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ACCA Applied Skills · Corporate and Business Law (Global) · Alternative dispute resolution mechanisms

Caldwell Inc and Dunmore Ltd agreed a med-arb clause. Mediation failed, and the same person, Ms Ezra, then became arbitrator and heard the case. During the mediation Caldwell told her in confidence that it would accept a lower payment than it was claiming. Which is the main concern this raises about med-arb using the same neutral for both stages?

The main concern is that confidential information given during mediation may influence the same person when acting as arbitrator, undermining impartiality and fairness. It does not make the award automatically non-binding or unenforceable. Parties can reduce the risk by using separate neutrals or giving informed consent.

  1. AHer arbitral award would be non-binding because mediators cannot act as arbitrators
  2. BConfidential information from the mediation may influence her as arbitrator, threatening perceived impartiality and fairnessCorrect
  3. CThe mediation stage becomes compulsory litigation, so the court must appoint a new neutral
  4. DThe arbitral award cannot be enforced under any circumstances because the process was hybrid

Explanation

The key risk of single-neutral med-arb is that private disclosures made in confidence during mediation may colour the neutral's later binding decision, raising bias and natural justice concerns. Parties can mitigate this by using different neutrals or by consenting to the arrangement. The other options misstate the law: a hybrid process is not automatically unenforceable or non-binding.

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