Sample Directions for the Facilitation of Settlement in International Arbitration
Launched 16 December 2010
The CEDR Rules for the Facilitation of Settlement in International Arbitration (the Settlement Rules) outline steps which Arbitral Tribunals (whether sole arbitrator or panel) are to take (and are not to take) with a view to facilitating settlement by the parties to an international arbitration proceeding (Parties).
The Settlement Rules are designed to supplement the legal provisions and the rules according to which the Parties are conducting their arbitration. The Settlement Rules can be incorporated on an ad hoc basis by agreement of the Parties, as part of an institution’s rules or within a contract clause requiring arbitration.
Purpose of Directions
Settlement techniques used by Arbitral Tribunals (and views as to best practice) vary considerably in different jurisdictions. In some jurisdictions Parties will expect more substantive involvement from their Arbitral Tribunal, involvement which Parties in another jurisdiction may feel uncomfortable with. The Settlement Rules reflect this need for an international toolkit and once adopted, still offer significant flexibility as to the steps that the Parties authorize the Arbitral Tribunal to take to facilitate settlement of their dispute. To assist Parties to select the individual provisions of the Settlement Rules they feel appropriate and potentially beneficial to their case CEDR is now launching a simple new procedural tool- the Sample Directions (Directions).
In the Directions, the Parties can select from a series of options, which the Arbitral Tribunal can then put into a consent order. This ensures clarity as to what the Parties have agreed and is a further safeguard against any challenge by the Parties as to the impartiality of the Arbitral Tribunal.
The Directions can be downloaded at www.cedr.com/arbitration
Options in Directions
By way of example, the Directions allow the Parties to opt to stay their arbitration pending mediation and allow the Parties to agree the stages in the arbitration that the Arbitral Tribunal is authorized to raise the topic of settlement.
The Parties can also agree the type of assistance that is permitted from the Arbitral Tribunal, whether this includes offering preliminary views on issues in dispute or even preliminary non- binding findings on law or fact (popular measures in arbitration in some jurisdictions) or is limited to less substantive techniques.
The Directions also allow the Parties to specify whether the Arbitral Tribunal may take into account any offer to settle when determining costs.
Feedback on CEDR Settlement Rules
Support for the ‘safe transnational standard’ of the Settlement Rules has been widespread. Clients have supported the need for more efficient processes to resolve the increased number of disputes they are seeing during the turbulent financial times. Clients with global businesses have welcomed what they see as a more consistent approach internationally.
The Settlement Rules have been praised as a structured, intelligent approach to promoting settlement which recognize the differences between civil and common law tradition and looks to take the best of both, whilst providing a menu which will be appropriate for different tribunals and different nationalities of parties.
Many feel that cases are better resolved in negotiated settlement than by arbitral decision. Arbitration bodies such as the ICC and CIETAC report that they are looking at ways to further facilitate settlement within international arbitration.
CEDR are hearing that the Settlement Rules are increasingly being referenced by Arbitral Tribunals in practice.
There has been healthy and interesting debate on the detailed provision of the Settlement Rules. A large portion of this has the background that practice between different jurisdictions varies. Practitioners from Asia asked that the Settlement Rules go further while practitioners from the UK/US felt less comfortable with the more pro-active steps. Debate centred on the following:
1. Arbitrator Impartiality
Some were concerned about keeping the impartiality of the Arbitral Tribunal (and therefore the enforceability of any Award). The ‘General Principles’ of the Settlement Rules set out in Article 3 specify that the Arbitral Tribunal shall not knowingly act in such a way as would make its Award susceptible to a successful challenge and expresses that the steps the Arbitral Tribunal may take will be subject to this requirement.
By adopting the Settlement Rules, the Parties also agree that the Arbitral Tribunal’s facilitation of settlement will not be asserted by the Parties as a ground for disqualification or challenge to Award. Further, for certain more substantive steps the Settlement Rules require that written agreement is given by the Parties and for other steps that the Parties themselves actually request the particular step in writing before the Arbitral Tribunal will do it.
The Settlement Rules also include safeguards in that the Arbitral Tribunal shall not meet with any party separately or obtain information from a party that is not shared with the other Parties (Article 5). In this way, if the parties decided to mediate their dispute, this would not be conducted by the Arbitral Tribunal, the Parties would need to engage a separate and independent mediator.
2. Timing of settlement initiatives
Again, views from different jurisdictions varied, with some favouring early involvement and others less comfortable until the arbitral process was further advanced. The Settlement Rules address this. First, many of the measures that the Arbitral Tribunal has the power to take without express permission, take the form of ‘discussing’ or ensuring the Parties are aware of their options. This way Parties can control when any settlement initiatives take place.
Second, the Arbitral Tribunal ‘may’ take such measures ‘where appropriate’ or ‘if it considers it helpful to do so’- it is expected that as highly skilled and experienced dispute resolution professionals, arbitrators would use their judgment as to whether a particular measure was appropriate.
Every case is different. A sensible view on timing is perhaps that timing of mediation or settlement discussions more depends on when you have an assessment of the issues, the chances of winning and losing and also an estimate of the cost.