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Article 9 of the Prague Rules contains three clauses which aim to regulate the whole settlement facilitation process during the arbitration proceedings. The wording of the article has left a considerable amount of the settlement facilitation relations unregulated and by doing so, in my opinion, the Working Group intended to maintain those ambiguities under the discretion of Arbitral Tribunal in order to increase its proactive role in dispute settlement. If we analyze each clause separately, in Article 9.1 Prague Rules define that “unless one of the parties’ objects, the arbitral tribunal may assist the parties in reaching an amicable settlement of the dispute at any stage of the arbitration”. From the wording it is clear that the article intended to formulate general rule for the assistance of Arbitral Tribunal in settlement facilitation. However, the same article carries some harmful ambiguities which will be addressed by following paragraphs of this memorandum accompanied by respective potential practical problems caused by them. Articles 9.2 and 9.3 regulate, respectively, the use of mediation during the arbitration proceedings as settlement facilitation method and the procedure for the continuance of mediating arbitrator’s mandate after unsuccessful mediation process. Article 9.2 states that “upon the prior written consent of all parties, any member of the arbitral tribunal may also act as a mediator to assist in the amicable settlement of the case” and, according to the Article 9.3, the same arbitrator may continue to act as arbitrator only subject to further written consent from all parties if the mediation does not result in settlement. One of the main uncertainties is the reason why the Prague Rules have defined “prior written consent of all parties” requirement for mediation on the one hand, while confining itself to the “unless one of the parties’ objects” criteria for other facilitation methods under Article 9.1 on the other hand. The potential problematic issues arising out of Articles 9.2 and 9.3 are mostly related to reducing the efficiency of arbitral proceedings and endangering the enforceability of the final arbitral award, especially by not regulating the conflict between the main principles of arbitration and mediation methods. 3. THE POTENTIAL PRACTICAL PROBLEMS 3.1. Potential problems affecting the enforceability of final award Article 9 of the Prague Rules which is designated to stimulate hybrid procedure, in particular arbitration-mediation, does not define any restriction on any technique which may have adverse effect on the final award. The most problematic technique is “caucusing” which is the main tool for the success of whole mediation process. During caucusing the parties could in ex parte meetings divulge secrets that they would not have disclosed during the normal course of the arbitration to the arbitrator-turned-mediator and to the other parties. Use of caucusing technique, which is not prohibited under the Prague Rules, may result with the challenge of final award on the grounds of: i) the partiality of mediating arbitrator and ii) the breach of the due process. Moreover, under Article 9 of the Prague Rules, there is a lack of some “safeguards” (for ensuring the enforceability of final award) which can also has significant potential for risking the enforceability of final award. 3.1.1. Caucusing as a technique leading to the refusal of enforcement and recognition of final award on the “partiality of mediating arbitrator” ground In fact, United Nation Convention on the Recognition and Enforcement of Foreign Arbitral Awards (hereinafter “New York Convention”) does not explicitly set the “partiality of arbitrator” as a ground for the refusal of recognition and enforcement of final arbitral award under its Article V. However, it is generally accepted that lack of impartiality on the part of the tribunal is a ground for refusing enforcement on ground of public policy under Article V.2.(b) of the New York Convention. The question is, how the caucusing technique may result in the bias of arbitrator? There is the risk of contamination of the arbitrator’s mind (bias) because of the information relating to the positions taken and evidence disclosed by parties for the purpose of mediation without prejudice, and using the same neutral as arbitrator who was the mediator may mean that their understanding of the case is tainted by what they learned during the without prejudice proceedings. So, it may be difficult for a mediator-arbitrator not to be influenced by the private communications he/she hears where a “caucusing” technique is adopted. Especially within the frame of article 9.3 of Prague Rules, if the mediation fails and the arbitration proceedings continue, the mediating arbitrator will probably lose his/her objectivity and impartiality on the account of the information he/she became familiar during the ex parte mediation sessions which are not part of the record. There are also some cases in which this exact danger has been focused on. One of the most famous cases in this regard is the Gao Haiyan v Keenye case (hereinafter “Gao Haiyan”), in particular the analyze of Court of First Instance of Hong Kong (hereinafter “CFI”) in the enforcement procedure of its final award. The CFI in Gao Haiyan case specifically pointed out the significant risk connected with the caucusing technique when used by mediating arbitrator: “the mediator who acts as arbitrator obtains confidential information in the course of one-on-one meetings with a party. That information may consciously or sub-consciously influence the mediator when sitting as arbitrator. It would be unfair on the other party for the media-tor turned arbitrator to act upon the confidential information without first disclosing the same and affording that other party a chance to comment on any prejudicial impact of the confidential information”. Even though CFI’s decision on non-enforcement of the arbitral award was reversed by the Court of Appeal, the CFI’s analyze is particularly important within the light of other abovementioned arguments about the risk of apparent bias resulting from caucusing. Additionally, in the US Duke Group case , as well as in the UK Glencot v Barrett case , it was upheld that just the fact of organizing private caucuses in the mediation phase can be interpreted as suggesting a bias in the med-arbitrator. 3.1.2. Caucusing as a technique leading to the refusal of enforcement and recognition of final award on the “breach of due process” ground Article 5. 1. (b) of New York Convention defines that the recognition and enforcement of the award may be refused on the ground that the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case. However, the main thrust of this provision of the Convention is directed at ensuring that the requirements of “due process” are observed and that the parties are given a fair hearing. Obviously, parties’ right to be heard is of particular concern in regard to caucusing. If the Arbitral Tribunal holds private sessions and listens to what one party has to say in the absence of the other, that party may reveal facts to the members of the tribunal the other party is unable to rebut. Such an ex parte conversation is a textbook example for a violation of the right to be heard and usually constitutes a ground to vacate the award. Nevertheless, there is also one strong contra-argument which is against the abovementioned “right to be heard” principle when the mediating arbitrator uses caucusing technique. The argument is “confidentiality of information gained through caucusing” principle. During caucusing party is able to provide the mediator with confidential information that is not shared with the other party and mediator’s possession of such confidential information from both parties usually allows the mediator to guide the parties to an amicable settlement. In order to avoid from the conflict of mentioned principles, for example, Centre for Effective Dispute Resolution Rules for the Facilitation of Settlement in International Arbitration (hereinafter “CEDR Settlement Rules”), in its Article 3 (General principles) states that: “4. Nothing said or done by any Party or its counsel in the course of any settlement discussions, or in the course of any other steps taken by the Arbitral Tribunal to facilitate settlement, shall be used against a Party in the event that the arbitration resumes (save as regards the allocation of costs in accordance with Article [6] of these Rules). 5. The tribunal shall not take into account for the purpose of making an Award, any substantive matters discussed in settlement meetings or communications, unless such matter has already been introduced in the arbitration”. Unfortunately, while the Prague Rules do not prohibit the use of caucusing during the hybrid process of mediation during arbitration and have not formulated any general principles such as in CEDR Settlement Rules, the basic principles “right to be heard in arbitration” and “confidentiality of information obtained in mediation” are more likely to collide and risk the final award under the “due process” ground. 3.1.3. Lack of “safeguards” as ground risking the enforceability of final award The abovementioned potential problems regarding to the challenge of final award could be prevented by including some safeguards into the Article 9 of the Prague Rules, while it is evident from the wording of the same article that the Working Group did not have any intention or concern for eliminating those risks. One of the most efficient ways for avoiding these risks is to obtain the appropriate waivers from the disputing parties. For instance, this safeguard is already to be found in the International Bar Association Guidelines on Conflicts of Interest, General standard 4(d) which indicates that “an arbitrator may assist the parties in reaching a settlement of the dispute, through conciliation, mediation or otherwise, at any stage of the proceedings. However, before doing so, the arbitrator should receive an express agreement by the parties that acting in such a manner shall not disqualify the arbitrator from continuing to serve as arbitrator. Such express agreement shall be considered to be an effective waiver of any potential conflict of interest that may arise from the arbitrator’s participation in such a process, or from information that the arbitrator may learn in the process. If the assistance by the arbitrator does not lead to the final settlement of the case, the parties remain bound by their waiver”. CEDR Settlement Rules also define this safeguard in its Article 3(3) as “the Parties agree that the Arbitral Tribunal’s facilitation of settlement in accordance with these Rules will not be asserted by any Party as grounds for disqualifying the Arbitral Tribunal (or any member of it) or for challenging any award rendered by the Arbitral Tribunal”. Therefore, silence of the Article 9 regarding the waiver instrument also increases the possibility of challenge procedure against the final award made under the Prague Rules. Additionally, Article 9 of the Prague Rules do not give a chance to arbitrator to resign if arbitrator has doubts to his/her ability to remain impartial or independent in the future stages of the arbitration proceedings. Article 9.1 which refers to the other settlement facilitation methods does not even consider any possibility for termination of arbitrator’s mandate after unsuccessful facilitation process and, therefore, has not developed any procedure for this purpose. According to the Article 9.3 of the Prague Rules, if the mediation does not result in a settlement within an agreed period of time the mediating arbitrator can terminate his/her mandate only when he/she cannot obtain written consent of the parties regarding his/her continuance as arbitrator. However, International Bar Association Guidelines on Conflict of Interest in General standard 4(d) give this chance to arbitrator by stating that “however, consistent with General Standard 2(a) and notwithstanding such agreement, the arbitrator shall resign if, 11 as a consequence of his or her involvement in the settlement process, the arbitrator develops doubts as to his or her ability to remain impartial or independent in the future course of the arbitration” and CEDR Settlement Rules in Article 7 also take the same approach with almost the same wording. Therefore, in the absence of this safeguard, the Prague Rules have again lost another chance to ensure the enforceability of final arbitral award by eliminating the risks of hybrid procedure. Consequently, in my view, by not incorporating any restrictions, especially regarding the use of caucusing technique, into the wording of Article 9 in order to maintain the impartiality, due process and confidentiality principles undamaged and, also, by not including discussed safeguards into the content of the same article, the Prague Rules have risked the enforceability of final award and even diverged from its own object of “increasing the efficiency of arbitral proceedings”. 3.2. Potential problems affecting practical efficiency of arbitration proceedings 3.2.1. From the “time and cost efficiency” perspective Assistance of Arbitral Tribunal for settlement through mediation can cause procedural delays and additional expenses. Possibility of risking time and cost efficiency of the arbitration process is, probably, higher when the mediating arbitrator is not accepted as continuing arbitrator by disputing parties after the unsuccessful mediation session(s). In fact, it would take time to appoint a new arbitrator (during which time the Tribunal is unlikely to be able to provide directions or deal with any interlocutory applications) and, practically, there will be additional costs for getting a new arbitrator up to speed. Therefore, mentioned presumable circumstance proves that the use of hybrid method under the Prague Rules may have “hazardous” effect on the time and cost efficient nature of arbitration method. 3.2.2. From the “party autonomy” perspective: coercing parties to settlement and “facilitation in the shadow of a possible future award” Article 9.1 of the Prague Rules indicates that “Unless one of the parties objects, the arbitral tribunal may assist the parties in reaching an amicable settlement of the dispute at any stage of the arbitration”. It is evident that, by defining “unless one of the parties objects” criteria, the clause again promotes the proactive role of arbitral tribunal rather than the parties explicit agreement and consent. However, in practice this proactivity may have undesirable effect on parties’ willingness to resolve the dispute, especially through hybrid arbitration-concliation proceedings which is possible under the Article 9.1 of the Prague Rules. On the one hand parties may feel coerced into settlement as an undesirable result of mutually agreed arbitration method which is based on the party autonomy principle and, on the other hand, the very fact that the conciliation is conducted by the person who will adjudicate the dispute in the event of failure of the settlement may put pressure on the parties which can also be called as conciliation “in the shadow of a possible future award”. Even most sincere mediation efforts in a combined, med-arb procedure might easily fail if the parties abstain from full participation and disclosure of relevant facts in an open and informal mediation procedure, while being aware that this information can be further used against them in the following arbitration part. As a result, tribunal’s assistance to parties as a facilitator would, probably, be ineffective while parties would reasonably feel coerced to settle the dispute and be reluctant to have unreserved conversations with future decision-maker (assuming that the mediation was unsuccessful and the mediating arbitrator was retained as a member of the Arbitral Tribunal). 3.2.3. From the “qualification of the arbitrators for mediation” perspective Another practical problem with such a hybrid approach seems to be that of competence while successful resolution of even numerous international commercial disputes through arbitration does not necessarily make an arbitrator similarly qualified to undertake the role of a mediator. Primarily, the skills of arbitrators, which are mostly concentrated on the decision making rather than “bringing parties to the same page” in most cases, can be considered as a ground confirming that the arbitrators cannot always conduct facilitation process as a qualified mediators. Moreover, another exercise of skills required from an arbitrator, in particular an ability to provide a neutrality of the procedure, including keeping a professional distance from the parties, might turn out to be disturbed if the same person is expected to get directly involved in seeking the final solution together with the parties as a mediator/facilitator. Therefore, in my opinion, mixing different alternative dispute resolution methods (arbitration and mediation) within one proceeding and handing over the control to the non-qualified mediator in most cases can lead to the both ineffective facilitation sessions and relatedly delayed arbitral proceedings which is against to the “increasing efficiency of arbitral proceedings” purpose of the Prague Rules. 3.2.4. From the “procedure for nomination of mediating arbitrator” perspective The Prague Rules in article 9.2 define that “......., any member of the arbitral tribunal may also act as a mediator to assist in the amicable settlement of the case”. The problem of the clause is uncertainty regarding the explicit procedure for the choice of that member of Arbitral Tribunal who will conduct mediation. For instance, in cases before a three-person Tribunal where each party has nominated an arbitrator and the chairperson has been appointed by an institution or by the party-nominated arbitrators, the most logical potential mediator would be the chairperson, however, Article 9.2 is silent on this point as stated above, and there may very well be reasons why another member of the Tribunal would be better suited for the role (because, for example, they are a CEDR qualified mediators). As a result, mentioned uncertain “mediator appointment” procedure would probably cause additional dispute between parties and undesirable delay of arbitral proceedings. 4. CONCLUSION It is evident that, the Prague Rules bring a new perspective in providing parties, counsel, arbitrators and institutions in international arbitration with a new set of rules that grant broader and more proactive powers to arbitral tribunals, making them more comfortable in the “driving seat”. However, specifically regarding the Article 9 of the Prague Rules, the comments are likely to be vice versa. In my opinion, assistance of Arbitral Tribunal in amicable settlement under the Prague Rules could be regulated in more accurate and detailed manner in order to eliminate “toxic ambiguities” by having benefited from alternative instruments, such as IBA and CEDR Rules regulating the same issues. Therefore, despite the fact that incorporating “assistance of Arbitral Tribunal in amicable settlement” in the content of the Rules may have some procedural profits, such as avoiding from the involvement of a separate neutral person for the purpose of conducting a mediation or conciliation before, during or in parallel with the arbitration which means duplicating the work, incurring additional costs and also possibly losing time, in my view, the above-discussed potential problems arising out of the ambiguity and insufficiency of that article outweigh its advantages.