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accompanied by their legal advisers. Moreover, the advantage of mediation is its flexibility, its ability to arrive at a solution acceptable to both parties even if it does not strictly adhere to positive law. Informality and unusual turns of phrase in some mediations should not lead to the belief that ‘anything goes’. As for the view that sex and ethnicity contribute to the outcome, the premise is based on a limited number of case studies; like all empirical surveys, the framework, the interpretation and the results are open to debate.

Mediation, by and large, is voluntary.15 Consent is required to initiate mediation, and parties also have to agree to settle the dispute. Apart from preserving the commercial relationship of the contracting parties, the costs of conciliation are not as high as those of arbitration or litigation. On the downside, conciliation does not always reach settlement since parties are free to walk away from the conciliatory process at any stage. They can turn to litigation or arbitration after carrying on with the conciliatory process for a fair while, thus doing away with one of the advantages that conciliation offers – reduction in costs. Further, it may be tactically disadvantageous to enter the conciliation stage, should the parties go to trial, since many of the reasons and arguments are likely to have been rehearsed during the conciliatory process.

The core features of mediation, associated issues and solutions are the subject matter of this chapter. However, before proceeding with this task, a brief account of international developments and developments in England in respect of mediation is provided.

International developments

The two international organisations, the United Nations Commission on International Trade Law (UNCITRAL) and the International Chamber of Commerce (ICC), which have played an important role in the promotion of arbitration, have drawn up conciliation16 rules, thus providing a framework. The ICC ADR Rules (hereinafter ‘ADR Rules’),17 which came into effect on 1 July 2001,18 cover issues such as commencement of ADR proceedings, selection of a neutral (i.e., mediator), fees and costs, and contain safeguards, such as confidentiality and neutral immunity.19 The ADR Rules leave it open to the parties to choose the ADR technique that most suits their needs for resolving the dispute amicably. In the absence of agreement, mediation is the technique to be adopted. Similar provisions on various aspects, such as appointment and confidentiality, are also found in the UNCITRAL Conciliation Rules (hereinafter ‘UNCITRAL Rules’).20 The UNCITRAL Rules are, however, more detailed than the ADR Rules. For instance, Arts 3 and 4 cover the issue of appointment of conciliators extensively. Presumably, this was felt necessary, since UNCITRAL does not provide the type of services offered by the ICC in the appointment of conciliators. There are also provisions on the stages that the conciliator has to follow during the process, in Art 5. Further, there is an attempt to introduce finality to the settlement agreement reached by the parties, in that Art 13(3) provides ‘that the parties by signing the settlement agreement put an end to the dispute and are bound by the agreement’. However, the parties are not bound by this provision if they use the UNCITRAL Rules,

15A number of jurisdictions, such as the United States (US), have been considering making mediation mandatory in some types of disputes, fo example, employment.

16Of interest are the ICC figures on requests for conciliation. For instance, between 1993 and 1998, a conciliator was appointed only in 10 cases. Whether these figures say something negative about the usefulness of conciliation as a dispute resolution mechanism is debatable, since factors such as lack of information about the availability of such mechanisms, and cultural inhibitions, may be relevant.

17ICC Publication 809. Text available at www.iccwbo.org.

18This replaces the ICC Rules of Optional Conciliation 1988.

19See Arts 2, 3, 4 and 7.

20Available at www.uncitral.org.

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Although BIMCO highlights the key benefits28 of mediation, the clause is drafted with the intention that it will be used to mediate parts of a large dispute during an arbitration process. The arbitration process, it seems, will continue alongside mediation. The motivation behind this approach was to ensure that parties did not use mediation as a delaying tactic.29

Developments in England

Before proceeding to discuss the features of mediation, a few words must be said about developments in respect of ADR in general in England. The Woolf Report on Access to Justice30 played a pivotal role in raising the profile of ADR in England – so much so that solicitors and barristers are currently training to be commercial mediators. This, of course, does not mean that only those engaged in the legal profession are best qualified to offer mediation services. As in arbitration, individuals with special expertise in the industry, such as information technology (IT) professionals and civil engineers, also play a central role in the provision of mediation services. Indeed, it is debatable whether lawyers are best placed to offer mediation, especially of the facilitative kind, since they bring with them their adversarial experience, not best suited to a technique founded on the principle of co-operation.31 In the absence of empirical research, the debate at best revolves around conjectures, prejudice and bias.

Encouragement of the use of ADR in the Woolf Report has found its way into the Civil Procedure Rules 1998 (in force since 26 April 1999). Prior to these Rules, the Commercial Court had already started recommending the use of ADR in its Practice Note.32 The Civil Procedure Rules have made co-operation and ADR part of the fabric of case management,33 and promote encouraging the parties ‘to co-operate with each other in the conduct of the proceedings’ and ‘to use an alternative dispute procedures if the court considers that to be appropriate and facilitating the use of such procedure’ (r 1.4(2) a and e). The Commercial Court has also produced its own Guide,34 which

(b)Notwithstanding (a), (b) or (c) above, the parties may agree at any time to refer to mediation any difference and/or dispute arising out of or in connection with this Contract. In the case of a dispute in respect of which arbitration has been commenced under (a), (b) or (c) above, the following shall apply:

(i)Either party may at any time and from time to time elect to refer the dispute or part of the dispute to mediation by service on the other party of a written notice (the ‘Mediation Notice’) calling on the other party to agree to mediation.

(ii). . .

(iii)If the other party does not agree to mediate, that fact may be brought to the attention of the Tribunal and may be taken into account by the Tribunal when allocating the costs of the arbitration as between the parties.

(iv)The mediation shall not affect the right of either party to seek such relief or take such steps as it considers necessary to

protect its interest.

(v) Either party may advise the Tribunal that they have agreed to mediation. The arbitration procedure shall continue during the conduct of the mediation but the Tribunal may take the mediation timetable into account when setting the timetable for steps in the arbitration.

28Speed, cost, confidentiality, control (in that the decisions are made by the parties) and rights (in that the rights of the parties are not affected by mediation).

29See ‘BIMCO: Standard Dispute Resolution Clause’, press release dated April 2002, available at www.bimco.org.

30See also Lord Chancellor’s Department, Access to Justice:The Interim Report, 1995, HMSO.

31Menkel-Meadow, ‘Pursuing settlement in an adversary culture: a tale of innovation co-opted or “the law of ADR”’ (1991) 19 Florida, State University LR 1; Menkel-Meadow, ‘When dispute resolution begets disputes of its own’ (1997) 44 UCLA LR 871; Nolan-Haley, ‘Lawyers, non-lawyers and mediation’ (2002) Harvard Negotiation LR 235.

32[1994] 1 All ER 34. See Practice Note [1995] 1 All ER 385.

33As part of case management, counsel are asked in the pre-trial checklist whether they have discussed the possibility of ADR with their clients. Recently in the United Kingdom (UK), a survey was conducted on the use of mediation in the construction industry. The report concluded that lawyers are utilising mediation for construction disputes and a significant number of construction lawyers were found to hold positive attitudes toward the benefits of using ADR in terms of savings in legal and management costs, the speed of achieving settlement and satisfaction with using the process. However, the findings indicate that solicitors and barristers in the survey experience higher settlement rates for commercial than construction mediation’. Brooker, ‘Construction lawyers’ attitudes and experience with ADR’ (2002) 18(2) Construction LJ 97, p 116.

34Available at www.courtservice.gov.uk.

endorses what was said in its Practice Note. Rule G 1.4 of the Guide provides that in all cases ‘legal representatives should consider with their clients and the other parties concerned the possibility of attempting to resolve the dispute or particular issues by ADR’. The judge may, ‘if he considers appropriate, adjourn a case for a specified period of time to encourage and enable the parties to use ADR’, according to r G 1.7. The Guide also, in r G 1.8, allows the judge to make an ADR order.35

Features and associated issues

Before parties decide to opt for mediation, they need to consider its core features and their legal consequences – for instance, enforceability of the mediation clause and the settlement agreement, and the degree to which the information they divulge during mediation is likely to remain confidential. In an international context, different jurisdictions are likely to deal with these aspects differently, and parties need to be aware of the lack of predictability in these areas. To some extent, parties can cushion themselves against surprises with suitable choice of law and choice of jurisdiction clauses.36 Harmonisation may, as in other areas of international commerce, hold the key.

Mediation agreement

As stated at p 612, mediation in most cases is a creature created by agreement between the parties. The UNCITRAL Rules, for instance, recommend the following model clause:

Where, in the event of a dispute arising out of or relating to this contract, the parties wish to seek an amicable settlement of that dispute by conciliation, the conciliation shall take place in accordance with the UNCITRAL Conciliation Rules as at present in force.

The ADR Rules, conversely, set out a number of different Model Laws reflecting a variety of possibilities, ranging from optional ADR37 and an obligation to consider ADR to an obligation to submit to ADR followed by ICC arbitration,38 as required.

In an ideal world, parties would abide by their agreement. However, what if one of the parties initiates proceedings? Could a party be stopped from taking a dispute to court in spite of a mediation clause in the contract? In other words, is an ADR clause enforceable? The answer depends on whether the clause is seen as an agreement to negotiate, or as participation in a structured process involving a neutral party as a mediator.

As for English law, it is well settled that an agreement to negotiate is unenforceable on grounds of uncertainty. Formulated in the well known Court of Appeal decision, in Courtney and Fairburn Ltd v Tolaini

35See Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576; Shirayana Shokusan Co Ltd v Danovo Ltd [2003] EWHC 3006 (Ch). See

Dunnett v Railtrack [2002] 1 WLR 2434 for using cost sanctions for refusal to pursue ADR. See also Cable & Wireless PLC v IBM UK Ltd [2002] EWHC 2059 (Comm); and Burchall v Bullard [2005] EWCA Civ 358.

36For instance, the CEDR recommends the following clause for international contracts: ‘The mediation will take place in . . . and the language of the mediation will be . . . The Mediation Agreement . . . shall be governed by, and construed and take effect in accordance with . . . law. The courts of . . . shall have exclusive jurisdiction to settle any claim, dispute or matter of difference which may arise out of or in connection with, the mediation.’

37 This clause reads: ‘The parties may at any time, without prejudice to any other proceedings, seek to settle any dispute arising out of or in connection with the present contract in accordance with the ICC ADR Rules.’

38This clause reads: ‘In the event of any dispute arising out of or in connection with the present contract, the parties agree to submit the matter to settlement proceedings under the ICC ADR rules. If the dispute has not been settled pursuant to the said Rules within 45 days following the filing of a Request for ADR or within such other period as the parties may agree in

writing, such dispute shall be finally settled under the Rules of Arbitration of the ICC by one or more arbitrations appointed in accordance with the said Rules of Arbitration.’

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Brothers (Hotels) Ltd,39 the principle was affirmed by the House of Lords in a more recent case. Walford v Miles40 concerned a lock-out agreement, where the vendor of a business agreed with the would-be purchaser not to negotiate for the sale of the business with third parties during the course of the negotiation. It did not specify how long the vendors were locked out from negotiating with a third party. The vendor decided to sell to a third party and an action for breach of the lock-out agreement was brought by the would-be purchaser. In the Court of Appeal, Bingham LJ, dissenting, said that a lock-out agreement, in the absence of a specified time, should be binding for a reasonable time, thus imposing a duty on the parties to negotiate in good faith. After due consideration of the views in the dissenting judgment, Lord Ackner concluded that the agreement was unenforceable due to uncertainty. He said:

The agreement alleged in para 5 of the unamended statement of claim contains the essential characteristics of a basic valid lock-out agreement, save one. It does not specify for how long it is to last. Bingham LJ sought to cure this defi ciency by holding that the obligation should continue to bind them for ‘such time as is reasonable in all the circumstances’ ...

However, as Bingham LJ recognised, such a duty, if it existed, would indirectly impose upon the respondents a duty to negotiate in good faith. Such a duty, for the reasons I have given above, cannot be imposed. That it should have been thought necessary to assert such a duty helps to explain the reason behind the amendment to para 5 and the insistence of Mr Naughton that without the implied term the agreement, as originally pleaded, was unworkable – unworkable because there was no way of determining for how long the respondents were locked out from negotiating with any third party.

Thus, even if, despite the way in which the Walford’s case is pleaded and argued, the severance favoured by Bingham LJ was permissible, the resultant agreement suffered from the same defect ... as the agreement contended for in the amended statement of claim, namely that it too lacked the necessary certainty, and was thus unenforceable [at p 462].

Recently, in Halifax Financial Services v Intuitive Systems Ltd,41 the court considered the issue of enforceability of an ADR clause. The clause in question was a stepped clause.42 Clause 33 (headed ‘Disputes’) provided:

33.1 In the event of any dispute arising between the Parties in connection with this agreement, senior representatives of the Parties will, within 10 Business Days of a written notice from either Party to the other, meet in good faith and attempt to resolve the dispute without recourse to legal proceedings.

33.2Ifthedisputeisnotresolvedasaresultofsuchmeeting,eitherPartymay,atsuchmeeting(or within 10 Business Days from its conclusion) propose to the other in writing that structured negotiations be entered into with the assistance of a neutral adviser or mediator (‘Neutral Adviser’).

39[1975] 1 All ER 716. Lord Denning MR enunciated the unenforceability of an agreement to negotiate thus: ‘If the law does not recognise a contract to enter into a contract (when there is a fundamental term yet to be agreed), it seems to me it cannot recognise a contract to negotiate. The reason is because it is too uncertain to have any binding force . . . It seems to me that a

contract to negotiate, like a contract to enter into a contract, is not a contract known to law . . . I think we must apply the general principle that, when there is a fundamental matter left undecided and to be the subject of negotiation, there is no contract.’

40[1992] 1 All ER 453.

41[1999] 1 All ER (Comm) 303.

42Also known as a tiered clause, by which the parties agree to enter the next step of the dispute resolution process, as specified in their agreement, if the previous step fails to resolve the dispute. The parties could agree to start with negotiation, proceed to mediation if the negotiation fails, and if the mediation fails to arbitration, and so on.

33.3–33.5 ...

33.6 If the Parties accept the Neutral Adviser’s recommendations or otherwise reach agreement on the resolution of the dispute, such agreement will be recorded in writing and, once it is signed by their duly authorised representatives, will be binding on the Parties.

33.7 Failing agreement, either of the Parties may invite the Neutral Adviser to provide a nonbinding but informative opinion in writing.

33.8 If the Parties fail to reach agreement in the structured negotiations within 45 Business Days of the Neutral Adviser being appointed then any dispute between them may be referred to the Court unless within a further period of 25 Business Days the Parties agree to arbitration in accordance with the procedure set out below.

33.9 Any dispute between the Halifax and Intuitive in connection with this Agreement that cannot be resolved by the above procedure will be referred to and determined by a sole arbitrator (‘the Arbitrator’), the arbitration to be held in London or any other place nominated by the Arbitrator.

It was argued on behalf of the defendant that cl 33 was similar to a Scott v Avery clause;43 it was a condition precedent and, hence, a defence to the action. Clause 33, looked at as a whole, according to McKinnon J, could not be construed as suggesting that the contractual procedure had to be complied with before issuing proceedings. The parties did not bind themselves to any method of determining any dispute between them, unlike in Cott UK Ltd v FE Barber Ltd,44 where an ADR clause was seen (applying the Channel Tunnel principle)45 as determinative to order a stay. The relevant clause provided that disputes were to be referred to a person who ‘shall act as an expert and not as an arbiter and his decision shall be binding on the parties’.46

The Conciliation Law addresses the issue of resorting to arbitral or judicial proceedings in Art 13 as follows:

Where the parties have agreed to conciliate and have expressly undertaken not to initiate during a specified period of time or until a specifi ed event has occurred arbitral or judicial proceedings with respect to an existing or future dispute, such an undertaking shall be given effect by the arbitral tribunal or court until the terms of the undertaking have been complied with, except to the extent necessary for a party, in its opinion, to preserve its rights. Initiation of such proceedings is not of itself to be regarded as a waiver of the agreement to conciliate or as a termination of the conciliation proceedings.

It seems according to the article that a party can apply for stay of arbitral or judicial proceedings while the conciliation process is taking place or where there is an express provision stating that they will not initiate arbitral/judicial proceedings for a specific period.This is similar to a Scott v Avery clause. Presumably, where one party notifies another party of its intention to enter into conciliation on the basis of their agreement, it will be construed widely as conciliation proceedings. However,Art 13 leaves the door open for the party to initiate judicial or arbitral proceedings even during conciliation proceedings, that is, to obtain interim measures on the basis that this is necessary for preserving its rights.47

43A clause where parties agree that no action will be brought until an arbitration award is made. Named after Scott v Avery (1856) 10 ER 1121.

44[1997] 3 All ER 540.

45Channel Tunnel Group v Balfour Beatty Ltd [1993] AC 334.

46See also Cable & Wireless v IBM [2002] EWHC 2059 Comm Ct where a contractual reference to CEDR and CEDR procedure was seen as not wanting in certainty.

47See para 42, Doc A/CN 9/WG II/WP 115.

Every person involved in the mediation will keep confi dential and not use for any collateral or ulterior purpose:

•the fact that the mediation is to take place or has taken place, other than to inform a court dealing with any litigation of that fact; and

•all information (whether given orally, in writing or otherwise) arising out of, or in connection with, the mediation including the fact of any settlement and its terms.

The Conciliation Law, although endorsing this general principle, interestingly does not use the word ‘confidential’51 in Art 10, although the explanatory remarks on the draft provision do state that it is designed to ‘encourage frank and candid discussion in conciliation by prohibiting the use of information listed in its para (1) in any later proceedings’.52

The degree to which these confidentiality agreements may be upheld varies from jurisdiction to jurisdiction53 and dependent on the circumstances. In England, for instance, courts have been willing, in the context of arbitration, to say that documents prepared for an arbitration hearing could not be disclosed to a third party,54 subject of course to some exceptions, such as where it is reasonably necessary in the interests of justice.55

A confidentiality agreement is likely to be challenged on a number of grounds. For instance, where one of the parties alleges that signature on the settlement agreement was obtained by fraud or duress, or indeed that there was no settlement agreement since the person who signed did not have any authority.The court, in these circumstances, will inevitably (in the interests of justice) have to encroach on matters deemed confidential. The Conciliation Law, unfortunately, fails to tackle the confidentiality aspect head-on by indicating the acceptable threshold – for instance, in the interest of national security and public interest – thus introducing a degree of uncertainty in international commercial mediation.

As part of the obligation of confidentiality, mediation agreements also grant a right of immunity to the mediators, since expecting mediators to testify would impair their impartiality. The mediation agreement may even extend this immunity to any members of the institution that offer the mediation services. For instance, the CEDR Mediation Procedure in para 19 provides:

None of the parties to the mediation agreement will call the mediator or CEDR (or any employee, consultant, offi cer or representative of CEDR) as a witness, consultant or arbitrator or expert in any litigation or other proceedings whatsoever. The mediator will not voluntarily act in any such capacity without written agreement of all the parties.

It must be added that this contractually agreed right of immunity is not absolute, and it is possible that a court may in some extreme cases compel a mediator to give evidence in the public interest – for instance, information relating to unlawful conduct, such as money laundering. The matter is one of balancing mediation confidentiality against public interest.56 Given the importance of ADR in case management, in most civil disputes, it is unlikely that a court will require the mediator to divulge confidential information.

51Note, however, that Art 8 (headed ‘Disclosure of Information’) deals with confidentiality in a limited context as between the participants in the conciliation process.

52UN Doc A/CN 9/487, para 140.

53In some US states –for example, Illinois – there are statutes that protect confidentiality in mediation agreements. See Kentra, Confidentiality in ADR, 2001, Illinois Institute for Continuing Legal Education (published in co-operation with the Center for Analysis of Alternative Dispute Resolution).

54Hassneh Insurance Co of Israel Ltd v Mew [1993] 2 Lloyd’s Rep 243.

55Ali Shipping Corp v Shipyard Trogir [1998] 1 Lloyd’s Rep 643.

56See the Australian case Esso Australia Resources Ltd v Plowman (1995) 128 ALR 291 for a different viewpoint.

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A related question is whether a mediator is under an obligation to report unlawful conduct that becomes apparent during the course of discussions with the parties. In English law, it seems that there is no obligation to do so in respect of civil matters.The issue for the mediator is an ethical one.

Settlement agreement and enforceability

Although it is possible for the settlement agreement to be oral, it is normally reduced to a written document signed by the parties concerned. Short of want of authority, duress or fraud, a written agreement would prevent the parties from claiming that a settlement was not agreed and would give a clear indication of the terms. A statement to the effect that the settlement agreement is binding would also aid enforceability. The UNCITRAL Conciliation Rules reflect this arrangement in Art 13(2) and (3) as follows:

(2)If the parties reach agreement on a settlement of the dispute, they draw up and sign a written settlement agreement. If requested by the parties, the conciliator draws up, or assists the parties in drawing up, the settlement agreement.

(3)The parties by signing the settlement agreement put an end to the dispute and are bound by the agreement.57

The settlement agreement is a contract, and English law requires that it meets the usual criteria, such as certainty, required of contracts.58 Parties can get around the uncertainty aspect of enforceability by converting the settlement agreement to a consent award.59 They can ask the mediator to take on the role of arbitrator and issue a consent award which reflects the agreed terms of settlement.The advantage of opting for such a conversion, in an international context, is ease of recognition and enforcement across borders.60

Enforceability of settlement agreements is covered in the Conciliation Law in Art 14. The draft put forward four variants A, B, C and D for consideration. The variant that was widely preferred61 during negotiations was B, which states that ‘if the parties reach agreement on a settlement of the dispute, the agreement is binding and enforceable as a contract’. Open ended in character, it does not require the settlement agreement to be in writing or signed. Neither does it add much to ensuring enforceability, since it would be possible to challenge an agreement on grounds of uncertainty – for instance, under the applicable law (e.g., English law). In contrast, variant D was perhaps the better solution providing that ‘if the parties reach agreement on a settlement of the dispute and the conciliator or the panel of conciliators have signed the settlement agreement, that agreement is binding as an arbitral award’. If this variant had been accepted, further details, such as recognition and enforcement of foreign settlement agreements, and the grounds for refusal of recognition, would have required further work to facilitate movement of settlement agreements across borders. The Model Law on International Commercial Arbitration could have provided a template for these purposes.62 Variant D was widely criticised for sharing the trappings of formality and undermining the flexibility that many proponents of mediation perceive to be its positive characteristic.

57The CEDR Model Mediation Procedure in cl 13 states that ‘any settlement reached in the mediation will not be legally binding until it has been reduced to writing and signed by, or on behalf of the parties’.

58For a US perspective, see Payne, ‘Enforceability of mediated agreements’ (1986) 1 Ohio State Journal on Dispute Resolution 385.

59Where litigation has been initiated, parties may seek a stay by using a consent order (aka Tomlin order) whereby the court disposes of the claim on the basis that a settlement has been agreed.

60See the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards 1958, which is adhered to by well over 100 parties.

61A/CN 0/WG II/WP 115, para 47.

62Ibid, para 49.