Ethical Standards for Arbitrators and Mediators

Table of Contents

1 Introduction
1.1 Abstract
1.2 Objective of the Paper
1.3 Procedure of Analysis

2 ADR Standards
2.1 Distinction between Arbitration and Mediation
2.1.1 Definition Arbitration
2.1.2 Definition Mediation
2.2 Role of Ethics
2.2.1 Ethical Standards within other professions and occupations
2.2.2 Are standards necessary?
2.3 Summary

3 Comparative Perspective
3.1 Ethical Standards for Arbitrators
3.2 Ethical Standards for Mediators
3.3 Comparative Approach

4 Conclusion

Bibliography

Table of Figures

1 Introduction

After globally recognizing that the regular methods of the legal system with its court procedure structure are insufficient for a quantity of domestic as well as international disputes, alternative dispute resolution (ADR) has become more prominent in the past three decades.^[1] The most eminent forms and processes of ADR are arbitration^[2] and mediation. Therefore, the discussion surrounding occupational standards is becoming more important. Various ADR associations and legislators all over the world have tried to define vocational standards for ADR. The intention of standards is to provide a minimum level of professionalism for all ADR practitioners as well as guaranteeing an ethical standard. The purpose of implementing standards is to offer a clear parameter for ADR service providers, parties and legislators. Thus, the driving points for implementing standards are: professionalism, institutionalism and consumer protection.

The Australian key policy body on ADR, the National Alternative Dispute Resolution Advisory Council (NADRAC), launched a discussion paper in 2000^[3] on the need of ADR standards. The negative response to establish mandatory occupational standards encouraged NADRAC to introduce a “guideline”^[4] for flexible standards in 2001.

1.1 Abstract

While the discussion about vocational standards continues, numerous associations have drafted competence and ethical standards for either mediators or arbitrators as well as for both procedural methods.

Ethical standards focus more on the procedural process and the duties and virtues of the leader of the procedure than on the occupational competence standardization, such as codes of practice, benchmarks, agreements, models and exemplars which are the “classical” forms of standards for practices.^[5]

Codes of practice determine the vocational rules of a profession, which may contain penalty regulations for misconduct. Benchmarks are a set of options which orient on successful approaches which have been proved in a certain professional field. Agreements focus on the “Agreement to Mediate” which the parties voluntarily agree on when using ADR. Models are preconceived rules or assessing criteria, which can be adopted to centralize the standardization approach. Exemplars are the collection and evaluation of successful ADR cases, which can be optionally awarded.^[6]

Predominantly, ethical standards appear as an appendix of codes of practice, wherein certain etiquettes, virtues and qualities of the procedural leader are determined.

1.2 Objective of the paper

Arbitration and mediation are both alternative methods to the traditional litigation procedure. Although derived from the common ground of ADR, arbitration and mediation contain significant dissimilarities, especially with regards to the procedural approach and the role of the neutral party. Whereas arbitrators adopt a judging role and decide, mediators are procedural leaders that assist in the process of “legal realization”.^[7]

The question examined in that paper is, whether arbitrators and mediators have the same, similar or diverse virtual obligations determined by ethical standards.

1.3 Procedure of Analysis

The comparative analysis of ethical standards of arbitrators and mediators will be divided into three steps.

The theoretical section pays attention to the method of mediation and arbitration and tries to classify the approaches within the field of ADR. Thus, the similarities as well as the differences of these two concepts will be highlighted. Referring to the illustrated approaches, the role of ethics will be discussed and compared to other professional ethical standards. Finally, the question whether to implement standards at all will be introduced. A summary of the first paragraph tries to review the theoretical approach.

The practical part examines and compares two selected ethical standards. In the first step, the ethical standards will be introduced to the reader. Hence, the standards will be analyzed in a comparative approach.

Finally, the last section draws a conclusion on the question of similarities and differences of the introduced standards.

2 ADR Standards

As previously mentioned, implementation of standards has become a global issue. ADR has become a prominent and established alternative method to litigation. Whereas the introduction of mediation standards has been progressively growing, standards for arbitration are still in its infancy compared to the mediation approach. Nevertheless, this paper focuses on the ethical approach of standards, which deals with the ethical core rules of the leader of the particular procedure.

Therefore, this chapter deals with the distinction between arbitration and mediation by defining the core elements of the method and the deriving roles and duties of the procedural leaders. Hence, the role of ethics within the particular standards will be illustrated. A comparison to other professions and occupations will be made as well as the necessity of standards discussed.

2.1 Distinction between Arbitration and Mediation

In his article The Case for International Arbitration, Pryles underlines that arbitration and mediation are sharing the common ground of the procedural leader’s appointment through the agreement by the parties, but differ in the judging role and resolving power. Whereas the mediators assist the parties to find a solution for their dispute, the arbitrator can determine a binding judgement by issuing an award.^[8]

Within the family of ADR, arbitration belongs to the determinative procedures, while mediation is subject to the facilitative processes. NADRAC has classified the field of ADR in three different groups:

- Facilitative: assisted dispute resolution process throughout third party, mainly without advisory and/or determinative role.
- Advisory: examination of the dispute by a third party, which gives advice on facts and possible outcomes.
- Determinative: examination of the dispute by a third party, with optional hearing and potential enforceable determination by the procedural leader.^[9]

Sourdin illustrated different processes and the connected characteristics in the following scheme:

illustration not visible in this excerpt

Figure 1^[10]

This scheme gives proof that arbitration and mediation are different approaches for resolving a dispute. Thus, not every method of ADR is appropriate for each dispute and vice versa. Both processes bear advantages and disadvantages, which also lie in the role of the procedural leader that influence the ethical approach of each form. Therefore, the two different methods will be introduced in the next step.

2.1.1 Definition Arbitration

When arbitration has been at its early development stage, it was regarded to be a simple form of settling disputes because the arbitrator only derived the authority by the appointment of the parties.^[11] This attitude has changed within the past years and the arbitral process has developed into a “more complex, more legalistic [and] more institutionalized”^[12] procedure.

However, common elements for the definition of arbitration do exist. Arbitration is used to settle disputes by a neutral third party, which is appointed by or on behalf of the parties.^[13] Nowadays, the dispute is decided by an arbitral tribunal, which consists of either one or more arbitrators. After the evidential proof and the hearing of the parties the arbitrator(s) will issue an award. The decision by the arbitrator(s) is binding and can be generally enforced by a court of law.^[14]

Unlike in mediation, the arbitral process seeks for a decision rather than suggesting a compromise. Therefore, the decision making process is comparable to the legal proceeding of the courts. The decision making and the award are mandatory elements of the arbitral process. Thus, arbitration and litigation have more similarities than arbitration and mediation.

As mentioned above, arbitrators derive their authority from the appointment by the parties. However, it is important to mention that this does not mean that parties have the “exclusive right to assign powers and duties of arbitration.”^[15] Arbitration has a private character and unlike the judicial process, do not derive their authority from the state. Nevertheless, the national legal system still plays a role within the arbitral procedure, e.g. overtakes an assisting role in the process (to guarantee a minimum level of fairness and justice) or assures the enforcement of an award.^[16]

The parties also have the opportunity to assign their right to appoint an arbitrator to an arbitration institution^[17], which determines the process under certain rules, such as the International Chamber of Commerce (ICC) Rules of Arbitration 1998 or the United Nations Commission on International Trade Law (UNICITRAL) Arbitration Rules. In fact, Fouchard, Gaillard and Goldman have stated that the international practice gives proof of a shift of power. In international disputes the arbitration institutions tend to overtake the right to choose an arbitrator on behalf of the parties. Nevertheless, arbitration institutions have to be entitled by the parties to choose an arbitrator. However, it has become rare that parties choose their arbitrator and organize the arbitral procedure by themselves.^[18]

These rules also play an important role when distinguishing whether an arbitral process is classified as domestic or international. The main aspects to focus on for proofing the character of the arbitral process are the identification of the parties and the nature of the dispute of foreign elements. The ICC Rules of Arbitration provide a definition^[19] that the nature of the dispute must be subject to a business dispute which is of international nature. Other law systems, such as the French Law or the Model Law on International Commercial Arbitration have adopted the approach to determine ICA.^[20]

2.1.2 Definition Mediation

Defining mediation is a difficult approach because there is no single form of mediation. Gottwald stated, when being asked, if he could define mediation: “Defining mediation is the same difficult approach as trying to nail pudding onto a wall.”^[21]

Boulle differentiates between the conceptualist approach, where mediation is described in an idealized concept, spotlighting values, principles and objectives, and the descriptive approach, with focus on the actual process.^[22]

Riskin’s approach to distinguish the different types of mediation has become a highly established form of differentiating mediator techniques into evaluative and facilitative practice, which can be broadly or narrowly referred to the particular approach. The evaluative method highlights an advisory approach, whereas the facilitative procedure focuses on the assistance of the process. The four quadrants are interrelated and are illustrated in the following scheme:^[23]

illustration not visible in this excerpt

Figure 2^[24]

This approach provides an excellent starting point to illustrate the mediator’s characteristics but is not entirely satisfactory. Both terms are descriptive and do not draw a certain line of exclusivity between the terminations.

Moreover, Folger and Bush have added the form of transformative dimension, which aims on the transformative human growth by using the mediation approach.^[25]

Nevertheless, these different approaches are each focusing on one specific area of mediation. Within the mediation field a lot of diverse forms of mediation exist, which have a differing degree of intervention by the mediator. One specific characteristic of mediation is the flexibility within the process. Therefore, a universal definition cannot be made. Moreover, a definition can only describe the main characteristics of the method. In some cases, they might not even apply to some particular forms of mediation. Nevertheless, NADRAC tried to define Mediation in a broad perspective;

[...]

^[1] Arbitration: in the first place became prominent for trans-border investment and trade disputes, http://www.ila.org.au/news/RevdArbitrationCLESeminar12June.pdf; Mediation: The mediation development mainly derived from the establishment of the “community justice centres” like in the USA and Australia in the early 1980’s. In Germany the development of mediation has started in the early 1990’s by connecting different mediation approaches to the particular realms of law. Alexander, N., Die Institutionalisierung von Mediation, ZKM 4/2001, p. 163. Mediation is also established as court-annexed mediation, which is implemented e.g in the Retail Leases Act 1994 (NSW), http://www.austlii.edu.au/au/legis/nsw/consol_act/rla1994135/.

^[2] In that paper the term arbitration refers generally to International Commercial Arbitration (ICA).

^[3] NADRAC, Discussion Paper - The Development of Standards for ADR, submissions, http://www.nadrac.gov.au/www/rwpattach.nsf/viewasattachmentPersonal/84A6F9407516A849CA256B900083B3B5/$file/Development%20of%20Standards.pdf.

^[4] NADRAC, A Framework for ADR Standards, p. 71-93.

^[5] NADRAC, A Framework for ADR Standards, p. 52-55.

^[6] NADRAC, A Framework for ADR Standards, p. 52-55.

^[7] Henssler, M., Mediation und Rechtsberatung, NJW 4/2003, p. 245. [Rechtsverwirklichung]

^[8] Pryles, M., The Case for International Arbitration, will be delivered to the Australian Mineral and Petroleum Law Association conference later this year.

^[9] NADRAC, Alternative Dispute Resolution Definitions, http://www.ag.gov.au/adr/Definitions.htm; also see Australian Standard, Guide to the Prevention, Handling and Resolution of Disputes – AS 4608, 1999.

^[10] Sourdin, T., ADR, p.18.

^[11] Refern, A./Hunter, M., Law and Practice of International Commercial Arbitration, p. 3.

^[12] Refern, A./Hunter, M., Law and Practice of International Commercial Arbitration, p. 3.

^[13] Chukwumerije, O., Choice of Law in International Commercial Arbitration, p. 2, also see Fouchard, P./Gaillard, E./Goldman, B., International Commercial Arbitration, Gaillard, E./Savage, J. (ed.), p. 12.

^[14] Refern, A./Hunter, M., Law and Practice of International Commercial Arbitration, p. 4.

^[15] Chukwumerije, O., Choice of Law in International Commercial Arbitration, p. 2.

^[16] Chukwumerije, O., Choice of Law in International Commercial Arbitration, p. 2.

^[17] Pryles, M., Reflection on the E.E.C. Contractual Obligations Convention – An Australian Perspective in North, P. (ed.) Contract Conflicts: The E.E.C. Convention of the Law Applicable to Contractual Obligations, A Comparative Study, p. 331.

^[18] Fouchard, P./Gaillard, E./Goldman, B., International Commercial Arbitration, Gaillard, E./Savage, J. (ed.), p. 33.

^[19] ICC Rules, Art. 1.1.

^[20] Chukwumerije, O., Choice of Law in International Commercial Arbitration, p. 3-5.

^[21] Gottwald, W., well-known German judge and mediator, professor at University of Applied Sciences in Lüneburg, Germany, in an email correspondence July 2002.

^[22] Boulle, L., Mediation – Principles , Process , Practice, p. 4-5.

^[23] Riskin, L., Understanding Mediators’ Orientations, Strategies and Techniques: A Grid for the Perplexed, Harvard Negotiation Law Review, Vol. 1, No. 7, 1996, p. 24.

^[24] Riskin, L., Understanding Mediators’ Orientations, Strategies and Techniques: A Grid for the Perplexed, Harvard Negotiation Law Review, Vol. 1, No. 7, 1996.

^[25] Folger, J./Baruch Bush, R., The Promise of Mediation, p. 5.