Originally from Dispute Resolution Journal

Free trade agreements are intended to encourage foreign investment by nationals of the state parties. The United States is a party to a number of free trade agreements. Ecuador is in the midst of negotiating a free trade agreement with the United States. Certainly, Ecuador hopes that this agreement will nurture the business relationships between investors from the two countries.

All business ventures, however, are likely to experience disputes. This is almost inevitable. For the most part, parties involved in international transactions have used international arbitration to resolve disputes. Yet mediation is an even better method of dispute resolution. But regrettably, it is not yet an accepted method of resolving international disputes. This article examines the impediments to mediation’s use and ways to overcome them. It also outlines a special “med-arb” procedure for high-risk international disputes.

What is Mediation?

In the United States mediation (called conciliation in some countries1) is a popular means of commercial dispute resolution.2 Mediation is a dispute resolution process that helps parties end their problems more efficiently and at less cost than adversarial processes like litigation and arbitration.3

When we consider the many advantages of mediation, including control over the outcome, flexibility, privacy, speed, less cost, and the preservation of business relationships, we feel compelled to ask why isn’t mediation the preferred method of resolving international business disputes? Some possible reasons and what we can do about them are discussed below.