The development of med-arb reflects and parallels the larger societal trend that has increasingly linked judicial procedure with various forms of less formal, more expedient processes for resolving conflict, collectively known as ADR. The Court system has always had an interest in facilitating negotiation to settle a case prior to trial. The rising quantity of disputes in the 1970’s elevated this interest and accelerated the trend in favor of mediation and other mechanisms for promoting settlement. In recent years Court systems reached “a warm endorsement” of facilitated settlement as preferable to litigation not only because of administrative convenience but also in the belief that a freely negotiated settlement will produce a higher quality of justice. With statistics showing that over 95 percent of court cases are settled without a trial, litigators have also come to “embrace the view that settlement is the goal”.
Like court process, arbitration has been subject to the same call for more expedient “alternatives” for resolving disputes. With many of the formalities of court adjudication, arbitration is criticized as “slow, expensive, formalistic, and unnecessarily adversarial”. The growth of mediation in the 1970s and its extension to a wide range of commercial disputes resulted in the “growing interaction” of arbitration and mediation.
An increasing number of commercial industries concluded that “combining mediation and arbitration in sequence can be a fair, efficient, and cost-effective process for resolving disputes”. Throughout the business community it became common practice “to provide a mediation window” available to the parties at any stage of arbitration.
Med-arb is a natural outgrowth of this trend. In a dispute resolution environment where mediation and arbitration often occur in sequential order, it makes sense to have the same neutral perform both functions, if feasible. This is particularly so when, in keeping with the law-centered model of mediation, the parties already expect the mediator to be adept at formulating optimal settlement strategies based on legal and technical norms and industry practice. In this context, the mediator already has tremendous power of persuasion based on his “expert” authority to evaluate the likely-outcome of the case if it went to trial, and his knowledge of how other cases in the same commercial sector have settled. While the neutral in arbitration has the ultimate degree of decision-making power by virtue of his authority to create a final and binding settlement, the evaluative mediator’s power to influence the settlement process may differ only as a matter of degree. This has led some to characterise the differences between mediation and arbitration as “artificial”