Mediation Vs Arbitration Benefits

You are a trainee at the law firm, Price Prior, and you have just received the following instructions from Raphael (your supervisor): I have just received an email from Hugo Groot, the Managing Director of one of our established clients, Tou-Waskler bv (‘Tou’). Tou is a limited liability company based in Holland. It owns thirty-seven retail megastores in Northen Europe. It sells city, mountain and touring bicycles as well as cycling accessories. Tou is currently in dispute with one of its main suppliers, an Indian bicycle manufacturer, Hava-Spiral Private Limited Company (‘Hava’). Hava is known for its precision engineering and has been supplying Tou with several city bicycle models since *. Please review (a) Hugo’s email and (b) the excerpt of Tou’s agreement with Hava (both of which can be found below). You should then use your skills of critical analysis to respond to the questions and/or issues raised by Hugo. Please note that Hugo is not a lawyer and you should explain any legal terminology in clear language. Kind regards, Raphael (a) Email from Hugo Groot, Managing Director of Tou-Waskler bv: Dear Raphael, I trust you are keeping well. We look forward to seeing you at our head office next month. In the meantime, I’m hoping you could give me some preliminary advice regarding a dispute we’re having with Hava. We really don’t want to lose Hava as a supplier because its bikes are excellent value for money. However, their quality control manager is being totally unreasonable in relation to a faulty component of its new electric e-FXPZZ model. We purchased five hundred of these electric city bikes in October * and, whilst awaiting delivery in December, we launched a massive promotional campaign in London. Unfortunately, customer complaints started coming in within days of the first sales. Inexplicably, the belt drive on the new model was tearing or suddenly snapping. The belt drive is a relatively new technology which replaces the traditional bicycle chain in the drivetrain. It is supposed to be more durable and easier to maintain. Hava gets its belts from a reputable Japanese manufacturer called Besketel. This particular belt is supposed to last for * to * thousand miles. One of our in-house mechanics examined a number of belts, both new and damaged. She suspects that an inferior grade of rubber has been used in the manufacture of the belts. Fortunately, we only launched the e-FXPZZ model in two stores, both in the UK. In light of the recommendations of our in-house mechanic, our sales team contacted all purchasers of the defective model to recall the bicycles. Despite offering a full refund and a *% discount off an alternative model, there are mounting negative comments about the issue on social media. We are concerned about the damage these faulty bicycles have already done to our reputation. Our Head of Contracts sent a copy of our mechanic’s report to the Director of Quality Control at Hava on 8th December *. Hava replied that a mechanic does not have the expertise or equipment to evaluate the quality of the drive belts. Despite various exchanges of emails since then, Hava maintains that the belts are not defective. It alleges that the tearing and snapping incidents have occurred due to failure to maintain the correct tension on the belts by us and/or our customers. Whilst it is possible to alter the tension of the belts, most of the failures have occurred within the first few days of purchase. We test all belts immediately prior to sale to ensure the belts are under the recommended tension, so it seems highly unlikely that incorrect tension is the cause of the tearing or snapping of the belts. Unfortunately, with all the wet weather in the UK, our sales have been disappointing during the Autumn and Winter months. It is, therefore, crucial that we settle this dispute with Hava as quickly and cheaply as possible. We wish to minimise adverse publicity too. I have had a look at our agreement with Hava. It’s the first time I’ve read though the whole document properly and I now have a number of questions: *. The Dispute Resolution clause refers to mediation. I am familiar with the process, although I doubt whether mediation will resolve this particular dispute. It is more likely to be a waste of time and money. Do we have to mediate and do you consider that mediation offers any advantages over arbitration? *. If mediation does not resolve all the issues within the time limit in Paragraph * of the agreement, we will want to proceed with arbitration as quickly as possible. Please explain precisely what we need to do to get arbitration under way quickly, including the contents of any communications. *. Which laws apply to the arbitration? *. I think it might be sensible to appoint a mediator who is also experienced in arbitration. What do you consider are the pros and cons of a mediator subsequently acting as arbitrator? *. Unlike the mediation proceedings, the language of the arbitration is not specified. We want to avoid translation / interpreter fees. How will the language be chosen if we can’t agree with Hava? *. As we suspect an inferior grade of rubber has been used in the manufacture of the drive belts, would it be appropriate and, indeed, possible to join Besketel into any future arbitration by making it a second respondent in the proceedings? *. I have heard that it can be cost-effective to ‘bifurcate’ (i.e. split) the proceedings into separate phases, concluding one issue before examining another. How would this work and could it be appropriate in this case? *. Can you suggest any other ways to minimise the length and costs of arbitration? *. I have been warned that the Indian and Dutch legal systems have evolved from different legal traditions (‘common law’ and ‘civil law’ respectively). Apparently, this may cause a disparity of approach from the parties’ lawyers. Could you explain the alternative approaches in relation to documentary and witness evidence, and how they can be reconciled in the arbitration proceedings? *. Unfortunately, the in-house mechanic who originally examined the damaged belts has been dismissed for gross misconduct. Are we able to force her to give evidence at any future hearing, and what are the pros and cons of doing that? *. Will the decision of the arbitrator be made public? *. If the arbitrator finds in our favour, how will monetary compensation be calculated and can we get interest on the amount due? I look forward to hearing from you shortly. It’s quite urgent. Kind regards, Hugo Hugo Groot Managing Director of Tou-Waskler bv   (b) Excerpt of Agreement between Tou-Waskler bv and Hava-Spiral Private Limited Company: J. Dispute Resolution Paragraph *. In the event of any dispute or claim arising from or in connection with this Agreement, the Parties agree to use their best efforts to settle the matter through mediation. Paragraph *. If the Parties do not concur on the appointment of a mediator within fourteen days, either party may request the current President or Vice-President of the Chartered Institute of Arbitrators to appoint a mediator. The mediation shall be conducted in English. Paragraph *. If all claims or disputes are not fully resolved by mediation within 30 days of its commencement, then either Party may commence arbitration by giving notice to the other party in accordance with the applicable arbitral rules. Paragraph *. A single arbitrator will conduct such arbitration in accordance with the UNCITRAL Arbitration Rules (*). The seat of arbitration shall be London. Paragraph *. The arbitration agreement shall be governed by laws of England and Wales. Paragraph *. Any award rendered by the arbitral tribunal shall be final and binding. The parties hereby waive their right to any form of recourse against an award to any court or other competent authority, insofar as such waiver can validly be made under the applicable law. […] P. Applicable Law Paragraph *. All disputes or claims arising from or in connection with this Agreement shall be settled in accordance with the provisions of this Agreement regarding its performance, in accordance with the substantive laws of England and Wales.