Negotiation or Mediation as a First Step Before Arbitration - Chapter 7 - Arbitration Clauses for International Contracts - 2nd Edition
Paul Friedland is a Partner at White & Case LLP and Chair of the firm's International Arbitration Practice Group. Mr. Friedland was Chair of the Task Force that developed the recent "IBA Guidelines for Drafting International Arbitration Clauses." Mr. Friedland is Chair of the Law Committee and a Member of the Board of Directors of the AAA and a Court Member of the LCIA.
Originally from Arbitration Clauses for International Contracts - Second Edition
NEGOTIATION OR MEDIATION AS A FIRST STEP BEFORE ARBITRATION
Both negotiation and mediation are consensual, rather than adversarial, and produce a resolution only if both parties agree thereto. The difference between negotiation and mediation, in brief, is that negotiation involves only the parties, and mediation involves the intervention and assistance of a third party (the mediator) as a facilitator in the parties’ effort to resolve their dispute.
Contractual undertakings to negotiate or mediate are increasingly enforceable before national courts, as well as before arbitrators.
Even where there is no provision for negotiation or mediation, parties can choose to negotiate or mediate at any time. The question is whether the chances for settlement are significantly increased by providing for negotiation or mediation as a mandatory first step before resort to arbitration, and there are no statistical answers to this question.
Two-step clauses, by practical necessity, require negotiation or mediation as a first step before arbitration. This can be a significant impediment to settlement via negotiation or mediation, because parties at the outset of a case are often entrenched in their positions, and their overconfidence in their case will diminish only once they receive an opposing submission or have the opportunity to observe the reactions of the arbitrators (even in a context as seemingly innocuous as the drawing up of terms of reference).