Alternative methods of dispute resolution, like arbitration and mediation, are quickly becoming the status quo in the international arena. When parties to a disagreement are from different countries with different legal systems, there is always a question as to where a lawsuit should be filed, and one party always feels like the other has a home court advantage. International dispute resolution methods, like mediation and arbitration, offer an expedient, equitable way to handle international disputes.
International arbitral organizations offer procedural rules for mediations. However, since mediation has only recently come to the forefront of international dispute resolution, these rules are vague in many areas. AS such, many of the mediator’s duties are not specifically defined. For example, the International Chamber of Commerce Rules of Optional Conciliation only state that the mediator has discretion to conduct the proceedings as he or she sees fit. The only restriction placed on the mediator by these rules is that the mediator must operate under the principles of impartiality, equity and justice. Mediators are left to determine what the principles of impartiality, equity and justice are. Given the discretion granted to the mediator, the success of the mediation often depends on the talents and temperament of the mediator. Despite the mediator’s wide discretion, the mediator still lacks authority to impose a solution on the parties, therefore his or her ability to get the disputants to negotiate and work towards a voluntary compromise is of utmost importance.
Arbitration in general (Both Domestic and International)
Parties that have exhausted other alternative dispute measures, such as mediation, and do not wish to resort to traditional litigation, may submit to a binding arbitration. This presumes that the parties are either subject to binding arbitration through an alternative dispute resolution (ADR) clause or are willing to agree to a binding arbitration after a dispute has arisen. One of the clearest advantages to binding arbitration as an alternative to litigation is the certainty of an outcome. Regardless of what transpires during the arbitration, the arbitrator has the final authority to make an arbitral award. No voluntary compromise on the part of the disputants is required as it is for a mediation to be successful. Further, arbitral awards resulting from binding arbitration are subject to limited judicial review according to the applicable state, federal, or international laws which usually deny appeal or review absent fraud or excessive zeal in defining issues by the arbitrator.
MEDALOA – Mediation and Last Offer Arbitration
A combination of mediation and arbitration may be used when parties want a binding outcome once they have not been able to agree after straight mediation. “MEDALOA” is the term coined by a former president of the American Arbitration Association for the combination of Mediation and Last Offer Arbitration. Typically, the same third party neutral participates in both the mediation and arbitration so that parties do not have to start the process all over again. However, if any party feels uncomfortable with using the same third party neutral, the mediator can find an arbitrator in very little time and with very little interruption in the process. A third party neutral, acting as both a mediator and arbitrator, should not use any confidential information learned in mediation in determining the arbitral award.
Traditionally, the differences between legal systems make arbitration attractive as a method for dispute settlement between international private parties. In addition to the general benefits of speed and expense of litigation, desires for a more global economy and for business expansion across geopolitical borders demands an effective way to merge different legal systems to reach an appropriate and acceptable dispute mechanism for both parties. This is particularly true when no single national court may be able to exercise effective jurisdiction over all aspects of the business venture.
By utilizing arbitral proceedings, international parties can blend their respective legal systems into one cohesive unit acceptable to both parties and eliminate the perceived bias in favor of one party over the other. “International litigation” is a misnomer in that there are no truly international judiciaries to which private parties can turn for dispute settlement. As a result, international litigation consists of international parties submitting to the jurisdiction of a local court.
Some international parties may reject arbitration in favor of litigation in national courts if they anticipate the need for interim relief. Generally, interim relief during disputes is not readily available to parties in arbitration. Other international parties may choose to litigate for the very reasons that others choose to arbitrate. For instance, a party may want to have extended judicial review of judgments, or extensive discovery, which is only available through the submission of the dispute to the jurisdiction of a local court unless contractual arbitral provisions exist to the contrary.
International arbitration may be governed by any set of procedural rules that the parties choose. In fact, most parties choose pre-established procedural rules in lieu of writing their own procedural rules for an ad hoc arbitration. In an ad hoc arbitration, parties create their own procedural rules, but parties should still designate a set of institutional procedural rules as a default in case the ad hoc rules do not address a particular procedural issue. It would also be difficult to detail all procedural issues in ad hoc rules and that would also make arbitration clauses lengthy and unwieldy. Before deciding on default procedural rules or any procedural rules, the parties should be familiar with what they entail and be ready to abide by them. The rules chosen via the written contract will be those used and unless both parties agree cannot be changed later because one party is unhappy with them.