Key recommendations

The ICC Arbitration and ADR Commission's Guide on Effective Conflict Management and Report on Facilitating Settlement in International Arbitration help organisations to put in place structures to mitigate, manage and resolve disputes, and to consider actions which could encourage or facilitate the settlement of arbitrations once commenced.

The Guide sets out:

• appropriate ADR techniques, including the effective use of dispute resolution clauses;
• de-escalation tips for potential claims and disputes;
• information about the services of the ICC ADR Centre;
• corporate governance strategies to encourage ADR and the resolution of potential or actual disputes; and
• methods for quantifying potential settlement or resolution.

The Report details what parties, arbitrators and arbitral institutions can do to facilitate settlement. These include encouraging:

• case management techniques, such as the bifurcation of issues where appropriate;
• the use of mediation or settlement windows in procedural orders; and
• arbitrators to give preliminary views or hold settlement conferences, and parties to consent to such strategies should they be put forward.

How mediation and settlement in the arbitration context should operate

The Guide and Report highlight that there are many opportunities for parties to resolve disputes.

The graphic below illustrates the typical progress of a dispute where mediation is contractually required:

Although in such scenarios arbitrations will differ in their pre-trial and pre-decision steps (with various rounds of submissions, and lay or expert evidence), the Report highlights the opportunity for parties to mediate even after filing their submissions.

It also suggests incorporating a gap or "ceasefire" in the procedural timetable, where there are no competing obligations on the parties in respect of the arbitration, for the parties to meet.

The Guide and Report acknowledge how hard it is to settle matters. The earlier a matter is settled, the lower the costs and potential impact on normal business operations. However, at that stage, the parties have less certainty regarding the outcome, as their positions have not sufficiently developed. As matters evolve, the technical and legal issues crystallize, allowing for more sound and detailed analysis of these issues.

To help with this, the Guide advises organisations to create a robust decision matrix or tree to establish an internal comprehensive position in respect of any potential settlement. Factors for such an assessment would be cost implications and other quantifiable and unquantifiable outcomes, which might be legal, financial and reputational risks (for example the costs to the business of engaging in the arbitration process, such as the time that witnesses will need to devote to the arbitration, rather than being engaged in growing the business).
Application of the ICC's guidance to construction and engineering arbitrations

The nature of construction and engineering arbitrations presents particular challenges to settlement. They involve highly technical issues needing a variety of expert advice such as delay, quantum and project management analysis, and assessments by civil or geotechnical engineers. There are also complex contractual notification procedures and timetables, often demanding significant additional documentary evidence and decisions from the contract administrator.

As a result, in addition to considering the ICC's recommendations, parties wanting to use mediation as part of construction and engineering arbitrations, or to see them settled efficiently, should think about:

• appointing experts early;
• facilitating discussion with stakeholders and members of the supply chain so that all key parties are aware of a potential dispute and can meaningfully contribute to its swift resolution. This is essential if any mediation is to be successful, because the parties need an agenda and submissions based on a clear understanding of the state of the project and the matters in dispute before the mediation; and
• engaging independent legal counsel to advise on potential outcomes and to assess the liability of third parties (such as designers or insurers), which usually requires building up and maintaining records and evidence on wider potential claims and causes of actions. Legal advisers will also help organisations put in place procedures to ensure that privilege in communications is not lost. Remember that all correspondence before and after any mediation must be without prejudice.

The time, cost and effort invested in these steps is worth it, even if resolution through mediation seems distant and unlikely, because if the matter proceeds to arbitration, the work already carried out will form a central part of the pleadings or memorials.

Authored by Rupert Sydenham, Emerson Holmes, and Ashleigh Gray.