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Byung-Woo Im
Kim & Chang, Seoul
bwim@kimchang.com

 

Report on a session by the Dispute Resolution Section at the 2019 IBA Annual Conference in Seoul

Monday 23 September 2019

 

Session Co-Chairs

Tom Price Gowling WLG, Birmingham

Sungjean Seo Kim & Chang, Seoul

 

Speakers

Professor Mohamed Abdel Wahab Zulficar & Partners, Cairo

Tat Lim Aequitas Law, Singapore

Yoko Maeda City-Yuwa Partners, Tokyo

Ira Nishisato Borden Ladner Gervais, Toronto

Gary Birberg JAMS, Miami, Florida

Christian Leathley Herbert Smith Freehills, New York

 

Judges and arbitrators can encourage settlement in subtle and indirect ways during court proceedings or arbitration proceedings. In the context of litigation, judges may do so by getting involved in facilitating settlement, either by asserting their views through an early neutral evaluation or by even being the parties’ mediator.

Using judicial gravitas and ability to influence counsel and clients to encourage the litigants settle may be positive when judges use their experience in court and the judges’ professional and impartial objectivity to creatively shape outcomes. Judges can also use their ability to predict judicial outcomes (knowing ‘where to push’) and in some cases, judges may have specific subject matter expertise that may assist in encouraging settlement.

However, encouraging settlement is not a core judicial function and there are several concerns that discourage judges and arbitrators from taking on this role. For instance, alternative dispute resolution (ADR) and the related soft skills may not be within a judge’s core skillset. Further, by asserting their own views prior to rendering judgment, a judge threatens their impartiality and objectivity before the eyes of the parties, which, once damaged, may be impossible to regain. In a similar vein, judges who actively encourage settlement are at risk of being viewed as ‘bullying’ parties to achieve a settlement at any cost. Any failure to reach settlement will result in that judge being harder on parties or counsel that do not settle.

In Canada, some form of judicial pre-trial or settlement conference is typical. There is no question that judges are regularly involved in settlement efforts and many cases settle with judicial assistance. However, there are significant variations in whether the judge who presides at such conferences can serve as trial judge if the case does not settle, and also significant variation in judges serving as mediators outside the litigation process.

In Japan and Korea, it is very common for judges to act as mediators in settlement discussions between the parties. In Japan, judges often indicate their tentative evaluation of the case to persuade the parties to settle. Some consider this to be problematic as a judge’s early impression can change during the course of the proceeding; an indication of their early evaluation may mislead the parties. In addition, each party has separate discussions with the judge in many court settlement negotiations in Japan, which may affect the judge’s impression of the case.

In the arbitration context, there has been a large debate during the last decade on the topic of the arbitrator’s role in settlement. In 2009, the Centre for Effective Dispute Resolution (CEDR) published the Rules for the Facilitation of Settlement in International Arbitration clarifying how the arbitral tribunal should approach settlement conferences. In parallel, the Chartered Institute of Arbitrators (CIArb) attempted UK Practice Guideline 7 on arbitrators facilitating settlement, which concluded that arbitrators should encourage the parties to appoint a third-party mediator, instead of acting as the mediator, and must be very careful to follow the procedures under the statutes that allow arbitrators to act as mediators (including Singapore and Hong Kong).

Meanwhile, Appendix IV to the International Chamber of Commerce (ICC) Rules states that ‘where agreed between the parties and the arbitral tribunal, the arbitral tribunal may take steps to facilitate settlement of the dispute, provided that every effort is made to ensure that any subsequent award is enforceable at law’.

It should be noted that multi-tiered dispute resolution is popular with clients. The 2018 Queen Mary Arbitration Survey found that 60 per cent chose arbitration together with ADR as their preferred method of dispute resolution, compared to 32 per cent who chose arbitration as a standalone mechanism.

As in litigation, an arbitrator becoming directly involved in facilitating settlement between parties is controversial and depends on the proper jurisdiction. A traditional common/civil law dichotomy would be over simplistic. For example, German and German-Swiss arbitrators may be more open and direct in encouraging the consideration of a settlement between the parties, but in other civil law countries the position could be entirely different. For example, in the MENA region and certain sub-Saharan African states, culture, tradition and practice militates against an ‘inducement’ to settle by the arbitrators. Direct involvement in facilitating settlements could jeopardise and compromise the arbitration proceedings, as well as the independence and neutrality of arbitrators. Some have even been challenged on the basis of suggesting a settlement. 

At a practical level, arbitrators can certainly take steps that will have an impact on facilitating or expediting a settlement between the parties, even if these steps are not directly aimed at inducing or facilitating a settlement. These include:

• decisions on interim measures that actually render the continuation of the dispute unappealing;

• decisions on joinder of third parties (such as a majority shareholder), which may induce the parties to settle; and/or

• partial awards on certain aspects of the merits that will render the continuation of the proceedings unnecessary.

The Singapore Convention on Mediation, signed by 42 states in August 2019, applies to ‘mediated settlement agreements’ for international commercial disputes and provides a mechanism to facilitate the enforcement of such settlement agreements. The Convention is expected to result in greater use of mediation for international commercial disputes in cases where both parties are from states that have ratified the Convention. It could result in consequential reduction of arbitration or litigation of such disputes proceeding to a full hearing/trial or award/judgment.

The immediate effect of the Convention on the litigation and arbitration processes themselves is less certain. In the case of arbitration, the Convention may make it easier for parties to enforce settlement agreements that they decide not to record in the form of a consent award.

 

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