Executive Summary

Conciliation and mediation are both forms of alternative dispute resolution. In mediation the mediator plays a neutral role and steers the parties towards a mutually satisfactory settlement. In conciliation, the conciliator is often a legal expert who advises the parties on the applicable law and proposes a settlement. When successful, both mediation and conciliation are usually less expensive than arbitration. When not successful, mediation and conciliation increase costs and result in delay, and may give each side advance notice of the other side’s arguments.

1.0 Introduction

This chapter provides a basic introduction to the pros and cons of mediation and conciliation, two forms of alternative dispute resolution that are often used in investment disputes.

2.0 Mediation

Mediations are structured settlement discussions where the mediator remains neutral. The mediator helps the parties to work together to reach a mutually satisfactory agreement by identifying issues, and each party’s respective interests and their priorities. The mediator does not usually propose the terms of a settlement, but instead helps the parties to arrive at a settlement. In most cases, a trained mediator or panel mutually selected by the parties conducts the mediation, frequently under the auspices of a mediation institution. The parties usually agree that the discussions will be confidential and held on a “without prejudice” basis, meaning that whatever is presented cannot be used in any subsequent arbitral or other dispute resolution proceedings. A mediator typically does not have the authority to make binding decisions; rather, the parties will present abbreviated versions of their cases through oral and documentary oral submissions, and the mediator will attempt to assist the parties in reaching a mutually agreeable settlement of their dispute.

2.1 Pros and Cons

The benefit of mediation is that it allows the parties to engage in confidential, structured settlement discussions that could result in an amicable and relatively quick resolution to a dispute that otherwise could require a lengthy period of time and substantial resources to resolve through formal proceedings. In addition, a trained mediator can in certain cases create solutions that, despite best efforts, have not occurred to the parties themselves. Mediation also gives the parties an opportunity to understand each other’s positions in a non-binding, relatively informal setting, and as importantly, to obtain an honest assessment of the case from a neutral evaluator.

The downside of mediation is that it can often be costly, burdensome and time-consuming, despite its relatively informal nature. For complex international disputes, simply obtaining a mutually available date for the relevant party representatives, counsel and mediator can take weeks if not months. And, given the charged and high-stakes nature of many international arbitrations, mediations often are

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unsuccessful. In such circumstances, mediations can be a waste of time and money, the only purpose of which, some would say, is to give one’s opponent a preview of one’s case.

Before requesting mediation, consider carefully the reasons for so doing, the likely time frames and the expected outcomes.

2.2 Mechanics of Mediation — Applicable Rules

In any mediation, the first step is always to consult the applicable procedural rules. A number of the institutional arbitration rules contain mediation provisions. For example, effective 1 January 2014, the International Chamber of Commerce (ICC) instituted new Mediation Rules that replaced its “Amicable Dispute Resolution” rules. The ICC Mediation Rules are intended to “provide users with clear parameters for the conduct of proceedings while recognising and maintaining the need for flexibility.”1 The rules contain ten articles addressing subjects, such as how to commence a mediation, the place and language of the mediation, selection of the mediator, fees and costs, etc.

3.0 Conciliation

Conciliation differs considerably from mediation. While conciliation is also an alternative form of dispute settlement, in conciliation the conciliator helps to drive the parties towards a satisfactory solution, by identifying legal rights and proposing settlements. The conciliator is often a respected figure and sometimes even an authority figure who understands the law in a given dispute. The parties turn to the conciliator for guidance and insight. As a result, the conciliator, while remaining neutral, plays a more direct role in steering the parties towards a settlement than a mediator.

The ICSID Convention provides a framework for conciliation proceedings and has a distinct set of Rules of Procedure for Conciliation Proceedings.2 An ICSID conciliation is, in theory, a “cooperative, non-adversarial dispute resolution process,” the stated object of which is “to clarify the issues in dispute between the parties and to endeavour to bring about agreement on mutually acceptable terms.” The Conciliation Rules are detailed and set out the process under which a “Conciliation Commission” is established. Once that is done, the “Conciliation Commission” can request relevant documents, hear witnesses, make site visits and issue recommendations to the parties to assist in reaching mutually acceptable terms of settlement. At the end of the process, the Commission issues a report declining jurisdiction, or recording the parties’ agreement, failure to agree or failure to appear or participate.

Know the applicable procedural rules. Although it may appear obvious, the first step for the practitioner is to consult and understand the applicable rules under which a mediation or conciliation may take place. For example, ICSID Arbitration Rule 1(4) provides that no person who previously acted as a conciliator may in any proceeding for settlement of the dispute be appointed as a member of an arbitral tribunal. Lack of knowledge of this basic rule could lead the unsuspecting to nominate for conciliator a candidate they intended to nominate as arbitrator.

3.1 Pros and Cons

While conciliation is less expensive than resorting to arbitration, and while conciliators are usually skilled in the law relevant in a particular dispute, there is no guarantee that a conciliation will lead to the settlement of a dispute. When it does, both time and money are usually saved; when it fails, both sides may find that their best legal arguments are already on the table and that the conciliator may have reduced the chances of a settlement during the course of an arbitration as one side may have hardened its position.

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4.0 Amicable Settlement

Bilateral and multilateral investment treaties, investment agreements, and arbitration agreements routinely require that the parties first engage in, or at least request, amicable settlement discussions before filing a claim for arbitration. For example, Article 26(2) of the Energy Charter Treaty provides:

If such disputes can not be settled according to the provisions of paragraph (1) within a period of three months from the date on which either party to the dispute requested amicable settlement, the Investor party to the dispute may choose to submit it for resolution […].

While the consequences of failing to observe such pre-arbitration procedural requirements vary from treaty to treaty, and depend on the circumstances of the particular case, there is little doubt that failing to comply with such provisions often produces collateral disputes between the parties that can be lengthy, complex and expensive. In some cases, amicable settlement provisions are held to be nonmandatory or unenforceable and their derogation results in little consequence. In other cases, a failure to comply with such provisions can result in dismissal of a case.

An ounce of prevention can be worth a pound of cure. Issuing a good faith request for formal mediation under the applicable procedural rules will usually satisfy an obligation to request amicable settlement. Accordingly, if there is any doubt as to the measures that must be taken to satisfy an obligation to request amicable settlement, a request for formal mediation should be made.

Notes

1. See https://iccwbo.org/dispute-resolution-services/mediation/mediation-rules/.

2. See https://icsid.worldbank.org/en/Pages/process/ICSID-Convention-Conciliation.aspx.