The ICC Guide on Effective Conflict Management
Introduction
The ICC Commission on Arbitration and ADR (“Commission”) published a new guide and report with the aim to increase awareness on alternative dispute resolution (“ADR”) mechanisms to prevent disputes and strengthen the relationship between all stakeholders.
The Guide on Effective Conflict Management (“Guide”) covers Commission’s main recommendations on selecting and efficiently using the most suitable ADR, reducing costs for the disputes that can be avoided before or after the arbitration proceedings. Guide divides such into two main categories (i) proactive conflict management and (ii) assisted conflict management. Guide also highlights pre-action risk assessment tool and gives examples from cases in most categories.
The Report on Facilitating Settlement in International Arbitration provides ways for settlement once the proceedings have begun with the aim to protect relationship between parties. It compromises of sections on case management techniques, mediation windows and protocols and preliminary views and settlement conferences.
This article will mainly focus on the recommendations highlighted in the Guide.
Proactive Conflict Management
The first section of the Guide lists tools for proactive conflict management (i) putting in place internal company policies for early dispute management, (ii) drafting effective dispute resolution clauses and (iii) increasing awareness of conflict management.
Internal Company Policies
Guide recommends companies to develop and implement policies and procedures which aims to avoid potential disputes. According to the Guide these consist of decision-making processes to identify strategies on disputes and can include (i) having senior management’s commitment to effective early conflict management, (ii) identifying an ‘ADR Champion’, (iii) training on ADR policies, (iv) establishing a corporate culture allowing employees to communicate concerns that can create disputes, (v) creating a technology platform for reporting, and (vi) having company standards for dispute resolution clauses.
Internal company policies should aim to create a safe environment and encourage open communication between the company and managers to share their disputes with the legal team at an early stage. This will help to avoid escalation of the dispute.
Drafting Effective Dispute Resolution Clauses
Parties when selecting dispute resolution clauses should consider disputes that can arise in their transaction, which ADR mechanism can address such and business objectives and constrains. Guide follows the general recommendation and point outs that parties should start by using model clauses such as the ones published for ICC Arbitration, ICC Mediation, ICC Expertise and ICC Dispute Boards. These different ADR mechanisms can be used individually or in combination (multi-tier clauses). When drafting and implementing multiple ADR mechanisms in a single clause parties should make sure to have a ‘workable’ clause.
Good practices also include clear entry and exit requirements for each tier of a multi-tier clause; consideration on costs, business objectives and speed; evaluation on whether the contract benefits from a system of reporting and trigger mechanisms (i.e. as in FIDIC standard forms) and systematic early pre-action risk assessment.
Increasing Awareness of Conflict Management
Educating and creating awareness on ADR mechanisms is essential for proactive dispute prevention. The Guide in this respect recommends that awareness and training programs could be held internally for legal teams and suggests using an ‘ADR Champion’.
Assisted Conflict Management
Assisted conflict management section of the Guide consists of ICC ADR Services and gives recommendation on how to effectively use them. In this vein the Guide covers the following ADR services:
- ICC Mediation
- ICC Expert Services
- ICC Dispute Boards
- ICC DOCDEX
The Guide point outs that when selecting a type of ADR parties should be mindful of the main feature that differentiates them from each other is the service that the ADR Neutral[1] will perform. An ADR Neutral depending on the type of ADR can (i) facilitate negotiations, (if parties agree) offer his or her view on merits (Mediation); (ii) can provide binding or non-binding evaluation (Expert- DOCDEX Expert) and (iii) provide opinion on potential causes of the dispute, recommendations on the dispute, contractually binding decisions on the dispute (Dispute Board Member).
The Guide further categorizes using ADR to avoid disputes, to promote settlement of disputes, for real-time dispute resolution and to facilitate settlement in arbitration. In the first category in which ADR is evaluated as a tool to avoid disputes, the Guide focuses on dispute boards and recommends to use dispute boards not only in construction cases but in all sectors to enhance conflict management and increase the success of contract execution. It is also recommended that if parties choose to use a ‘standing mediator’ they should contract with the ICC ADR Centre.
The second category of using ADR to promote settlement of disputes tackles with early neutral evaluation and recommends reasoned early neutral evaluations. It is said that unless agreed otherwise this evaluation can later be used by parties during settlement negotiations with or without the involvement of an ADR Neutral. An example given in this respect is that the parties can resort to ICC Dispute Board Rules or ICC Expert Rules or ICC DOCDEX and then use this evaluation in a mediation governed by ICC Mediation Rules. The Guide emphasizes the importance of drafting a settlement agreement in a manner that ensures enforceability. It also references the 2018 United Nations Convention on International Settlement Agreements Resulting from Mediation (known as the "Singapore Convention"), to which Turkey is a ratified party.
The Guide also points out that a proper risk analysis with a realistic assessment before mediation and reevaluating this assessment through the dispute resolution process as a part of case management can increase the chances of a settlement.
The third category of using ADR is stated to be for near real-time dispute resolution. In this context, the Guide emphasizes the effectiveness of employing ICC Expert Rules and ICC Dispute Board Rules for making binding determinations when a negotiated settlement is not feasible and a prompt decision is required. The Guide also highlights the significant advantage of this process in terms of time and cost savings for the parties involved.
The final category of using ADR is stated to facilitate settlement in arbitration. Even though arbitration itself is an alternative dispute mechanism aiming to solve disputes its possible for parties to keep an eye on other ADR techniques to decrease the costs and expedite the outcome. The Guide lists the key benefit to reach a settlement in arbitration is to obtain a consent award that can be enforced under the New York Convention. If a settlement is reached through a mediator but not drafted as a consent award it can be enforced under Singapore Convention.
Pre-Action Risk Assessment
The appendix of the Guide includes a part on pre-action risk assessment. Guide encourages parties to consider costs, quantifiable and unquantifiable implications when conducting a risk assessment. A beneficial table on cost estimation is also a part of the appendix. The cost estimation exercise is divided into four phases: claim preparation, negotiation, ADR techniques and arbitration/litigation. Each phase is also divided into two categories internal and external costs. Once these costs are determined parties should evaluate the possible outcomes, while doing such parties can consider issues such as statute of limitation, causation and quantum. Parties can also try to attribute a value to each outcome. This type of exercise will provide a picture to the parties and facilitate decision making process of resorting to a possible ADR technique. In addition to financial risks and terms there might be other unquantifiable results parties should consider. The Guide provides for some examples such as reputational impacts, policy objectives, relationship with regulators etc.
Conclusion
The Guide is a valuable resource for individuals and organizations seeking to prevent disputes, strengthen relationships, and achieve efficient resolutions. Divided into two main categories, proactive conflict management and assisted conflict management, the Guide provides practical recommendations and tools to navigate the complex landscape of dispute resolution.
In the realm of proactive conflict management, the Guide emphasizes the importance of implementing internal company policies aimed at early dispute management. By fostering a corporate culture that encourages open communication and the reporting of concerns, companies can create a safe environment to address conflicts at an early stage. Additionally, drafting effective dispute resolution clauses tailored to the specific transaction and business objectives is highlighted as a key practice.
Increasing awareness of conflict management through education and training programs is also highlighted by the Guide. By equipping legal teams with knowledge on ADR tools and appointing an "ADR Champion," organizations can empower individuals to proactively prevent and address conflicts.
The assisted conflict management section of the Guide focuses on the various ADR services offered by the ICC. From mediation to expert services, dispute boards, and DOCDEX, each service is outlined, emphasizing the unique role of the ADR neutral in facilitating negotiations, providing evaluations, and rendering binding decisions.
The Guide further categorizes the use of ADR to avoid disputes, promote settlement, facilitate near real-time dispute resolution, and aid settlement in arbitration. It highlights the benefits of utilizing dispute boards to enhance conflict management and increase contract execution success. The Guide also emphasizes the importance of reasoned early neutral evaluations and the drafting of enforceable settlement agreements.
Pre-action risk assessment is another crucial aspect covered in the Guide, providing parties with a framework to evaluate costs and potential outcomes at each phase of the dispute resolution process. By considering both quantifiable and unquantifiable implications, parties can make informed decisions about the most suitable ADR technique to pursue.
Overall, the Guide on effective conflict management equips stakeholders with the knowledge, tools, and recommendations necessary to navigate conflicts proactively and efficiently. By embracing the principles outlined in the Guide, parties can foster constructive dialogue, preserve relationships, and achieve mutually beneficial resolutions, ultimately contributing to a more harmonious and successful business environment.
- The ADR Neutral refers to an individual who, with respect to an issue in controversy, functions specifically to aid the parties in resolving the controversy.
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