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Mediation-arbitration is a private two-step dispute resolution process that parties may adopt by contract. A med-arb process involves, firstly, mediation of their dispute, and secondly, arbitration of that dispute if settlement is not reached in the mediation. The contract by which the parties provide for this process is known as a "mediation-arbitration agreement", or "med-arb agreement".

The decision to terminate mediation and launch the case into the arbitration phase of med-arb is typically delegated to the mediator, who will make that choice when it appears that no further progress can be made in mediation.

In practice, med-arb agreements frequently appoint the same person to act as both mediator and arbitrator. This practice may seem to make sense, but it is problematic. A discussion of this issue is set out under the heading "who will be the mediator?", below.

• how a med-arb case works:

The mediation phase of a med-arb process is basically conducted in the same way as any other mediation. The procedure is "without prejudice" and confidential and the same Terms of Mediation apply. What makes the mediation conducted in a med-arb process different is the fact that, if no settlement is reached at the mediation, the parties are obliged to take the case to arbitration -- they have no choice -- pursuant to their med-arb agreement.

If and when a case moves into the arbitration phase of med-arb, that arbitration is basically conducted in the same way as any other arbitration. Whether the parties created their own procedure, or are relying on the provisions of the Act, or have agreed upon some hybrid of the two, they now face a contest in which they must present admissible testimony from witnesses, formal proof of documentary evidence and argument. The parties do not participate in the decision at the arbitration because, in their med-arb agreement, they delegated the power to decide the issues to the arbitrator, who acts, essentially, like a privately-appointed judge.

Moving from the mediation phase to the arbitration phase, if that occurs, is a major change, because the two processes are very different. Mediation is an informal procedure, with no witnesses, no formal proof of evidence and a fluid process that can change repeatedly in the course of one session. The parties have substantial control while the case is in mediation, and can settle it together if they are able to agree. Any result they may reach in mediation does not have to accord with the decision that might be reached by a Judge. Arbitration is much more complicated. It presents many of the same procedural and evidentiary issues as arise in litigation in Court, including requirements of sworn or affirmed testimony from witnesses, production and formal proof of documentary evidence and a contest between the parties' positions through argument to the decision-maker, which generally includes submissions of law. Most importantly, the parties do not have a hand in the decision made at the arbitration, because they delegated the power to decide the case to the arbitrator in their med-arb agreement.

Our laws of evidence and procedure evolved, in part, to ensure fairness in procedures in the courts, where the decision-makers were judges -- but the person who has power to decide an arbitration is not a judge. Arbitration is a relatively new process. When it developed, issues arose as to whether the laws designed to ensure fairness in proceedings before judges also applied to proceedings before arbitrators. Statutes like Ontario's Arbitration Act, 1991, were enacted to settle such issues by ensuring that arbitrations were governed by rules and procedures parallel to those governing procedures in the Courts.

On occasion, after failure to settle at mediation, one of the parties may decide that he or she does not want to proceed to arbitration after all. This will not pose a problem if the opposing side wants to withdraw from arbitration, too: they can withdraw from arbitration on consent. However, if the opposing side still wishes to arbitrate, as originally agreed, that party may seek a Court order to compel arbitration. On such an application to compel, the Ontario Courts will generally defer to the original contractual intentions of the parties by enforcing their agreement to arbitrate. It is important, therefore, that parties understand that an arbitration agreement -- including the arbitration provision in a med-arb agreement -- is generally binding. The only sure exit from an arbitration agreement is to have consent to that exit from all other parties to the agreement.

• who will act as mediator and arbitrator?

In practice, med-arb agreements frequently provide that the mediator who acts in the mediation phase will become the arbitrator if the case goes forward to arbitration. Apart from their own agreement in such terms, there is no legal requirement that the parties appoint the same person to act in both capacities. Such appointments are often made more or less automatically, without much thought, and I believe the issue of appointment deserves more careful consideration.

Apart from confirming that candidates have appropriate credentials and experience in alternate dispute resolution, I think the following issues are worth canvassing:

• what sort of expertise will serve the parties best?

• subject-area expertise:

With respect to the mediation phase, there are some excellent mediators who come to the practice of alternate dispute resolution from fields and perspectives other than law. This can provide two advantages to the parties:

the parties might want to appoint a person who, in addition to having qualifications as a mediator, has specialized knowledge in the subject area of their dispute, such as an accountant or an engineer. Specialized subject-area expertise may yield a more insightful process in mediation, and thus may improve the chances of success there; and/or
the parties might simply wish to seek out a person, from any background, who is known to be highly expert as a mediator, even though that person is not suited -- not even qualified, perhaps -- to be the arbitrator, should the case go to the arbitration phase. Again, the appointment of a more experienced mediator may improve the chances of success in the mediation phase.

In short, the person who might be the most effective mediator for your case may not be suitable as an arbitrator, and vice versa. Depending on the nature of the case, the parties might consider retaining 2 different people as their mediator and arbitrator, and might consider retaining them from different disciplines;

• legal expertise:

As discussed above, mediation and arbitration are very different -- in fact, in practice, they are almost opposites. Although it is classified as an alternate dispute resolution process, arbitration is much more closely related to litigation that it is to mediation. Arbitration is a complex and legalistic process. It is not the same thing as simply chairing a meeting. While many ADR professionals from many different fields are trained in both mediation and arbitration, I do not believe such training can equal the expertise gained through a legal education and practice in the field of law. For my part, if I were personally faced with the decision to appoint an arbitrator, my preference would be to have as my arbitrator an ADR-trained lawyer who had litigation experience.

• can joint appointment compromise the arbitration process?

• risk of tainted knowledge:

In med-arb, it is the obligation of the arbitrator to hear the case fresh from the start even if the arbitrator is the same person who acted as the mediator, in which case the arbitrator must put aside and disregard everything he or she learned in the mediation. The parties must start from scratch and put forward their cases in accordance with the rules of evidence, procedure and law, as though the mediation never happened. The arbitrator may "know" something from the mediation phase of the process, but if that thing is not agreed upon by the parties or properly proven in evidence at the arbitration, it cannot be considered in the arbitrator's decision-making process.

Personally, I think this "forgetting everything you learned" is a difficult thing to do, and that there are some arbitrators who are incapable of doing it. This should be a concern to those who make such appointments, because both parties are entitled to an arbitration process that is procedurally fair, and that includes having an arbitrator that does not act on information, assumptions or preconceptions that come from outside the rules of evidence and the arbitration hearing itself. Importing such information is not permitted. It taints the process, and may provide grounds upon which to attack the integrity of the process or the good faith and impartiality of the arbitrator, or both.

When a party believes that an arbitration has been compromised, he or she has the right to take that issue to the Courts for review. If the Court is satisfied that there was compromise, it is empowered to overturn any arbitral Award, and may send the case back to be arbitrated again, with all the expense and delay that would entail.

To be clear: I am not saying that there may truly be tainted evidence in a process that seems to have been compromised. There may be, but good arbitrators do their best to develop habits of mind that preclude real prejudice -- but that may not be enough to avoid the problem.

I say that because the law is clear that a proceeding may be compromised not just by the fact of prejudice, but by the appearance of prejudice. This is true where a party raises a legitimate objection to the process of an arbitration. But the appearance of impropriety is a relatively broad test, and an unscrupulous party, aggrieved by the arbitration result, perhaps, might take advantage of the appearance of impropriety as a tactical means to attack the process.

Issues relating to contamination of the arbitral process through knowledge carried forward from the mediation phase do not arise if the parties appoint different individuals as their mediator and arbitrator.

• inherent conflict of interest:

As stated above, the decision to terminate the mediation phase and launch the case into arbitration is typically delegated to the mediator. When the med-arb agreement provides that the mediator will also act as arbitrator, also, a conflict of interest arises, because the decision to go to arbitration affords the mediator/arbitrator an opportunity to earn greatly increased fees -- he or she will have a stake in how much effort is put into the mediation, and whether the parties succeed in settling the case there.

To decide the issue of going to arbitration on the basis of fees would be grossly unprofessional, and I believe most ADR professionals would scorn to let that consideration weigh with them in making the decision, but the possibility remains, and may be worth considering, but note, again, that such issues relating to the temptation of personal gain do not arise if the parties appoint different individuals as their mediator and arbitrator.

• is joint appointment truly economical?

It is often argued that it is economical to appoint the person who will act as mediator in the mediation phase of the med-arb process to act as arbitrator, also, if the case goes to arbitration. I do not agree that this accomplishes any economy.

The functions of the mediator and the arbitrator in a med-arb process are intended to be completely separate. The arbitrator does not perform the same tasks as the mediator, and no work product created by the mediator, such as notes, can be used by the arbitrator. An arbitrator who served as mediator is under exactly the same obligations in the arbitration as an appointee who is new to the process.

In a med-arb where mediation has failed, and the agreement provides for a new person to step into the case as arbitrator, that person will need to come up to speed. However, an arbitrator is not intended to know the facts of the case unless and until they are properly proven in evidence. Therefore, an arbitrator will review the documents in the nature of pleadings that the parties submit in the arbitration - claim, defence, reply - but ought not to be privy to the parties' Statements of Issues and any other documents filed in the mediation phase. This rule applies to any new appointee serving as arbitrator, but it applies equally to the original mediator if he or she is appointed as arbitrator, as he or she is obliged to put everything he or she learned in the mediation phase out of mind when acting as arbitrator.

In these circumstances, I do not believe there is any duplication of service that signifies, or any material increase in cost, if the parties decide to appoint two different professionals as their mediator and arbitrator, rather than just one person to assume both functions. If the parties believe they will be better served by the appointment of two different professionals, there is no legitimate argument about expense that should prevent them from doing so.

ARBITRATION:

"med-arb" (mediation-arbitration)

• overview of mediation-arbitration ("med-arb"):