Indo-American Chamber of Commerce (IACC)

MED-ARB: A VIABLE SUBSTITUTE FOR INTERNATIONAL ARBITRATION

In Uncategorized on November 11, 2010 at 12:07 pm

You have a dispute involving international parties or you are afraid that your deal will devolve into one.  And if you are the aggrieved party you want and need to end up with an arbitration award in your favor that you can enforce almost anywhere under the New York Convention.  But you have heard some terrifying stories about the international arbitrations most everyone signs up for that have gone on forever and devoured rather than helped the disputing parties.

There is a quick and economic shortcut to that arbitration award called Med-Arb.  It is a so-called hybrid dispute resolution process in which, most typically, both parties to the dispute sign up with a mediator who, in the event of an impasse, is authorized by their agreement to put on an arbitrator’s hat and resolve any remaining issues that the mediation failed to dispose of.

Med-Arb is hardly a new process; it dates back to the ancient Greeks and has been and is being used in many countries, including the US, China, India, Italy and others. For a long time, though, it fell out of favor in the US.  Now, however, as arbitration has come to be called the “new litigation” because of its increasing length and cost, Med-Arb has had a dramatic rise in popularity.  In fact, many of its proponents refer to it as encompassing “the best of both worlds” because it combines so many of the benefits of mediation and arbitration. This amalgamation capitalizes on the advantages of both processes, while simultaneously eliminating many of their individual disadvantages. The combined proceeding aims to resolve disputes faster, more efficiently and more economically.

Of course Med-Arb’s biggest and overwhelming advantage is that you know when you sign up that your dispute is going to be resolved.  Moreover, you can also be sure that if you pick a good Med-Arbiter you will at least start off with a sympathetic mediated hearing of the kind that not only saves time, and energy but also conserves relationships.   Another certainty is that the proceeding will be a fraction of the time and cost of a typical long-running arbitration with excellent odds that a real arbitration will never be needed. Even in those relatively infrequent cases where a party, having disregarded the Med-Arbiter’s “hints,”  causes an impasse, the arbitration portion need only deal with the remaining issue or issues that the mediator couldn’t resolve.

There used to be some doubt about whether a Med-Arb proceeding could generate an arbitration award enforceable under the New York Convention.  But several articles have now been written confirming such enforceability in virtually all US courts.  While Med-Arb requires “informed consent” and is not for everyone, it clearly can be the right choice for many parties wanting to avoid the cost and strain of drawn out expensive arbitration proceedings both international and domestic.

Author: Norman Solovay and Tanya de Sousa, McLaughlin & Stern, LLP Partner & Chair of its Alternative Dispute Resolution Practice

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