Notes from the bar: Arb Med Arb or Med Arb. What is the difference?

In recent years, one manner of alternative dispute resolution has taken the form of a combination of mediation and arbitration.

In recent years, one manner of alternative dispute resolution has taken the form of a combination of mediation and arbitration.

In this update, we look briefly into the difference between an Arb-Med-Arb clause and a Med-Arb clause and how the difference between these two may impact on how you resolve your disputes.

What is an Arb-Med-Arb (“AMA”) clause?

To put it simply, it is a dispute resolution clause where the parties agree that in the event of a dispute, the parties may commence arbitration. Once arbitration has commenced and the arbitration tribunal has been constituted, the arbitration tribunal shall stay the arbitration proceedings in order that the dispute can be submitted for mediation.

Based on the current SIAC-SIMC Arb-Med-Arb Protocol, once the arbitration is stayed, the SIAC will send the case file to the SIMC for mediation at the SIMC.

The arbitrator and mediator will generally be different persons although the parties may by consent agree that the same person be the arbitrator and mediator.

In the event the dispute is successfully resolved via mediation, the settlement agreement will be referred to the arbitration Tribunal to be recorded as a consent award.

In the event the mediation is unsuccessful, the matter simply goes back before the arbitration tribunal to be decided in the usual manner.

What is a Med-Arb (“MA”) clause?

The difference between a MA clause and an AMA clause is that instead of commencing arbitration first and referring the dispute to mediation, a dispute in governed by a MA clause is submitted to mediation first, and if mediation is unsuccessful, the parties will then refer the matter to arbitration.

So what is the difference?

One major difference is the manner in which the dispute resolution process is commenced, and that in practical terms, makes a huge difference if the respondent to a claim tries to delay the dispute resolution process.

In the Singapore High Court case of Heartronics Corporation v. EPI Life Pte Ltd & Ors [2017] SGHCR 17, the Singapore High Court had to consider an application involving a MA clause.

The Heartronics case involves a License Agreement and Distribution Agreement pertaining to the licensing and sale of certain medical devices.

The dispute resolution clause in the agreements provide as follows;

“All disputes … shall be submitted to the Singapore Mediation Centre and the Singapore International Arbitration Centre for resolution by med-arb in accordance with the SMC-SIAC Med-Arb Procedure for the time being in force …”

The Plaintiff in this case sought to invoke the dispute resolution clause by writing to the Defendant to refer the matter to mediation pursuant to the MA clause.

The Defendant took all forms of excuses and did not accede to the request for mediation. Even after the Plaintiff submitted a request for mediation to the Singapore Mediation Centre, the Defendant did not take the steps required for the mediation to proceed. The Defendant even failed to make payment of the filing fee for mediation.

Eventually the mediation could not take place due to the non-cooperation of the Defendant. As a result, the Plaintiff decided to commence proceedings in Court instead.

After Court proceedings were commenced, the Defendant applied to stay the Court proceedings on the basis that there was an arbitration clause in the agreements and that the matter should be referred to arbitration instead.

In the judgment of the Assistant Registrar who dismissed the stay application, the Assistant Registrar followed the decision of the High Court in the case of Dyna-Jet Pte Ltd v. Wilson Taylor Pte Ltd [2016] SGHC 238 which held that where a party has committed a repudiatory breach of the arbitration agreement, and that the repudiation has been accepted by the innocent party, the agreement to arbitrate comes to an end as it has been discharged by breach.

Once the agreement to arbitrate has been discharged by breach, it is no longer operative and therefore, there is no longer any basis to stay the Court proceedings and to refer the dispute to arbitration.

As a result, the Heartronics case will now proceed to have the dispute resolved via the Court litigation process instead of the mediation-arbitration process as provided for in the agreements.

Implication of the Heartronics case

If the dispute resolution clause in the Heartronics case had been an AMA clause instead of a MA clause, then the outcome would have been very different.

In a dispute governed by an AMA clause, the dispute resolution process would be commenced by the commencement of arbitration.

Arbitration is commenced by the claimant serving his notice of arbitration on the respondent. There is no necessity for any form of cooperation from the respondent in order for the arbitration to commence.

Commencement of mediation on the other hand would require the cooperation of the respondent as mediation is an entirely voluntary exercise. One cannot be compelled to mediate.

As seen from the Histronics case, the Plaintiff’s attempts at referring the matter to mediation were stymied by the Defendant and hence the Plaintiff really had no other choice but to commence proceedings in Court.

One can only imagine the amount of time and legal cost wasted by the Plaintiff arising from the unsuccessful attempts at starting mediation, only to finally have to resolve the dispute through the courts.

This is therefore a case example of how the agreed dispute resolution mechanism in the agreement completely failed.

Advantages of the AMA clause

The AMA clause has the advantage where the commencement of proceedings is at the behest of the claimant. There would be better control over the commencement of proceedings by the claimant.

Once proceedings are commenced, the current SIAC-SIMC Arb-Med-Arb Protocol has a certain time frame by which the mediation should be completed. In our experience from handling numerous commercial disputes, mediation is a powerful tool in resolving commercial disputes in a fair, cost effective and least acrimonious manner.

It is not unusual to see parties coming out from a successful mediation shaking hands and with promises of more business dealings in future. We have however never come across any parties coming out from the Court room after a trial shaking hands and with promises of exploring further business opportunities.

And if the dispute cannot be settled via mediation, the claimant can still continue with the arbitration without losing much time. The SIAC-SIMC Arb-Med-Arb Protocol provides for a 8-week time frame for the mediation to be completed.

Key Lessons Learnt

  • Always review your dispute resolution clause in your contracts to find one that is most suitable for you.
  • Sometimes, your claim can be jammed up by the other side simply because the dispute resolution clause is not properly worded or suitable in the circumstances.
  • Do consider the possibility of mediation as a dispute resolution mechanism, but you must be careful to ensure that a clause providing for mediation does not become an excuse for the other side to delay your claim.
  • Not all mediation or arbitration clauses are the same. Always consult your legal advisors if in doubt.

Download full version of Arb-Med-Arb or Med-Arb. What is the difference? - November 2017 (PDF, 174KB)