Multi-Tiered Dispute Resolution - The Most Effective Way to Resolve a Commercial Dispute

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Multi-Tiered Dispute Resolution - The Most Effective Way to Resolve a Commercial Dispute

The GPC Series has been around the world asking stakeholders in commercial dispute resolution about the major issues in the industry, past, present and future. One interesting takeaway from 2016 was the delegates views on the most effective type of process.

When asked what was the most effective type of process for commercial dispute resolution, all categories of stakeholders voted overwhelmingly in favour of multi-tier processes. 

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Specifically, the stakeholders voted for "Combining adjudicative and non-adjudicative processes (e.g. arbitration/ litigation with mediation/ conciliation). But why did the stakeholders vote this way and what does this combination of processes look like?

 

The Advantages of Multi-TIered Dispute Resolution

This practice of 'multi-tiered dispute resolution' or MDR is becoming increasingly prevalent in the commercial dispute resolution world. It allows parties to tailor the process to suit their circumstances and - evidently - stakeholders think it works.

It allows parties to enjoy the benefits of different forms of ADR, while minimising the risks of those processes. For example, parties can enjoy the flexibility of mediation with the fall back of the finality of arbitration.

The disadvantage is that it can potentially add a layer of cost and time to the dispute if the dispute proves unsuitable for the early stage processes and goes all the way to the final tier. 

MDR is particularly popular in a cross-border setting. One of the most common forms of this is combining mediation and arbitration. This is particularly effective at a cross-border level, because it can allow a mediated settlement agreement to be put in the form of an arbitral award. It will therefore be covered by the New York Convention and become easily enforceable around the world. 

 

Supporting Multi-Tiered Dispute Resolution

One of the major issues with MDR today is the enforceability of an MDR clause. For example, under English law, it is well established that an 'agreement to agree', or an agreement to negotiate 'in good faith' is likely to be unenforceable (Walford v Miles [1992] 2 AC 128) because it is too uncertain.

This has raised problems with multi-tiered dispute resolution clauses involving negotiation and mediation, as an agreement to mediate or negotiate in good faith may fall within this exception.

Recent cases, however, have helped to support MDR. For example, in Emirates Trading Agency LLC v Prime Mineral Exports Pte Ltf [2015] 1 WLR 1145, the parties included a clause in their contract stating:

parties shall first seek to resolve the dispute or claim by friendly discussion … If no solution can be arrived at between the parties for a continuous period of four weeks then the non-defaulting party can invoke the arbitration clause and refer the dispute to arbitration.

In the event, this clause was held to be enforceable because it was sufficiently specific in its description of the time period and because it was possible to reference an identifiable standard of fair, honest and genuine discussion. 

Judicial support for multi-tiered dispute resolution in this way should be welcomed. The results of the GPC survey suggest a growing recognition of the effectiveness of multi-tiered procedures and it is important the law stays up to date with commercial practice.

 

Learn More About MDR

As parties become more sophisticated, so too are dispute resolution procedures. We have briefly mentioned combining mediation with arbitration into a two stage 'med-arb' procedure. But it can get much more complex. 

For instance, non-adjudicative processes can be woven into arbitration in 'blended' or 'hybrid processes' such as arb-med-arb. This is also raises important ethical questions about whether a mediator should be able 'change hats' and act as arbitrator and vice versa.

The GPC survey results showed continued enthusiasm for these processes and it is important for mediators looking to embrace this opportunity to educate themselves on the surrounding issues.

If you would like to learn more about these multi-tiered processes, you can check out Professor Nadja Alexander's introduction to Multi-Tiered DIspute Resolution online course by clicking the big green button below.

Learn all about Multi-Tiered Dispute Resolution

Topics: Civil and Commercial

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