Winter Course on International Commercial Arbitration

Introduction to
Alternative Dispute Resolution
Rekha Rangachari, NYIAC
Othmane Benlafkih, GBS Disputes
16 January 2024 | Islamabad

*Any comments provided herein are for the purposes of this presentation only and do not
constitute any legal advice.
Roadmap – 22 Slides
1. Disputes

2. ADR

3. Negotiation

4. Mediation

5. Conciliation

6. Arbitration

7. ADR v. Litigation

8. Q&A

2
Disputes
1. In business transactions, disputes between the parties are an
unavoidable fact of life.

2. The complexity is heightened by external factors such as geopolitical

instability, trade embargoes, disrupted transit routes, and volatile
currency markets.

3. In addition, every dispute—irrespective of the amount involved—strains

the business relationship of the parties.

4. Traditional dispute resolution through litigation is often seen as a

lengthy, costly, and adversarial process. It operates within a rigid
framework of procedural rules and legal formalities, potentially
escalating the conflict.

3
Disputes
1. Divergent Interpretations of Contract Terms

2. Unexpected External Events

3. Performance Delays or Quality Issues

4. Communication Breakdowns

4
Disputes
1. Scarcity of Resources

2. Communication Failures

3. Human Nature and Psychological Factors

4. Existential Competition

5. Power Imbalances

6. Divergent Values and Beliefs

5
Nature of Disputes
1. Are disputes constructive or destructive in nature? (open discussion)

6
Nature of Dispute Resolution
1. Distributive / Redistributive

• Opposing interests of parties

• Win / Lose

2. Integrative

• Parties not necessarily opposed. A “win-win” solution.

• Problem-solving, mutuality, based on interests and goal

3. Principle-based

• Opposing interests of parties

• Restoration of face, reputation, respect

7
What is ADR?
1. Alternative Dispute Resolution (ADR) encompasses various methods
used to resolve disputes outside traditional court litigation.

2. ADR offers several benefits over litigation, including confidentiality,

flexibility, and often, reduced costs and time.

3. Today’s introduction will focus on four primary ADR methods:

• Negotiation

• Mediation

• Conciliation

• Arbitration

examining their legal framework, applications, and critical role in

contemporary legal practice.
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The Legal Framework of ADR
1. ADR is generally governed by principles like party autonomy,
confidentiality, and flexibility, which allow for a more personalized and
less formal approach to dispute resolution.

2. Key legal instruments influencing ADR include the UNCITRAL Model Law
on International Commercial Arbitration, the New York Convention, the
Singapore Convention on Mediation, and various national arbitration
acts

3. Not all problems are justiciable

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Alternative? Amicable? Appropriate?
1. The acronym: Alternative Dispute Resolution

• Majority of disputes solved through negotiation (not adjudication)

• Traditional legal thinking assumes legal process is baseline against

which all other dispute resolution mechanisms are to be measured

2. Why search for alternatives?

• Not all problems suited to resolution through adversarial process

• Perceived deficiencies

i) Time & Cost v) Effectiveness

ii) Binding vi) Confidentiality
iii) Participation of Parties vii) Remedies
iv) Predictability viii) Fact finding 10
What to Choose?
1. Process adopted tends to influence, if not determine, the results
achieved.

2. Some problems are more amenable to particular types of process.

3. In an international setting, it is widely felt that state courts are not a

suitable forum for settling such disputes.

4. In practice, international arbitration is still the most important of these

alternatives.

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 Typical International Dispute Lifecycle

Disputes Between Negotiation / Disputes

the Parties Arose Mediation Resolved

Request for Confirmation of Arbitral Enforce /

Award
Arbitration the Tribunal Proceeding Challenge

Jurisdictional Damages
Merits Phase
Phase Phase

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Resolving An International Dispute: Means

 Negotiation:
– Only involves the parties to the dispute (no third party to assist in
resolution); informal; not binding
 Mediation / Conciliation:
– Non-adversarial method involving a mediator to resolve the
parties’ disputes; not binding (until signed settlement agreement)
 Arbitration:
– Based on an arbitration agreement between the parties;
adversarial and binding
– Resulting awards are enforceable in 172 countries under the
New York Convention (1958)

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Negotiation
1. Negotiation is the most fundamental form of ADR, relying on direct
dialogue between parties to reach a mutually beneficial settlement.

2. In legal terms, negotiation is governed by principles of contract law,

particularly the concepts of offer, acceptance, and mutual consent.

3. A critical legal aspect of negotiation is the enforceability of agreements

reached, often dependent on adherence to contract law formalities and
the absence of vitiating factors like duress or misrepresentation.

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Negotiation
1. Lawyers?

• Lawyers act as intermediaries/buffers between clients - opposing

lawyers attempt to achieve agreement - no emotional state - thus
enable mutually agreeable solution to be reached

• Clients make substantive decisions on issues

• Repeated counselling sessions between lawyers and clients

2. May negotiate the particular method of dispute resolution e.g. whether

to arbitrate or litigate potential/real dispute

3. May negotiate further to determine procedure of dispute resolution

(precise details of procedure – party autonomy principle) e.g.
appointment of arbitrators issues to be submitted to arbitrator

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Key Concepts of Effective Negotiation
1. Two types:

• Distributive Negotiation (fixed value, zero sum)

• Integrative Negotiation (cooperation, interests – benefits, win-win)

2. Key concepts:

• BATNA (Best Alternative to Negotiated Agreement)

• ZOPA (Zone of Possible Agreement)

• Anchoring Effect

• Objective Criteria

• Interest v Positions

• Expand the Pie 16

Meditation
1. Mediation involves a neutral third party facilitating discussions between
disputing parties to help them reach a voluntary agreement.

2. Legally, mediation is characterized by its non-binding nature, unless an

agreement is reached and formalized into a binding contract.

3. The mediator's role is not to provide legal advice but to assist parties in
understanding and articulating their interests.

4. Confidentiality is paramount, with legal protections often in place to

prevent disclosure of mediation communications in subsequent legal
proceedings.

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Conciliation
1. Conciliation is similar to mediation but often involves the conciliator
playing a more active role in proposing solutions.

2. From a legal standpoint, the conciliator's suggestions are not binding

until both parties agree and formalize the settlement into a contract.

3. A unique feature of conciliation in some legal systems is the ability of the

conciliator to provide a non-binding opinion or evaluation of the dispute,
which can guide parties towards a resolution.

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Arbitration
1. Arbitration involves a neutral arbitrator making a decision on a dispute,
which is usually binding and enforceable.

2. The legal basis of arbitration lies in the agreement of the parties to

submit to arbitration (the 'arbitration agreement'), usually found as a
clause in commercial contracts.

3. A critical aspect of arbitration law is the enforceability of arbitral awards,

governed internationally by instruments like the New York Convention
on the Recognition and Enforcement of Foreign Arbitral Awards.

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6. ADR v Litigation
1. Formality and Procedure

2. Cost and Time Efficiency

3. Privacy and Confidentiality

4. Control Over Outcome

5. Finality and Appeal

6. Expertise in Decision-Making

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What Dispute Resolution Methods
Do Parties Prefer?

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Q&A