20 January 1995, Geneva, Switzerland
The Mediation Rules of WIPO and Others: A Ticket to Paradise or into a Better Mousetrap?
by Marc Blessing, President
Swiss Arbitration Association (ASA);
Bär & Karrer, Zurich
ADR (including in particular Mediation):
Is it merely a pre-arbitration passage?
or a better mouse-trap for losing some more time and some more money?
Is the late Dr Gillis Wetter right when he said "ADR is the stuff dreams are made of, nothing else"?
Or is ADR/Mediation the new era
- marking the post-arbitration world?
- Is it the paradise relieving all of us from the pains we endure and suffer when struggling through the thorny runway of arbitration?
I am slightly intimidated to speak on such a subject late in the afternoon and with so little time carved out in the programme for my presentation.
I will divide my Report in two different parts:
First, I will make some comments on the WIPO Mediation Rules, and how they compare to other Rules.
Second, I would like to raise the question of what is occurring with ADR in Europe.
Third, I would like to describe some essential aspects -- and requirements -- of an ADR procedure.
Fourth, I will have some concluding remarks.
A. The WIPO Mediation Rules: How They Compare to Other Mediation Rules
I do not intend to go into a detailed analysis of the WIPO Mediation Rules as such, for at least one good reason: All ADR procedures are, of course, entirely voluntary, and thus their rules are less critical than those in respect of arbitration. In essence, it can be said that the WIPO Rules adopt a liberal, flexible and informal concept of mediation, leaving as much freedom as possible so as to allow a friendly, non-adversary spirit (conducive to the preservation of a good business relationship) to govern throughout the procedure.
1. Different Types
As you may know, ADR (alternative dispute resolution) is the magic word in the United States, denoting the growth industry at this time. The magic ADR words, for instance, include "mediation", "conciliation", "mini-trial", "MED/ARB", "MEDALOA" and at least a dozen variants (such as the "rent-a-court"/"rent-a-judge"; "multi-door court", "night//weekend-court"; "court-annexed mediation" etc.). All these devices may be categorized in (i) totally informal procedures, (ii) less formal and (iii) very formal but expedited procedures, conducted (iv) among the disputants themselves, or (v) procedures with the typical third party assistance (mediator, facilitator, umpire, silent listener etc.) and (vi) finally, rapid procedures resulting in a binding and enforceable adjudication by either a court or a panel of arbitrators. This is not the time to discuss these various procedures and their different features.
In the following I will, somewhat interchangeably, refer to ADR or mediation; it is of course clear that mediation (and conciliation) is just one of the methods of ADR. On the other hand, mediation is entirely flexible and will accommodate the parties by allowing almost all the different procedures the parties may have in mind.
2. What Are the ADR Rules "on the Market" for Use in Europe ?
There is no shortage of rules readily available such as, e.g.
- the UNCITRAL Conciliation Rules, adopted in July 1980 (1)
- the ICC Conciliation Rules (as amended as of 1 January 1988)
- the Zürich Conciliation Rules (1977)
- the Zürich Mini Trial Rules (adopted as of 5 October 1984)
- the Rules provided by CEDR (London)
- the Rules provided by CPR (New York)
- the AAA Commercial Mediation Rules, of 1 January 1992
- Rules of various other arbitral institutions and chambers of commerce
- and lastly: the WIPO Meditation Rules, of 1 October 1994
3. A Comparison of Some Essential Features
Appointment of the Mediator
As in respect of arbitration is it certainly essential that the parties are given the authority to agree themselves on the person (or persons) to act as mediator. This notion is clearly reflected in Article 6 (a) of the WIPO Mediation Rules, Article 4 of the UNCITRAL Conciliation Rules, Article 4 of the AAA Commercial Mediation Rules, Chapter B of the CPR Model ADR Procedure, CEDR ADR Procedure (see in particular the CEDR Sample Dispute Resolution Clause 2, para. 3, Zürich Mini Trial Rules, Article 5 (2).
Only the ICC Conciliation Rules provide (in Articles 1 and 4) that the conciliator shall be appointed by the ICC (2). This seems to be too stiff a solution and may be one of the reasons why the ICC Conciliation Rules are rarely used.
On the mediation procedure (3) little needs to be said because, in any event, the procedure will be conducted--on the basis of the mutual agreement of the parties--in a very flexible (but professionally structured) way. A typical aspect of ADR procedures are the so-called caucus sessions in which the mediator meets with one party alone, thus obtaining confidential information which the mediator will not thereafter--without the prior explicit consent of the party--make known to the other party; see hereto Article 11 and Article 12 (c) WIPO Mediation Rules; Article 10, second sentence of the AAA Commercial Mediation Rules; the CPR Rules; and less explicitly: Article 10 UNCITRAL Conciliation Rules (but affirmed in Gerold Herrmanns Commentary referred to in Footnote 1).
Other Rules do not express this important aspect specifically, but it may be said that--in stark contrast to the procedure in an arbitration--caucus sessions are one of the distinctive elements of any ADR procedure, and I would therefore assume that also in a mediation under other Conciliation Rules such caucus sessions can be held. As far as the ICC is concerned, ICC conciliators seem to have been notably reluctant to caucus separately with the parties (4).
Duties of the Mediator
All Mediation Rules express, or at least imply, the notion that the mediator shall endeavour to assist the parties in an independent and impartial manner in their attempt to reach an amicable settlement, being guided by principles of objectivity, fairness and justice, giving consideration to, among other things, the rights and obligations of the parties, the usages of the trade and all relevant circumstances surrounding the dispute, including any previous business practices between the parties; see hereto explicitly Article 7(1) and (2) of the UNCITRAL Conciliation Rules. On the other hand, it is clear that the mediator does not have the authority to impose a settlement on the parties.
Confidentiality is, of course, another most essential aspect of every ADR procedure. Basically, each party participating in such procedure will be extremely anxious to ascertain that the statements and concessions it may make will not thereafter be used against it. Therefore, the WIPO Mediation Rules contain detailed provisions to this effect in Articles 14 to 17, which are more elaborately shaped than Article 14 of the UNCITRAL Conciliation Rules, or Articles 6, 10 and 11 of the ICC Conciliation Rules, or Article 12 of the AAA Commercial Mediation Rules.
The entering into a Confidentiality Agreement is, therefore, another typical/characteristic for ADR Procedures, and it is indeed recommended to draft such an agreement very carefully.
Suspension of the Running of a Limitation Period
Another important aspect is the parties concern that they should not be trapped by a statute of limitation during the mediation procedure. To this effect Article 27 of the WIPO Mediation Rules does infer that the parties are taken to have agreed that the running of a statute of limitations shall be suspended, to the extent permitted by the applicable law. However, the law applicable to this issue may be such that, in a critical situation, a party may be forced to initiate arbitration (or ordinary litigation) so as to effectively interrupt a statute of limitations. In such a case, the party may most probably obtain a suspension for such arbitration (or litigation) for as long as the mediation procedure will be conducted (compare hereto Article 16 of the UNCITRAL Conciliation Rules).
Quid, if ADR/Mediation Fails
The WIPO Mediation Rules, in Article 13 (b), contain an interesting and rather unique provision which is noteworthy. The provision says that the mediator, if he believes that any issue in dispute cannot be resolved through mediation, will not simply close the file thereon and terminate his unsuccessful mission but will, instead, try to then act as a "disputologist" (I am borrowing this term from Sir Michael Kerr) in the sense that he will then discuss with the parties various possibilities which might be conceived to resolve the particular issue. In fact, it is not a necessary or inevitable consequence of a failed mediation that parties will thereafter have to embark on complicated, full-fledged "lege artis" arbitration proceedings. Instead, there exists a variety of other options which may provide a quicker result on a more focused basis.
In particular, the WIPO Mediation Rules make reference to an expert determination in respect of one or more particular issues (such as, e.g., on the determination of the value of a particular asset, which determination will then be made by a neutral expert whose opinion will be binding for the parties and may, thereafter, enable the parties to reach an overall solution).
Another solution might be to use a MED-ARB Procedure, whereby the mediator would, after the unsuccessful mediation, "change his hat" and become an arbitrator (5). In such a case--which of course requires the explicit consent of all parties--it would then normally be appropriate (and indeed desirable) that the mediator, when acting as arbitrator, makes use of all the information he has received from the parties, including the confidential information. Examples discussed in the United States show that such a procedure is quite often desired by the parties (6).
Another possibility would be to provide for a MEDALOA Procedure, a term invented by Robert Coulson (past president of the American Arbitration Association) (7), according to which the arbitrators mission will be to determine which one of the last offers made by the parties in the framework of the mediation procedure will prevail (it normally being understood that the arbitrator shall not have the authority to make his determination in a middle way). This procedure, imported from the United States, has the advantage that each party will have to reflect very carefully on the last offer it will submit during the mediation procedure. If a party submits a last offer which is too far away from the appropriate solution, it will risk that the arbitrator will reach the conclusion that the other partys offer will have to prevail in its entirety.
Another advantage of the MEDALOA Procedure is that the arbitration will be strictly focused and should normally provide a determination within a very short period of time such as, e.g., six months. Indeed, the MEDALOA Arbitrator will not normally have to work through all of the files and thousands of documents, but may focus on those limited issues which are directly relevant in respect of his appraisal regarding the two last offers. I have drafted a Model MEDALOA Clause which is attached to this paper; the clause permits the "escalation" from mediation to MEDALOA and, if necessary, to ordinary arbitration.
Obviously, there are many other possibilities or combinations which the mediator may discuss with the parties so as to provide the best possible assistance to them.
B. Why is ADR in Europe a Slow Starter ?
While, as already indicated, ADR is the growth industry in the United States, and certainly the most predominant dispute resolution mechanism practised in the Far East (more than 99% of the disputes are mediated for instance in Japan, less than 1% are submitted to arbitration), it is indeed surprising to realize that ADR has gained so little recognition in Europe (8).
In Europe a scepticism vis-à-vis ADR (mediation etc.) still seems to prevail (9). In fact, many practitioners will proudly emphasize that, in Europe, there is little need for mediation because arbitration in civil-law countries, as is sometimes said,
- has managed to remain " more civilized" than in the United States, has caused less frustration, and in particular,
- has managed to stay away from overly legalistic procedures,
- from excessive oral and written pleadings,
- from excessive cross-examinations at hearings lasting for many weeks, and
- has managed to ban any sort of discovery proceedings etc.,
- and thus has managed to keep up a good and efficient working basis for arbitration.
While there may be some truth in such arguments, I nevertheless suspect that those European practitioners may have understood little about the spirit of mediation. Those claiming to have mediated ever so often in their professional lives in the sense of conducting settlement negotiations, may in actual fact never have taken the care and time to study and learn; not so much the procedure and technique, but to study and improve their own ways of conducting negotiations, to critically work on their own perceptions, their openness and their ability to listen to the other party, their ability to analyse and develop different perspectives and options.
For this reason, my short Report will less deal with paragraphs and procedures, but will aim to convey a few thoughts which, in my conviction, are much more important than the rules and the paragraphs.
And I do hope that the scepticism will over the time give way to a growing awareness, even in Europe, of the infinite advantages offered by ADR (mediation etc.) and that the scepticism against ADR is giving way to a new thinking process (10).
C. The Essential Aspects of ADR
1. When to consider ADR ?
ADR can be used/considered in respect of all disputes that may arise. Nevertheless, there are some typical situations which are almost crying out for an ADR procedure, particularly in all long-term contractual relationships such as
- in construction contracts: ADR may solve the dispute quickly and without disruptive effects; ADR may thus avoid a disaster on the construction site, and may also avoid a disaster on the table of the lawyers since, if the dispute has to be arbitrated, they may see themselves confronted with ten thousands of documents;
[Note: Do also consider other "tools" to avoid litigation/arbitration such as, e.g., the use of a disputes review board ("DRB"), and the use of a so-called "expert determination" ("Schiedsgutachten") for determining a disputed status of facts (or law)];
- in joint-venture situations, where you do not want to jeopardize the existence of the joint venture as such;
- in long-term production or delivery contracts;
- generally, if the maintenance of a good business relationship is important to you.
And, even for small one-shot deals, you may recall this old dictum of Zürich merchants of the 15th Century"businessmen always meet twice in their lifetimes"
I submit that the above dictum has something to do with mediation and ADR in general!
2. What then is Special About ADR ?
I do not intend to compile an exhaustive catalogue. The following is only my short list:
ADR (Mediation etc.)
likely to disrupt your business relationship
not (or less) disruptive
gets into the machinery of the legal department which controls the process
remains within the active control of the management
all evidentiary material submitted (including second-best materials)
only the best materials; concentration on the essence
builds up fixed "positions"
wants a pragmatic, principled and flexible negotiation; aims to bridge the gap
non legalistic procedure, but carefully structured
joint sessions only
joint sessions and separate caucus sessions
solves or recommends
the rule of law governs
commercial perspectives prevail
determines issues that had arisen in the past
looks not only backwards, but also (and essentially) to the future
the arbitrator can hardly be "creative"
the mediator can assist the parties "to enlarge the cake," thus to develop a creative and mutually advantageous business solution
goal: to win (the process is "rights driven" and problem-oriented)
goal: to solve the dispute on an acceptable basis ( the process is "interest driven" and result-oriented
takes a lot of time
enforceability of the outcome: yes
enforceability of the outcome: no
It is never wrong to consider/reconsider whether ADR would not be a suitable alternative for the solution of your dispute (or the dispute submitted to you as legal counsel). It does seem to me that many lawyers do not carefully enough evaluate all these perspectives and rather seem to be inclined to shoot for arbitration, although ADR might provide a much better suited solution to the client in question.
However, the most essential question is not whether ADR is suitable for you. The much more important (and difficult) question is whether you (as a person) are suited for ADR.
3. Are You Fit for ADR? Are You Suitable?
ADR (mediation) requires from you as counsel, as well as from the parties, a radically different approach.
Indeed, the ADR negotiating technique must be learned, ideally by training in small working groups. And it can be learned, at least by those who are prepared to work on themselves, to step out of their routine, by those who will be prepared to take it on themselves to work on and change their own patterns and to work on the many unapprehended pre-suppositions (11). [I cannot myself claim to already have reached any suitable level in this educatory work. I rather consider myself to be a learner/beginner, and I also believe that, during our life-times, we are and remain learners and beginners.]
It is not possible to present the subtleties within a speech of 20 minutes; a few ideas must
(1) Identify and Segregate the Human Problems!
Most disputes arise out of (or have to do with) human problems such as anger and other emotions between those individuals who have been involved in the performance of a certain contract. For instance, the engineer who once felt offended by the project manager, causing a growing deterioration of the business relationship (and this may well be the real cause for a dispute resulting in a costly arbitration).
Identify these human problems; the best way, in most cases, may be to discuss them openly, rather than to ignore or swallow them; thereafter exclude emotions for the purpose of the further negotiations; possibly you may wish to use different people who will be able to take a fresh and independent approach!
(2) No positions!
The typical behaviour in negotiations is to argue and negotiate on positions ("this is my position ... "; "this is my bottom-line ... "; "you may take it or leave it ...").
A positional negotiation is in most cases wrong and counter-productive; it makes your blind to other alternatives; it may even prevent you from understanding the other partys case and problem (which is an essential prerequisite for your ability to come to an amicable solution).
(3) First Walk in the Other Partys Shoes!
In the above sense, it is necessary that, first of all, you place yourself in the position of your adverse party so as to fully understand its concerns, perspectives, constraints and the implications of any solutions. Looking at oneself through the eyes of the other party is always a very educative exercise!
(4) Look for and Define Common Goals, Common Concerns, Common/Shared Interests!
Instead of emphasizing antagonistic views, instead of focusing on opposed and incompatible positions, it is in most cases much better to devote the time to consider and identify the common interests. The focus should be "solution-oriented," rather than "problem-oriented" (indeed, all of us will recall examples where most of the time available for negotiations was used to emphasize the problems, instead of concentrating the intellectual efforts on mutual interests).
(5) Work out Common Solutions!
To work on common solutions is a different approach from what is usually done, namely the defining and proclaiming of ones own position. It is a common approach which requires a creative and imaginative thinking.
(6) "Enlarge the Cake!"
In the Harvard Getting to Yes terminology, this will mean to explore whether and if so, how, new business perspectives can be added, so as to make the stake of the cake bigger for each party, such that there will not necessarily be a winner and a loser, but in fact two winners.
(7) Define Second and Third Best Alternatives!
Forget about the maximum result you had in view to shoot for, because you will not get it anyway! Instead, use all your efforts, time and imagination to work on and develop second and third best alternatives. Only these will be realistic and will have a reasonable chance to be commonly acceptable.
Certainly, these few basic ground-rules deserve much further development, but this is not the time for it (12).
A reflection on these points shows something quite clearly:
Most of these aspects and perspectives are extraneous to ordinary litigation or arbitration, but these are the perspectives for ADR/Mediation!
D. A Characterization: What is ADR/Mediation ?
To conclude, my answer is the following: ADR [such as mediation] is the distinguished manner of a highly structured negotiation process.
It is thus the most noble way of dispute resolution.
And compared to arbitration: Arbitration is not only a technique, it is an art; and ADR (such as mediation) even more so: it is a culture and art!
However, ADR can only work, as I stressed, if we first take it on ourselves to work on ourselves so as to become suitably fit for ADR. Working on ourselves again is not simply to work on a technique. Working on ourselves means in the first instance
- to be and become aware of our own communication patterns [such as, e.g., to work on our ability to first listen carefully (a statement which sounds trivial, and yet the lawyer or manager who is unable to listen to what you say, but instead immediately comes in with his positions and (often or even mostly wrong) pre-suppositions, is that a kind of person known to you?)],
- by avoiding to state, build up or take unproductive (adverse) positions,
- by avoiding to speak--as we mostly do (but without in fact being aware of it)--in pre-suppositions,
- and to thereby work on and develop a new quality of communication.
It is my firm belief that indeed every dispute would be susceptible of being resolved by mediation (or another ADR procedure), and the success rates reported from the United States are both impressing and encouraging. And where the mediation process fails to bring about an amicable solution, then this, in certainly more than 50 % of the cases, rather has to do with our own communication mistakes or the failures of those persons that had been involved in the negotiation/mediation process. Only in the minority of cases will the failure have to do with insoluble factual or legal problems.
There is no reason why, in Europe, we should not, much more than ever before, think about and start working on the development of mediation (or any other ADR procedure). Indeed, to develop mediation (as opposed to a litigious dispute resolution such, as arbitration) is a noble task--probably the most noble one in our professional lives!
Proposed Model MEDALOA Clause
I would propose to draft a MEDALOA clause along the following lines:
"1. Any dispute, controversy or claim arising under, out of or relating to this Contract (and any subsequent amendments thereof), including without limitation its valid conclusion, binding effect, interpretation, performance, breach or termination, as well as tort claims and quasi-contractual claims (hereinafter referred to as "the Dispute") shall be resolved by an alternative dispute resolution procedure (hereinafter referred to as "the ADR Procedure") in the sense of a .......
[conciliation under the UNCITRAL Conciliation Rules]
[mediation under the WIPO Mediation Rules]
[mini-trial under the Mini Trial Rules of the Zürich Chamber of Commerce]
as in force at the time of initiating the procedure. The ADR Procedure shall take place in ........ [Zürich/Switzerland]. The language to be used shall be .........[English].
2. If and to the extent that the Dispute has not been settled pursuant to such ADR Procedure within ......  days of the initiation thereof, each party shall submit its best last offer ("the Last Offer") to the mediator (or conciliator or facilitator) and the other party, and a further bona fides attempt shall be made to resolve the dispute within a further time period of 20 days.
3. If such further attempt fails, the Dispute shall exclusively be referred to and finally determined by a Last-Offer-Arbitration, conducted as an ad hoc arbitration. The arbitral tribunal shall consist of ....... [three arbitrators] [a sole arbitrator]. The place of arbitration shall be ....... [Zürich/Switzerland].
The mission of the arbitral tribunal (respectively of the sole arbitrator) shall be confined to determine, on the basis of an arbitral procedure, whether the Last Offer of the claimant party or of the opposing party shall prevail; the tribunals (or the sole arbitrators) decision shall be handed down in an arbitral award.
The language to be used in the arbitral proceedings shall be ........ [English].
4. In making its determination, the arbitral tribunal (respectively the sole arbitrator) shall, to the extent necessary for the purpose of the Last-Offer-Arbitration, apply or have regard to the substantive laws of ........ [Switzerland] in respect of the dispute, controversy or claims referred to such Last-Offer-Arbitration (including those on any statute of limitations, set-off claims, tort claims and interest claims).
5. The parties are agreed that the award shall be final and binding on them and undertake to honour its terms voluntarily; they are moreover agreed that the award shall qualify for recognition and enforcement under the terms of the New York Convention of 1958 on the Recognition and Enforcement of Arbitral Awards.
6. If a party fails to take part in the ADR Procedure and, particularly, if a party fails to submit its Last Offer as per the second paragraph above, the other party shall be entitled to initiate ordinary arbitration in the sense of ..........
[an ad hoc arbitration, the claimant party having the option to require that such arbitration shall be conducted under the terms of the UNCITRAL Arbitration Rules]
[an arbitration under the WIPO Arbitration Rules]
[an arbitration under the International Arbitration Rules of the Zürich Chamber of Commerce]
[an arbitration under the ICC Arbitration Rules]
[an arbitration under the LCIA Rules]
as in force when initiating such arbitration. Regarding the place of arbitration, the language and the substantive law applicable, the provisions as above provided for the MEDALOA procedure (above paras. 3 to 5) shall apply."
3. An excellent Mediation Primer is contained in the Donovan Leisure Newton & Irvine ADR Practice Book (1990) ISBN 0-471-50687-7, pages 113 ss. As this book is available in most law firms, I am limiting my comments in this Report to a few observations only.
5. Normally, and absent a specific agreement among all parties, a mediator who failed to achieve an amicable solution between the parties, is "worn out" and, thereafter, will be disqualified from acting as arbitrator. But this does not necessarily have to be so, if the parties agree otherwise.
6. It is not surprising that, in England, the concept of Med-Arb is seen with very critical or sceptical eyes; see e.g. Paul Newman et al., "The Med-Arb Debate--Some Contributions," in Arbitration Vol. 60 No. 3 (August 1994), 173 ss.
8. The following two articles were published only after the WIPO Conference of 20 January 1995: Pieter Sanders, "ADR in Civil Law Countries," in Arbitration Vol. 61 No.1 (February 1995), 35 ss. and de Witt Wijnen, "ADR, the Civil Law Approach", in the same journal, 38 ss.
9. So far, for instance, the ICC Conciliation Rules have very rarely been used, i.e. only in about 1% of the cases. No statistics on the use in Europe of other ADR Rules are available to me, but I know for instance that even the excellent Zürich Mini Trial Rules--which in 1984 came out certainly one decade ahead of time--have only rarely been used so far.
10. The Institute of International Business Law and Practice of the ICC has now set in motion a study group (meeting on 21 April 1995) to analyse ADR in Europe, and a special Seminar is planned to be held in Paris on 24/25 October 1995. Even before, CPR will once again organize one of its carefully structured ADR Seminars in Paris (18 - 20 April 1995); and WIPO will organize its Training Program on Mediation in Intellectual Property Disputes (Geneva, 19/20 May 1995). The ball is moving!
11. It is my view that much personal and professional benefit can be drawn from an NLP training course (such courses are widely offered in Europe, lasting between a few days up to 6 weeks); it can hardly be learnt from books, but the book by Joseph OConnor and John Seymour Introducing Neuro-Linguistic Programming; The New Psychology of Personal Excellence (Mandala, London 1990, ISBN 1-85274-073-6) or the German translation published by VAK Verlag, Freiburg 1992, ISBN 3-924077-20-7 is certainly worth reading. While NLP training may provide deeper personal insight, there are books with the more limited focus of practical business negotiation techniques such as the bestseller Getting to Yes by Roger Fisher and William Ury (Penguin Books, ISBN 0 14 00. 6534 2).
12. After my oral presentation of this Report, Mr Paul A. Koches (Popham Haik, Washington) drew my attention to the indeed excellent book written by Stephen R. Covey, The Seven Habits of Highly Effective People (1989, ISBN 0-671-70863-5), apparently a bestseller in 1992/1993, which I did not know so far. Covey, in some other words, enumerates comparable ground rules; a reading of his book is highly recommended.