The Settlement Privilege: A General Principle of International ADR Law

Abstract

IT HAS been said that the settlement of a dispute dirough agreement of the parties ‘is of the essence of the spirit of arbitration’.1 Sometimes, however, these settlement talks, conducted prior to or during the arbitration with or without the assistance of a third neutral, fail for whatever reasons and the arbitration commences or continues. In such a scenario, a party may feel inclined to introduce into the subsequent arbitration procedure views, admissions, proposals, suggestions, indications of readiness to accept a certain proposal for settlement, made in writing or orally by the other side during the settlement negotiations. That side will object to such an undertaking. It will argue that its statements made during settlement negotiations or ADR proceedings to bring about a settlement agreement between the parties to the dispute should not be admitted as evidence in the subsequent arbitration because they are privileged. The party’s position that the tribunal must reject the motion to produce such evidence will be based on article 9(2)(b) of the IBA Rules2 which provides that the tribunal shall exclude evidence if it is privileged ‘under the legal or ethical rules determined by the Arbitral Tribunal to be applicable’. While in many cases, the law applicable to such a privilege objection must be determined by classical conflict of laws analysis,3 the situation is different with respect to the settlement privilege. Here, a transnational privilege exists which protects settlement negotiations both with and without the presence of a third neutral. ### (a) The Transnational Rule There is a unanimous view today in international ADR and arbitration practice that a general mediation privilege exists which renders all evidence, whether written or oral, stemming from mediation, conciliation and similar ADR processes between the parties inadmissible as evidence in subsequent arbitration proceedings.4 The privilege follows from the notion of …