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Med-Arb Revisited – Using OMAP (Opt-Out Med-Arb Process) as a Process Option

Since the publication of the ADR Institute of Canada’s Med-Arb Rules in 2020, Med-Arb has become much more widely accepted as an integrated dispute resolution process in Ontario. Despite this many counsel and parties still have a significant degree of resistance to its use. In the best-known form of med-arb, a single neutral acts as both mediator and arbitrator. The process only transitions into arbitration if the mediation fails; in that case, the med-arbitrator conducts the arbitration and issues a binding decision.

This process offers time and cost efficiencies over stand alone mediation and arbitration and guarantees an outcome, it can also create concerns about role confusion and bias, which may lead to challenges to the process’s integrity and its outcome. Given the limited appeal rights in most med-arb agreements, we must be especially concerned about a challenge to the med-arb process. To ensure that the process is protected, it may be wise to include a provision in the med-arb agreement confirming that they deliberately chose a med-arb process and that in itself is not grounds for a successful challenge.

That one person can mediate and if needed arbitrate in the same dispute is somewhat difficult to accept given the traditional separation and distinct differences of the mediation and arbitration processes. While a valid concern, the process can be designed to meet it. Parties worry that confidential information shared during mediation could affect the arbitrator’s decision as med-arb calls for a complete separation of decision-making from tentative opinions that may have formed during the mediation process. Keep in mind, however, that information is not evidence.

While the legal profession is still somewhat lukewarm about med-arb, courts in Ontario have supported med-arb as a process dating back to the 2007 decision of the Court of Appeal in Marchese v. Marchese. The courts have also addressed the specific concerns of confidential information in the 2017 case of McClintock v. Karam:

If the mediator/arbitrator must move to the arbitration phase, it cannot be expected that they can entirely cleanse the mind of everything learned during the mediation phase, and of every tentative conclusion considered, or even reached, during the mediation phase. However, at a bare minimum, the parties are entitled to expect that the mediator/arbitrator will be open to persuasion and will have yet to reach firm views or conclusions. This clarification of the mediator-arbitrator’s role in the ‘opt-out’ process should address concerns about bias and ensure the audience understands the process. The mediator/arbitrator’s role is to remain open to persuasion and not to have reached firm views or conclusions, thereby ensuring the process’s fairness and integrity.

More recently, the Federal Court of Appeal in Fono v. Canada Mortgage and Housing Corporation, a judicial review of a Canada Labour Board decision in 2021, had this to say about med-arb:

Further, it is typical for labour adjudicators or arbitrators who conduct consensual mediation sessions prior to hearing a case to express tentative views during the mediation as to the potential strengths or weaknesses of parties’ positions to foster settlement, especially where, as was the case here, the parties are represented by experienced counsel. Such statements are not indicative of bias.

And:

It would have a chilling effect on employment and labour mediations and undercut their efficacy if statements such as those the appellant alleges were made by the adjudicator were to be placed before the courts. The comments impugned by the appellant merely reflect the adjudicator’s tentative views as to the strength of the offer made by the respondent as compared to risks associated with pursuing the adjudication. This sort of comment is standard fare in a mediation.

It is clear that med-arb is accepted as a legitimate ADR process at various court levels, despite legal professionals and their clients having legitimate concerns about the process.

There is a simple alternative to the more common traditional practice that meets these concerns. Provide the parties and the med-arbitrator with the option to opt out of the neutral continuing as arbitrator. This ‘opt-out’ provision allows the parties to choose a different arbitrator if they are concerned the mediator’s decision might be influenced by the information shared during mediation. This effectively addresses concerns about impartiality and preserving the integrity of the process. In other words, med-arb’s ‘opt-out’ feature empowers parties by safeguarding their autonomy and instilling confidence in the process.

It is important to note that the opt-out is not out of the process; it is merely that the mediator will not continue as arbitrator.

When I first wrote about the Opt-Out in Med-Arb in early 2020, the opt-out was a concept “borrowed” from Australia. The New South Wales Commercial Arbitration Act 2010 No. 61 section 27D (4) and (5) provides:

(4) An arbitrator who has acted as mediator in mediation proceedings that are terminated may not conduct subsequent arbitration proceedings in relation to the dispute without the written consent of all the parties to the arbitration given on or after the termination of the mediation proceedings.

(5) If the parties consent under subsection (4), no objection may be taken to the conduct of subsequent arbitration proceedings by the arbitrator solely on the ground that he or she has acted previously as a mediator in accordance with this section.

In Ontario the Arbitration Act states:

Mediation and conciliation

35 The members of an arbitral tribunal shall not conduct any part of the arbitration as a mediation or conciliation process or other similar process that might compromise or appear to compromise the arbitral tribunal’s ability to decide the dispute impartially. 1991, c. 17, s. 35.

This section applies to arbitrators becoming mediators, not mediators becoming arbitrators, so a mediator can act as an arbitrator in the arbitration phase of med-arb. However, for clarity, you should exclude this section from an arbitration agreement, and it is good practice, even if technically unnecessary, to include a waiver of section 35 of the Arbitration Act in any type of med-arb agreement.

OMAP is a powerful tool that empowers parties by instilling confidence in the process and thus offers significant advantages. It provides greater control over the dispute resolution process, allowing clients to reassess their comfort level with the neutral after mediation and decide whether to proceed with arbitration. This enhanced control promotes client satisfaction and a sense of empowerment.

The use of OMPA significantly reduces perceived risks by also removing concerns about the med-arbitrator’s impartiality. If parties believe that the neutral may have been influenced by confidential information shared during mediation, they can terminate the neutral’s involvement before arbitration begins. This not only enhances the sense of security but also boosts confidence in the fairness of the process.

Additionally, OMPA significantly reduces perceived risks by minimizing concerns about impartiality. If parties believes that the neutral may have been influenced by confidential information shared during mediation, they can terminate the neutral’s involvement before arbitration begins. This option provides a sense of security and also boosts confidence in the fairness of the process.

Mediation offers strategic flexibility for disputes with complex dynamics but may not reach a resolution of a dispute. The opt-out feature allows the parties to continue with the original mediator as arbitrator or retain a different arbitrator to complete the process. This option provides an opportunity for reevaluating the neutral’s role, ensuring both parties are comfortable proceeding. It also maintains a sense of control and confidence in the transparency of the process.

OMPA enhances party autonomy, as parties retain significant control over how their dispute unfolds, aligning the process with their preferences and comfort levels.

The opt-out option may encourage more open communication in the mediation phase, as parties feel reassured that sensitive information will not influence an arbitrator’s decision which removes the risk of perceived bias. In traditional med-arb, the mediator-arbitrator may inadvertently consider confidential information disclosed during mediation. The opt-out option eliminates this risk by allowing parties to end the neutral’s involvement before arbitration, preserving the integrity of the process.

Despite introducing an additional decision point, OMAP remains an efficient process regarding cost and time compared to using mediation and arbitration as two stand alone processes. Emphasizing mediation’s collaborative potential helps parties avoid protracted disputes. Arbitration is a fallback mechanism if mediation efforts fail, ensuring disputes do not drag on without resolution which reassures parties about the efficiency of the process.

An unexpected benefit of med-arb in general is that it often improves mediation outcomes. Knowing that arbitration will proceed, parties may engage more constructively in mediation and, importantly, be prepared for mediation. This increases the chance of a resolution that keeps value at the table.

It is important to remember that having the opportunity to opt out of acting as arbitrator also benefits the neutral should they have concerns over confidential information becoming part of the decision-making process. It is important to remember that arbitrators have at least two duties to the parties. First to produce an enforceable award and second not to cause a dispute over that award.

Implementing OMAP requires careful process design. Given the relatively new uptake of med-arb beyond labour and family law disputes, the med-arb Agreement is likely to be something other than an off-the-shelf product. As a custom-designed process, the terms and their impact on the process must be carefully negotiated.

Specific consideration must be given to the use of caucusing in the mediation phase and the timing of the parties’ election to proceed from mediation to arbitration.

Any opt-out clause must be clearly defined, including the timing and method for parties or the med-arbitrator to exercise their right to opt-out. Ambiguity in the clause can lead to confusion or disputes about the process, undermining its effectiveness and opening it up to challenge.

The selection of the med-arbitrator is also critical to the process and deserves a complete article. Some of the considerations in selecting the neutral include,

  • Significant Med-Arb Experience
  • Subject-Matter Expertise
  • Proven Track Record in Med-Arb Process Design
  • Experience drafting Med-Arb Agreements
  • High Ethical Standards and Impartiality
  • Clear Communication style
  • Understands the Boundary Between Mediation and Arbitration
  • Case Management and Timeliness
  • Cost-Effectiveness and Transparency
  • Availability
  • Technological Proficiency

In addition, in OMAP the neutral must accept and be prepared for the possibility of being replaced after mediation, which requires a professional and adaptable mindset.

While there is a potential for tactical opt-outs where parties might use the option to delay resolution or gain leverage, this is not a serious concern, unlike in stand-alone mediation or arbitration. Parties choose med-arb because they want the certainty of the outcome it provides.

How does the OMAP work? In the design meetings the choice of standard Med-Arb or OMAP is discussed and agreed upon requiring the selection of an alternate arbitrator. It is extremely important that the selection process is clearly delineated at this stage of the process design.

In many cases, the parties have selected an alternate arbitrator in mind and they are named in the opt-out provisions in the agreement. Sometimes the parties do not agree on who the alternate arbitrator should be, or do not want to pay the costs of a standby arbitrator, as they are confident the dispute will be resolved in the mediation phase. In that case, the parties will often empower the mediator, in the med-arb agreement to choose the alternative arbitrator from names, usually three from each party, provided by them.

The Med-Arb Agreement’s OMAP provision must be carefully drafted to ensure its success. It should explicitly outline the neutral’s roles and responsibilities, the conditions for opting out, and the steps to be taken if arbitration does not proceed with the same neutral. Clear terms help prevent confusion, maintain the process’s integrity, and ensure that parties provide informed consent. Establishing a deadline for opting out after the mediation phase can avoid unnecessary delays.

OMAP represents a practical evolution of ADR by addressing traditional med-arb’s limitations while preserving its benefits. Its flexibility, autonomy, and confidence-building features make it an obvious consideration for those wishing to use the process. If there is informed consent from the parties, they are entitled to select med-arb as their dispute resolution process. While many lawyers may not be comfortable med-arb as a concept, the use of OMAP should meet their concerns.

Comments

  1. This is really interesting Colm. I love how the field is evolving existing processes and adding new ones to meet the needs of clients. Appreciate the detailed description and discussion. All the best for the holiday season!

  2. This is a superb, well thought out and academically sound article Colm. Thank
    You for this ! I will bring it to the attention of my colleagues in the Med/ Arb Committee of Fdrio , as a vitally important and timely discussion point.

    Kind Regards and Happy holidays
    Anne Freed

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