Med-arb: tips for international parties

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In part one of this article, in last month’s China Business Law Journal, the authors considered the nature of med-arb (by which an arbitrator acts as mediator in the same proceedings), the circumstances in which it arises, as well as its potential benefits and risks. Here, in part two, we address the type of procedure envisaged, as well as the safeguards on which parties can agree to mitigate some of the perceived risks of med-arb.

Be familiar with form of mediation

Broadly speaking, mediation can be conducted on an “evaluative” or alternatively a “facilitative” basis. The former involves an arbitrator appraising each party’s case and directing them toward settlement based upon his or her assessment. In the latter, the arbitrator offers no such evaluation but simply facilitates a dialogue or negotiation between the parties.

The “evaluative” approach is more commonly employed by PRC arbitrators, and they often adopt a robust style in doing so. This can be highly effective. The tribunal is in effect providing an advance warning of the determination it will give should the mediation fail. It would, therefore, be a brave party that, having been given that warning, refuses to adjust its position accordingly.

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Philip Nunn is a consultant and Matthew Townsend is an associate in the Hong Kong office of Norton Rose Fulbright