MEDIATION IN ARBITRATION: INSIGHTS FROM THE LONDON CHAMBER OF ARBITRATION AND MEDIATION/ HERBERT SMITH FREEHILLS SURVEY

The Herbert Smith Freehills arbitration team has partnered with the London Chamber of Arbitration and Mediation to conduct a snapshot survey of more than 50 mediators, exploring their experience of mediation in arbitration in 2019 and 2020. The results of the survey shed light on current take-up of mediation in arbitration, the stages of the dispute at which these mediations are most likely to occur, claim values, and settlement rates. In this blog post we discuss and reflect on mediator responses to the survey, examining what the survey results reveal about the current trends in mediation in international arbitration. You can also watch a short video summarising the key findings of our research here.

Timing of mediation in arbitration[1]

The survey set out to explore the timing of mediations taking place in an arbitration context and mediators were asked to indicate the stage of the dispute at which they had conducted such mediations in 2019 and 2020.[2]

The vast majority of the mediators with experience of mediation in arbitration reported that they had mediated these disputes at the pre-document production stage, with 94% of the mediators having mediated at least one dispute at this stage in 2019 or 2020. Mediators were much less likely to have experienced mediations at the post-document production stage, with just over a quarter of mediators having conducted mediation in arbitration after the document production stage (but before the hearing). It was not surprising to see that mediation after the hearing is much less common than mediation at earlier stages of the arbitration and only 6% of the mediators with experience of mediation in arbitration had conducted post-hearing mediation in 2019 or 2020.

The results of the survey illustrate that proposing mediation early in an arbitration is usually more likely to be effective than attempting to settle relatively late in the day. While early mediation is clearly desirable from a cost and time-saving perspective, the right time to mediate in any individual case will be when a party has a sufficiently clear understanding of the strengths and weaknesses of both its own and the other party’s case and of the appropriate range for any settlement. The survey results demonstrate that parties to arbitration will usually feel sufficiently informed to mediate without proceeding to the document production phase of the arbitration. However, as shown by the survey responses in relation to the (more limited) use of post-document production mediation, in some arbitrations the parties will want to see what comes out of the document production phase before embarking on mediation. This is probably particularly likely in the highest value arbitrations.

Claim values

The mediators were asked to indicate their experience of meditating arbitration cases in a range of different value bands, allowing us to visualise the claim values seen in their caseload in 2019 and 2020.

The majority of mediators with experience of mediation in arbitration reported having conducted mediations with a value in excess of £10M and just under 18% of mediators reported having mediated at least one claim in the £100M plus band. Mediators were most likely to have experienced mediating claims with a claim value of between £1M and £10M and around two thirds of the mediators reported mediating arbitration cases in this band. Mediators were much less likely to have mediated the lowest value arbitration claims, with under 15% of the mediators having experienced mediations involving a claim worth less than £1M.

The survey results demonstrate that mediation is trusted by both counsel and clients to resolve high value arbitration cases, with mediators mediating arbitration cases up to £100M and beyond in 2019 and 2020. While mediation is being used to resolve some lower value arbitrations, it seems likely that settlement of smaller arbitration claims is often pursued by negotiation between the parties, whether at the client to client level or between counsel, rather than via mediation. While this may be because of cost considerations, given the availability of cost-effective mediation options it is somewhat surprising to see that the mediators responding to this survey had such limited experience of the smaller arbitration claims.

Scale of mediation in arbitration

The survey also sought to establish the scale of mediation in arbitration, with all mediators asked to state the proportion of their caseload which was made up of arbitration-related mediations in 2019 and 2020.

The responses to this question varied very significantly between different mediators surveyed. Around a quarter of the mediators who responded to the survey had a significant arbitration-related caseload, with such mediations making up over a third of their mediation work. For a small number of the mediators surveyed, arbitration-related cases dominated their practice, with 10% of the mediators reporting that more than 50% of their mediations were arbitration-related. By contrast, just over half of the mediators we surveyed had a highly litigation-dominated caseload, with arbitration-related mediations making up less than 10% of their caseload.

The survey results suggest that arbitration-related caseload is highly variable between individual mediators and this may well be influenced by perceived mediator sector specialisms. Mediators with professional backgrounds in sectors where arbitration has traditionally been very strong are arguably likely to have more arbitration-related work than mediators without this type of experience. It seems likely that mediators with experience in the fields of construction, maritime or commodities, for example, may often be seeing a higher proportion of their caseload made up of arbitration-related mediations than those mediators with a background in general commercial litigation.

Success rate

The mediators responding to the survey were asked to indicate their success rate in relation to their arbitration-related mediations and the majority reported impressive settlement rates for these cases in 2019 and 2020.

Just under half of responding mediators with experience of mediation in arbitration reported that they were settling at least 70% of these cases at the mediation. Of these mediators the majority indicated that their success rate for 2019 and 2020 was over 80% for mediation in arbitration. A further 17% of mediators with experience of mediation in arbitration reported a success rate in the 50-70% band. Some mediators reported a lower success rate, with around a third of mediators with experience of arbitration-related mediation stating a success rate of less than 50%.

The striking average settlement rates reported for mediation in arbitration by the mediators we surveyed underline the importance of considering mediation as a means of resolving disputes, particularly given the benefits for parties in terms of cost and time savings. Success rates are known to vary between mediators and will be influenced by a variety of factors, including difficulties inherent in settling particular cases and the types of cases mediated. CEDR have previously noted that in their experience individual mediator settlement rates are not a significant factor in mediator selection, suggesting that counsel and parties to disputes appreciate that there may be many reasons for an individual mediator having a lower success rate than average in any given year.[3]

Comment

This short survey has provided valuable insight into when mediation is most commonly attempted in arbitration cases, the arbitration claim profile seen in mediation and the proportion of arbitration claims in the overall mediator caseload. This has the potential to assist parties contemplating mediation of an arbitration case in evaluating whether mediation is a suitable next step in their case and when it should be proposed. Perhaps most importantly, the impressive average settlement rates for arbitration cases revealed by the survey will assist parties to conduct a rounded analysis of the potential benefits of mediating their disputes.

While the survey shows that some mediators are already seeing a significant volume of arbitration-related work, there may well be an appetite for more widespread use of mediation in arbitration and  60% of survey respondents to the Queen Mary University of London International Arbitration Survey in 2015 thought there should be greater encouragement to settle arbitration cases, including via mediation.[4] We will be sharing our thoughts in relation to some of the potential barriers that may currently exist to mediation in arbitration, including ways these could possibly be overcome, in our forthcoming Herbert Smith Freehills Mediation in Arbitration Podcast.

You can also hear more about the current profile of mediation in arbitration by joining us for the London Chamber of Arbitration and Mediation webinar on 18 March 2021, where Craig Tevendale, Chris Parker and Rebecca Warder of Herbert Smith Freehills will be joining Kathryn Britten and Jonathan Wood for an in-depth discussion of the implications of the survey results. To register for this webinar please click here.

For more information, please contact Craig Tevendale, Partner, Chris Parker, Partner, Rebecca Warder, Professional Support Lawyer or your usual Herbert Smith Freehills contact.

[1] The survey questions regarding timing and claim values allowed the mediators to select all options that reflected their caseload. This means that the data relating to these questions exceeds 100% as the respondents often selected more than one of the available responses.

[2] Mediators were asked to respond to all questions with regard to their mediations conducted in 2019 and 2020 only.

[3] See the comments in the “Performance in mediation” section in the CEDR Eighth Mediation Audit 2018.

[4] Queen Mary University of London – White & Case 2015 International Arbitration Survey: Improvement and Innovations in International Arbitration, p30