In early July 2023, the ICC Commission on Arbitration and ADR (the “Commission”) published the Report on Facilitating Settlement in International Arbitration (the “Report”). The Report aims to present the techniques that have proven to be effective in the settlement of disputes and may be considered and applied by parties and tribunals.
The Report follows further endeavours by users of international arbitration for reducing costs and time spent on dispute resolution. Specifically, it has been increasingly recognized, especially by in-house counsel, that, in their current form, arbitrations sometimes tend to take a life of their own, often foregoing the primary goal of promptly resolving the dispute that gave rise to the proceedings.
The Report provides useful tools that may assist the parties in reaching a settlement either at the start or during the arbitration, thereby saving unnecessary costs and/or maximizing recoveries.
In more detail
Greater demand for dispute settlement rather than dispute resolution
One of the trends in international arbitration in recent years has been the development of the role of the arbitral tribunal from a decision-maker to a more proactive role when it comes to dispute resolution techniques. This trend also includes a more active role for tribunals in promoting settlement. The Report notes in this regard that “the debate has now moved from whether arbitrators (and arbitral institutions) should take steps to facilitate settlement, to how that should be done.”
The statement is supported by the results of the IMI Mixed Mode Taskforce report quoted by the Report. The Taskforce report found that 78.38% of the respondents answered positively to the question “Do you think an arbitrator has a role in fostering settlement”. The results indicate a significant change in the perception by users of the role of tribunals, which requires a change in the techniques used to meet this evolution.
General tools available to tribunals
The Report notes that some general tools may be used by tribunals to promote settlement, one of which is the holding of case-management conferences and mid-stream conferences. The Report highlights that tribunals should check at each of these conferences if the parties’ positions have changed, discuss which issues they consider relevant and provide guidance on the issues to be addressed. The Report suggests that this may give the parties an opportunity to re-assess the strengths and weaknesses of their case, potentially narrowing the gap between their respective positions and promoting settlement. Another useful technique may be the building of mediation / settlement windows into the timetable, as discussed below.
Bifurcation of proceedings may also contribute to settlement. Indeed, if matters of liability (or other preliminary issues) are decided earlier, the parties may be much more willing to settle on the quantum of claims, saving significant time and costs.
Mediation / settlement windows and considerations for contract drafting
Mediation / settlement windows are periods during the arbitration dedicated to the parties’ mediation or settlement attempts. They may be built into the procedural timetable, especially after major milestones in the proceedings (such as after the exchange of the statement of claim and the statement of defence or following document production).
The Report suggests that such windows may provide some ‘breathing space’ for the parties to discuss settlement, provided that they do not unnecessary prolong the arbitration proceedings.
The Report notes that a few issues should be considered in this context, such as:
- Who shall raise the idea. The parties are often reluctant to raise mediation or settlement in fear of being perceived as weak. This may be addressed if the contract provides for the mediation / settlement window to be included in the procedural timetable. The Report also suggests that tribunals may raise the idea but cannot in principle include the mediation window in the procedural timetable without the parties’ agreement.
- Timing and duration of the window. The Report suggests that the timing will depend on the circumstances but should occur when the parties have sufficient information to undertake a risk analysis and assess the merits of a settlement. The durations may range from relatively short periods (which stimulate a more active discussion) to “on-going parallel mediation” (mediation in parallel to arbitration, as long as it takes to reach an agreement).
- Whether the arbitration shall be paused for the period of the mediation / settlement window. The Report suggests that using shorter windows, providing for a “pause” in the procedural timetable, enables the parties and their advisors to focus on the settlement without being distracted by the deadlines in the arbitration.
Preliminary views by tribunals
The Report suggests that tribunals may consider taking more active steps in promoting settlements, as long as they can do this without jeopardizing the enforcement of the potential award. One such step may be for tribunals to issue preliminary and non-binding views on the matters in dispute.
This technique is more controversial than the ones discussed previously. However, its use may significantly promote settlement. As reported, studies have shown that parties tend to predict outcomes inaccurately, which is often caused by overconfidence bias (general overconfidence in predictions of events) and confirmation bias (the tendency only to see evidence that maintains the initial belief). By expressing their preliminary views on the matters in dispute, tribunals may assist the parties in overcoming these biases and looking at their respective cases more realistically.
The Report notes that an express agreement of the parties is necessary for the tribunal to have authority to give preliminary views to avoid challenges on future awards.
The Report notes that receiving preliminary views may result in parties wishing to engage in settlement conferences that take those views into account, and which may be chaired by the tribunal if the parties wish so and expressly agree to it.
The Report highlights the role of the tribunal when chairing the settlement conferences, as opposed to a mediator. Specifically, the tribunal may not hold private meetings with one of the parties or obtain the information from one of the parties which is not shared with the other party.
While the above tools could prove useful, parties should carefully consider and use the most appropriate techniques, taking into account all of the circumstances of their matter as not all of the techniques described in the Report will be appropriate for every case.
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 This is also the approach taken by Mediation Guidance Notes issued by the Commission (clause 29) (https://iccwbo.org/wp-content/uploads/sites/3/2014/12/icc-mediation-guidance-notes-english.pdf).