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Straus Dean Tom Stipanowich Interviewed by China Legal Daily on Mediation and Arbitration

During the recent Shanghai Arbitration Week, the China Legal Daily interviewed Dean Tom Stipanowich - internationally renowned for his expertise in mediation practices - to learn more about his experience in both mediation and arbitration. The complete interview with legal reporter Mao Xiaofei has been translated to English in full:

Professor Thomas J. Stipanowich is Academic Dean of the Straus Institute for Dispute Resolution (Ranked No. 1 in the US) of Pepperdine University in the United States, and an internationally renowned arbitrator and mediator. He is also a member of the Academic Counsel of the Institute for Transnational Arbitration, a member of the Advisory Board of the ALI’s Restatement of American Law of International Arbitration, and the co-author of the ground-breaking five-volume Federal Arbitration Law: Agreement, Awards & Remedies Under the Federal Arbitration Act. Since 2002, he has been invited by several Chinese arbitration organizations to serve as an expert advisor on mediation rules. During the Shanghai Arbitration Week in March this year, I was fortunate enough to have an exclusive interview with him.

Mao Xiaofei: May I ask how did you get into the arbitration field?

Stipanowich: Actually, my initial dream was to become an urban designer. During my undergraduate and postgraduate studies, I studied architecture and later went to the law school. After graduation, I worked in a law firm in Atlanta, USA. This law firm is well-known for solving architectural and engineering disputes. In this way, I had the opportunity to combine my architectural background with legal knowledge. The law firm had many cases and clients at the time. Therefore, I quickly learned a lot of litigation skills and accumulated arbitration experience in this field.

Mao Xiaofei: What made you develop a great interest in mediation and become a well-known expert in this area?

Stipanowich: In 1982 I was an attorney for a construction company engaged in a major dispute regarding the expansion of a hospital in the Chicago area. My client filed a demand for arbitration and we were proceeding forward with the case when the attorney for the hospital suggested that we try to settle the dispute through mediation. You have to know that at that time almost no one in the United States had heard of mediation, just like me. Moreover, there was no lawyer or expert specializing in mediation. We hired a famous Chicago architect as a mediator. Although the case did not finally get settled in mediation, it was the first time I had encountered mediation. At that time, I had a strong feeling this is a great way to resolve disputes other than litigation. The American ADR (Alternative Dispute Resolution) Revolution was quietly rising. Fortunately for me, my personal growth has also been accompanied by the development of the mediation system.

Mao Xiaofei: In the mediation and arbitration, which case impressed you the most?

Stipanowich: Once I was appointed as a mediator for a dispute between a British mining company and an American insurance company. This case was about the allocation of the compensatory damages in a mine accident. Both parties had great discrepancy in the amount of compensation and had not been able to reach a settlement. During the mediation, I suggested that they could consider a “last offer arbitration” in which an arbitrator would render a decision to choose one of the final positions of the parties. I told them that I could help them set up the rules of procedure and propose a list of arbitrators. Two days later, the lawyers from both parties called me and said that the parties were willing to accept my proposal for arbitration and appointed me as an arbitrator to conduct an ad hoc arbitration. This surprised me very much. To tell the truth, this rarely happened in the past, so it left a deep impression on me.

Mao Xiaofei: In the case you mentioned, your role was actually changed from a mediator to an arbitrator, that is, you’ve had a “changing hat”. However, in international arbitration, there are still some controversies with “changing hats”. What do you think about this?

Stipanowich: Yes, (there are still controversies) especially when it comes to changing from a mediator to an arbitrator. I think that in this process, we must pay special attention to the autonomy of the parties, and do not put pressure on the parties and their lawyers, even if you personally prefer the other alternatives for dispute resolution. Only when both parties take the initiative to ask you to “change hats” should you do so. Don't tell them as such “let me be your mediator or arbitrator”. I had an occasion where a lawyer came to consult me that in an arbitration case, the arbitrator constantly asked them if they could allow him to mediate the case. This made them feel a lot of pressure because they did not want to mediate, but (by rejecting such a proposal), they were afraid that they might offend the arbitrators which they did not want to, either.
Problems may also arise where a single party approaches an arbitrator and suggests that the arbitrator change hats and become a mediator. At this time, the arbitrator should suggest that they talk to the other party first, and if and when the other party agrees, the parties could come to the arbitrator jointly and propose that the arbitrator become a mediator I found that sometimes the parties and their attorneys say that they want to mediate to please the arbitrators. But you must keep in mind that by doing so you may put yourself in a bad situation.
Once the "hat" has been changed in arbitration, I suggest that we must amend the agreement with the parties, stating that it is "with the consent of both parties" and including other necessary exemption clauses.

Mao Xiaofei: In arbitration and mediation, "back-to-back" mediation is very common in China because it would be more efficient while in international arbitration, there are a lot of concerns about this. It is deemed difficult to make sure that the information and evidence obtained in mediation will not affect the neutrality and fairness of the arbitrators at late stage. What do you think?

Stipanowich: I think this is very important. If the parties can have a "face to face" mediation which is conducted with everyone in the same room, then there would be no problem if the mediation fails and the parties return to arbitration. However, if the mediator is meeting with individual parties in separate rooms, it may create problems if the mediation fails to settle the case and the mediator changes hats and becomes an arbitrator, because the mediator-turned-arbitrator may have been exposed to prejudicial information during the private sessions.
In addition, I would like to say that not only the words of the parties and their attorneys in the mediation portion of a back-to-back proceeding (“med-arb”) may affect the subsequent arbitration. The statements made by a mediator may create problems if they lead parties to believe that the mediator will act a certain way after they change hats and become the arbitrator. It is often said that "the speaker has no particular intention in saying something but the listener reads his own meaning into it”. I have had a lawyer who came to consult me about a back to back proceeding. He said that after the arbitral award was decided, both he and his client wanted to sue the arbitrator because the amount of compensation that was awarded was very different from the amount the arbitrator had suggested he would give them when he was acting as mediator. They believed that the arbitrator deceived them in mediation. Of course, it was very difficult to sue the arbitrator and vacate the award. However, I felt that this was not good for the arbitrator either, because being accused of dishonesty would damage his reputation. ONLY ONE ARBITRATOR, NOT ARBITRATORS

Mao Xiaofei: Do you think that in the future the "American experience" and "Chinese experience" may merge in the mediation system? How do you view the cultural difference?

Stipanowich: Culture is a huge factor in dispute resolution. Cultural differences have a great impact on the mediation system. Chinese culture has a very long history and continuity. I think the Chinese mediation system will collide with other cultural mediation systems in the process of going international. I now feel that China's arbitration institutions are in the process of making adjustments in the mediation system to adapt to the needs of internationalization.
In the United States, we also recognize that some of our procedures in court and arbitration are very different from those employed in other countries. The legal culture of the United States places particular emphasis on fairness and confrontation, and we tend to provide for extensive exchange of information about cases. However, this is often very expensive and time consuming. In international arbitration, U.S. practitioners have come to recognize that it is often necessary to modify our expectations in light of the very different expectations of parties and attorneys from other countries and legal systems.
I think it can be coordinated by means such as the "protocol", similar to the "IBA rules of evidence." For example, the change of roles between arbitrators and mediators can be allowed in one case, but the free choice of the parties must be guaranteed. In addition, "back-to-back" mediation should only be conducted with great caution. Of course, this will put limits on the mediators’ initiatives, but it can largely eliminate the doubts of the parties. In addition, it is very important that, if mediation is conducted in the arbitral proceedings but is unsuccessful, the parties should be given the option to opt out of arbitration. These are the basics, of course, there are other combined and mixed ways.

Mao Xiaofei: Do you think that mediation can be an effective way to solve the problems in current international arbitration such as litigationized, time-consuming and costly issues?

Stipanowich: I think that mediation can partially alleviate these problems, but it cannot solve them all. From my experience, the main role of mediation in the future should be in the initial stage of dispute resolution, that is, before the parties initiate arbitration or litigation proceedings. Mediators can intervene early to evaluate the impacts that different dispute resolution mechanism may have on the parties. The mediator can lay the foundation for the entire dispute resolution and becomes the “process adviser” for resolving the dispute.
In the American and international arbitration, there is such a phenomenon that after the formal initiation of the procedure, both parties have conducted a lot of information exchange and evidence disclosure before considering whether they can mediate. At this time, the parties have already paid most of the expenses. I suggest that you consider mediation much earlier in the process.

Mao Xiaofei: What kind of role do you think lawyers play in mediation and arbitration?

Stipanowich: First of all, I think lawyers have their own interests. Their self-interest may to a large extent affect the time for settlement. Most of the time, the lawyers are usually very enthusiastic about the use of mediation and hope that the mediation will succeed in bringing about a settlement. Of course, this is not all the case. There are also situations where lawyers try to use mediation as a way of delaying dispute resolution or harming the other side.

Mao Xiaofei: What do you think arbitration institutes can do to promote mediation?

Stipanowich: Arbitration institutes can indeed guide the mediation to some extent through the rules. I have also seen that some institutes have introduced mediation rules, including model mediation clauses, to encourage mediation. However, I am more concerned about how to improve people’s understanding of mediation through education. As I said earlier, early mediation can help people design dispute resolution procedures as a whole. At present, there are not many people talking about this topic in this area.

The original article may be viewed here.