermined list that likely would not include experts that specifically meet the particular requirements of the case. And, in the rare instances where such an expert does not exist, the Centre works with the parties to better understand their needs and refine the qualities they require in the expert.

Alya Ladjimi then explained ICC’s most unique offering, administered expert proceedings, which require an agreement for their use. The administered Expert Rules contain a simple defined procedure that assists experts, who unlike arbitrators, often do not have experience in managing proceedings. The Rules also assist parties by providing greater clarity concerning what they can expect from the process. Experts can be jointly nominated by the parties or appointed by the ICC Centre and may be a physical or legal person (such as a company or partnership). In either case, experts must establish a mission setting out, among other things, the scope of the expert’s mandate and a procedural timetable. Experts are tasked with making findings in written experts’ reports that the ICC Centre scrutinizes, helping ensure that reports, which often are technical, are comprehensible and fulfill the experts’ respective missions. In administered proceedings, both the parties and experts can draw upon the knowledge and experience of the ICC Centre, which has a staff of experienced attorneys available to respond to questions and assist them in the process. Victoria Orlowski added that, as far as she is aware, ICC is the only arbitration institution that offers administered expert proceedings and rules.

The panellists first focused on the practical applications of the ICC Expert Rules and their benefits. Ms Orlowski discussed how, in her experience, parties are more familiar with expert determinations than they may think. Calling upon an expert to resolve an issue is a natural and logical way to resolve many issues – and any time a provision calls for an accountant, appraiser, bank or party with particular expertise to make a determination, they are using an expert – but may not be accustomed to thinking of expert determination as a unique form of dispute resolution. In fact, parties often ask for draft ‘arbitration’ clauses, when what they are looking for is an expert determination provision. Examples of expert determinations that have arisen in cases she has been involved in as counsel include using appraisers to value landmark property in New York City, using banks to determine the value of a joint venture in the energy industry and using experts to determine whether development plans for oil fields complied with certain specific criteria. But, there is no limit on the range of experts or issues that can be submitted to them. David Laliberté provided helpful examples of when experts can be used by SMEs, including determining the costs of entry and exit of investors to a venture capital fund, providing a fair and neutral valuation for licensing agreements and determining prices for the sale of copyrighted material.

Mr Laliberté also provided valuable insight into the practical benefits of the ICC’s Expert services from an in-house counsel perspective. His company provides cybersecurity and secure communications products to military and law enforcement clients, so issues and disputes arise that are highly technical, and must be resolved efficiently and confidentially. His primary goal as in-house counsel is to avoid disputes. But, when they become unavoidable, his goal is to ensure certainty, predictability, limit costs and stay out of courts. One way to achieve those goals is by including the right dispute resolution procedure, and drafting effective expert determination provisions.5

On that note, Ms Ladjimi introduced the ICC’s model clauses for experts,6 and explained how experts can be used in conjunction with other dispute resolution services, such as mediation and arbitration (in any order) to achieve parties’ dispute resolution needs. Victoria Orlowski then provided five drafting tips for expert provisions, specifically: (1) to start with a good basis, such as an ICC model clause; (2) to clearly delineate between any mechanisms selected, including appropriate carve outs and considering where provisions appear; (3) to specify whether the expert determination will be binding or non-binding; (4) to designate a governing law and place of the expertise; and (5) to address appointment mechanisms, ensuring that the appointing authority will make the necessary appointment. After explaining the benefits of the ICC’s Expert offering and providing examples of why and how SMEs can use them, the panellists invited parties interested in ICC’s Expert offerings to contact the ICC Centre, which is always willing to provide more information and review draft expert provisions.

Available at https://iccwbo.org/publication/icc-2014-mediation-guidance-notes/ and https://library.iccwbo.org/dr-commissionreports.htm.

See the ICC Mediation clauses, which the Clauses A to D can be used for mediation alone or in parallel with or prior to arbitration or other proceedings.

See ‘The Ninth Mediation Audit: A survey of commercial mediator attitudes and experience in the United Kingdom’ (CEDR 2021), available at https://www.cedr.com/wp-content/uploads/2021/05/CEDR_Audit-2021-lr.pdf.The proportion of cases that achieved settlement on the day of mediation reached 72% in 2020 (p. 16).

Statistics up to 31 December 2020.

For additional guidance and discussion, see V. Orlowski, ‘Using Experts as Adjudicators: Meeting the Demand for Dynamic Dispute Resolution with ICC Expert Rules’, ICC Dispute Resolution Bulletin, 2017 Issue 3 (https://library.iccwbo.org/).

The ICC Model Clauses for the ‘Appointment of Experts and Neutrals’ and the ‘Administration of experts proceedings’ are available at https://iccwbo.org/dispute-resolution-services/experts/.