Michael Hwang（Singapore）

Former Chief Justice of the Dubai International Financial Center Courts (DIFC Courts)

Former Vice-President of the ICC International Court of Arbitration

In the last four to five years, there has been much litigation in different common law countries where parties have tried to stop an arbitration from being commenced and carried on without full compliance with the terms of the Multi-Tier Dispute Resolution ("MTDR") procedure which has been incorporated into the dispute resolution clause. Such challenges usually commence before the arbitration itself and, if the challenges are dismissed, they are then escalated to the curial Court under Article 20 of the UNCITRAL Model Law.

("Model Law").

This has resulted in what some practitioners consider to be nuisance litigation and (sometimes) even a form of guerrilla tactics, because the objecting parties often do not genuinely believe that mediation will resolve the dispute, but simply want to create significant delays to the inevitable arbitration that will follow arising from the differences in interpretation under the MTDR clause. And, if they can succeed in persuading the Tribunal to dismiss a Notice of Arbitration on the grounds of lack of jurisdiction, then they get a bonus by way of a costs order against the Claimant for wrongly commencing the arbitration without fully complying with the procedure set out in the MTDR Clause.

I will not spend time analysing those cases in detail except to say that this battle has been fought by parties who argue that strict compliance with the prescribed mediation procedure is required, and any failure of complete compliance will amount to a lack of jurisdiction based on the need to go through the prescribed Alternative Dispute Resolution ("ADR")process exactly as set out in the MDTR clause.

The foundation of the challenge to arbitration where provisions of the MTDR clause are not strictly complied with has been based on the argument that a true construction of the MTDR clause requires full compliance with the exact provisions for the pre-arbitration ADR procedure to be carried out (typically requiring certain very senior executives from each side to meet and spend a certain period on amicable discussions to settle the case before any arbitration is commenced). And the consequences of non-compliance with such procedures will be that the Notice of Arbitration that is filed without going through the prescribed procedure should be declared to be null and void by the Tribunal (and, if necessary, by the curial court on appeal) as a jurisdictional objection. This access to the court of the seat is especially significant because a decision on jurisdiction by the Tribunal is the only decision of a Tribunal which can be appealed to the curial Court under Article 16 of the Model Law.

The practical effect of such an application to set aside (which need not be raised until the filing of a Defence under the Model Law, where applicable) will be that the substantive work undertaken by the intending Claimant will all be wasted if a Tribunal and/or Court rule(s) that the failure to comply strictly with the pre-arbitration protocol deprives the Tribunal of jurisdiction, and therefore a Notice of Arbitration filed without following the MTDR procedure must be struck out, and the costs of the abortive arbitration will (usually) be ordered to be paid by the Claimant. Such a ruling will inevitably cause great frustration to the potential Claimant and possibly result in the Claimant having to pay a substantial sum in legal costs to the potential Respondent, thereby granting the latter a great tactical victory. The latter will have achieved a delay plus legal costs, and lowered the morale of the Claimant (and possibly the claimant's confidence in its legal team).

However, from the legal viewpoint, it can only interrupt, but not preclude, the Claimant from re-filing its Notice of Arbitration in strict compliance with the steps prescribed by the MTDR clause.

The history of the most recent challenge cases which have been brought before Tribunals or Courts shows that the common law courts have largely been robust in declining to classify such MTDR clauses as a ground for a jurisdictional objection to an arbitration filed without full compliance with the prescribed ADR procedure. [See the article in this Liber Amicorum by Koh Swee Yen SC, Tiong Teck Wee and Thea Elyssa Vega.]

Instead, such Courts have (more often than not) characterized the failure of Claimant to strictly observe the ADR provisions as an issue of admissibility rather than jurisdiction. Such a breach will therefore not result in a Notice of Arbitration (and all subsequent proceedings) being struck out by the Tribunal or the Court.

The Courts in England & Wales, Singapore, Hong Kong (with minor exceptions) and Australia have all adopted this approach (although not all of them necessarily believe that the dichotomy of jurisdiction versus admissibility is actually a true binary test), and, for practical purposes, all that matters is whether an objection can properly be classified as a jurisdictional issue or an issue of admissibility.

Some authorities and practitioners (including myself) have argued that, in strict law, there is only one test to be applied i.e. is the challenge to the Notice of Arbitration that has been filed without full compliance with the MTDR clause a challenge to the Tribunal’s jurisdiction or not? In my view, a pre-arbitration protocol should not be regarded as jurisdictional as opposed to admissibility if the Jan Paulsson test is applied: “the nub of the classification problem is whether the success of the objection necessarily negates consent to the forum. Our lodestar takes the form of a question: is the objecting party taking aim at the tribunal or at the claim?” Only if the attack is on the forum hearing the arbitration will it be a true jurisdictional challenge, in other words, the potential claimant is in the wrong forum. [“Jurisdiction and Admissibility” by Jan Paulsson in “Liber Amicorum in honour of Robert Briner” ICC Publishing, International Chamber of Commerce 2006 at 601 (at page 616).]

All of these issues have been discussed in case law and contemporary literature, and I do not wish to explore this further except to point out one remaining line of argument which continues to be raised by arbitration guerrillas. This is to argue that the apparently mandatory requirements of an MTDR clause amount to a Condition Precedent which, if not strictly observed, would also nullify the filing of a Notice of Arbitration, because the Condition Precedent is one which, if not strictly observed, will result in any originating process being liable to challenge as being null and void (but see the case of CZQ and CZR v CZS discussed later).

Although a purist might wish to simply discuss the challenge to the Notice of Arbitration as not being a true jurisdictional challenge, citing the Jan Paulsson test described above, the order made by the Tribunal or the court upholding a Notice of Arbitration that does not comply with the MTDR's prescribed procedure should not be concerned with labelling the nature of the challenge, as such classification would serve no useful purpose (other than academic). [See “The Chimera of Admissibility in International Arbitration—And why we need to stop chasing it” by Michael Hwang in “Selected Essays on Dispute Resolution (SIAC 2018) at page 431 available for free download at www.mhwang.com.] What matters is that the Tribunal or court recognises the urgency of initiating a dispute resolution procedure as soon as possible that can deal with an immediate choice of process to kick-start the dispute resolution procedure. If there is no pressing demand for immediate holding measures that require an arbitral tribunal to be immediately appointed so as to be able to make orders for interim relief to hold the fort, that factor should lead to an arbitral tribunal's immediate appointment at least on an emergency basis so as to "hold the ring" and prevent any drastic (and possibly irrevocable) steps being taken so that the status quo can be maintained. Then the tribunal can decide whether or not mediation will and should take place if the period for which mediation can be completed within a reasonably short period (say 3 weeks), and if the mediation then fails, then the future arbitration process can take place. And even then, the tribunal can keep a watchful eye as to whether, as the story of the dispute develops, the tribunal can set up a reasonable opportunity for further settlement discussions, whether bilaterally or with the aid of a mediator. [ See Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416; DKH Retail Ltd v City Football Group Ltd [2024] EWHC 3231 (Ch).]

In the light of the recent common law authorities denying setting aside applications because of non-compliance with the MTDR clause, some arbitration guerrillas have taken to rely on the Condition Precedent argument, especially in Singapore which has been upheld by the Singapore Court of Appeal in International Research Corp PLC v Lufthansa Systems Asia Pacific Pte Ltd[ [2013] SGCA 55.] (although it is rumoured that this decision may be re-assessed by the Court of Appeal in the near future).

However, the Singapore International Commercial Court ("SI CC") has recently placed serious restrictions  against relying on this ground to attack a Notice of Arbitration. In the recent case of CZQ and CZRv CZS[ [2023] SGHC 16.], the SICC (by a bench of three distinguished Judges, including a former English High Court Judge) analysed the case law from Singapore on this topic thoroughly, and offered the following analysis.

(a) The doctrine of Condition Precedent is capable of requiring strict compliance before the main contract becomes capable of performance.

(b) However, the Court will adopt a strict construction of any alleged Condition Precedent, and will not readily find that the MTDR clause is indeed  a Condition Precedent so as to prevent the filing of a Notice of Arbitration if the so-called Condition Precedent has not been strictly observed.

So the case law is developing in a way which will likely defang attempts by arbitration guerrillas to insist on compliance with an MTDR clause when they would very likely not be able to demonstrate a true Condition Precedent, and such attempts are aimed at creating potholes in the road to prevent a speedy and efficient hearing in a court or Arbitral Tribunal to address the real source of the dispute between the parties.

So let me now turn to the heart of this issue. How do we respect both forms of dispute resolution and have collaboration between arbitration and mediation?

My central thesis is that we should give equal importance to both methods of dispute resolution. I set out below the ground rules for my proposed protocol to allow both methods to co-exist in the same MTDR.

The Hwang Protocol for reconciliation of Mediation v A rbitration options in an MTDR clause

1) Each side has the right to seek Arbitration or Mediation as a means of dispute resolution.

2) If an Arbitration has started, and the other party asks for Mediation, pause the Arbitration in favour of Mediation because Mediation takes a much shorter time to complete, so the stay can be for (say) 4 weeks then resume the Arbitration if Mediation proves unsuccessful.

3) If Mediation has started first, then it should be completed before any meaningful step is taken in progressing the Arbitration.

4) Exceptions:

If one party needs to start an Arbitration urgently because:-

(a) that party needs to apply for interim measures from a Tribunal, an Emergency Arbitrator or a Court; or

(b) that party needs to file a Notice of Arbitration to prevent its claim from being time-barred;

then the mediation should be paused so that:-

(c) A Notice of Arbitration can be filed (to prevent a time bar); but without any further steps being taken in the arbitration without the approval of the Tribunal, Emergency Arbitrator or the Court [I am grateful to Jern-Fei Ng KC for this useful qualification.]; or

(d) An application for an Interim Measures application can be filed, and the Tribunal or Emergency Arbitrator or Court (as the case may be) can decide whether the application for Interim Measures is so urgent that it needs to be heard first before the Mediation can be heard.

5) Both procedures can go on at the same time, but which procedure should be fast-tracked or prioritised is a decision for the Court or Tribunal or Emergency Arbitrator (as the case may be) hearing the application to strike out the Notice of Arbitration.

Let me share a personal experience where I was able to create a scenario for the possibility of how arbitration and mediation can be used as partners in dispute resolution. I was appointed by the Singapore International Arbitration Centre ("SIAC") as an Emergency Arbitrator where I (with the consent of all parties) ordered a standstill of an Interim Measures Application in favour of Mediation of a joint venture dispute. Both sides agreed that this standstill would mean certain freezing measures during the period when the mediation was progressing (e.g. no single party signing of cheques, no changing of bank signatories, no new corporate loans or encumbrances  being created over joint venture property). Almost a dozen consecutive standstill orders were made (by consent) over several months until ultimately settlement proved unsuccessful, and the hearing for interim measures was eventually restored for hearing resulting in certain emergency measures being eventually granted by me.

Ultimately, the multiple adjournments did not achieve a settlement, but I can say that the parties really tried hard to make a settlement possible (unfortunately, I have no news on who won the eventual arbitration or whether the parties eventually reached a settlement).

This balance between Arbitration and Mediation recognizes the importance of each method of dispute resolution so that they can work in harmony with each other.

WORKING TOWARDS A MODEL MTDR

I have put my money where my mouth is and have recently drafted a contract between my client and an architect for his contract of engagement to create a new house for my client, and persuaded him that this method of dispute resolution was fair to both parties. This model contractual clause is set out in the Schedule for study and discussion.

With some diffidence, I offer this as a possible model clause which adequately recognizes the value of both Arbitration and Mediation, and how we can provide a multi-ADR process that plays to the strength of both methods of Dispute Resolution.

DISPUTE RESOLUTION CLAUSE (see attached Model C lause) attached as Schedule A

But before we say "happy ending", we must understand the evil that we are seeking to eradicate. It is not to push Mediation into second place, but it is to prevent the abuse of an MTDR clause.

The situation to avoid is the following scenario.

(a) Parties are beyond mediation (at least for the moment), so that process would clearly be a waste of time at this stage of the dispute (without prejudice to revisit that process later).

(b) There has been an attempt to mediate, but not exactly in accordance with the MTDR-prescribed procedure.

(c) Then one party files a Notice of Arbitration, and the other party challenges it as a breach of the alleged Condition Precedent.

(d) The real aim of the guerrilla challenge is to strike out the Notice of Arbitration simply to gain a tactical victory, delay the arbitration and get a costs order which will:-

(a) demoralise the opposition and possibly lead the Claimant to re-think its forensic strategy;

(b) possibly even question the competence of its own legal team; and

(c) make clear that further guerrilla tactics might be forthcoming in this arbitration.

This is what we want to avoid.

My proposed Protocol is therefore as follows:

(a) It has clauses allowing both arbitration as well as mediation;

(b) Each side has the right to commence either process;

(c) Parties agree that the MTDR clause is not a Condition Precedent;

(d) If the Notice of Arbitration is filed and then a Notice for Mediation follows, the Notice of Arbitration will be paused, and the parties should mediate according to the requirements of the MTDR, so mediation takes priority; and

(e) If the mediation fails, then the Arbitration procedure resumes where it left off.

I have set out above the bare bones of the Dispute Resolution Clause which my client has now agreed with her architect, and

I suggest that this could be the basis of a Model Clause which

I will now take you through. It is based on using the relevant arbitration and mediation institutions in Singapore, but could easily be adapted for arbitration and mediation institutions in other countries.

I offer this Protocol for readers to consider for adoption, and look forward to receiving comments to further refine the drafting and possibly to suggest improvements in its concept as well as its drafting.

Model MTDR Clause

1. Notwithstanding the parties' agreement to refer any difference or dispute to arbitration and entitlement to refer any difference or dispute to mediation, the parties may agree to refer any difference or dispute to any mode of dispute resolution (and the terms of such reference) by consent.

2. Notwithstanding parties' agreement to refer any difference or dispute to arbitration, each party shall be entitled to refer the difference or dispute for mediation at the [Singapore Mediation Centre [("SMC")] in accordance with [SMC's] Mediation Procedure in force for the time being. Either party may submit a request to mediate to [SMC] upon which the other party will be bound to participate in the mediation within 14 days of receiving a copy of such request. Each party must be represented by senior executive personnel (or their equivalent), with authority to negotiate and settle the dispute. Unless otherwise agreed by the parties, the mediator(s) will be appointed by the [SMC]. The mediation will take place in [Singapore] in the English language and the parties agree to be bound by any settlement agreement reached.

3. Prior reference of the difference or dispute to mediation is not a condition precedent to the reference to arbitration and does not in any way prejudice or affect the rights of either party to refer the difference or dispute to arbitration.

4. Any difference or dispute between the Parties arising from or in connection with this Agreement (including any question regarding its existence, validity or termination), shall be referred to, and finally resolved by, ad hoc-arbitration governed by the rules of the [Singapore International Arbitration centre ("SIAC") ]to the extent applicable, disregarding all other provisions of the SIAC Rules 2025 which are not compatible with an ad hoc arbitration as provided by this Clause: The Arbitrator shall be:

(a) a person to be agreed upon between the parties; or

(b) (failing agreement within fourteen days (14 days) after either party has given to the other a written request to the appointment of an Arbitrator), a person to be nominated by the [President of the Law Society or other suitable party] at the request of either party. Both the appointment of the arbitrator and the arbitration proceedings shall be in accordance with the Arbitration Act 2001 (Cap 10, 2020 Rev Ed).

Footnote: The names of the institutions and legislation mentioned in square brackets in the above Protocol will obviously vary from jurisdiction to jurisdiction according to the wishes of the parties.