ICDPASO Commercial Arbitration Rules Interpretation SeriesArticle 34: Settlement, Mediation and Negotiation Facilitation

In the field of international commercial dispute resolution, parties today require not only professional adjudication but also flexible, efficient and enforceable amicable settlement mechanisms. The ICDPASO Arbitration Rules(the “Rules”) incorporate provisions integrating multiple dispute resolution approaches precisely to meet this need. Article 34, "Settlement, Mediation and Negotiation Facilitation," embodies this concept. It innovatively combines party-initiated settlement, institutional mediation and negotiation facilitation into an integrated framework, establishing an amicable resolution "toolbox" embedded within the arbitration process and accessible at any time. This provides parties with multiple options throughout the dispute resolution process and, through mechanisms such as "converting settlement agreements into awards," creates a channel for transforming amicable settlement results into legally binding and enforceable legal instruments, unifying efficiency and effectiveness.

I.Text of Article 34. “Settlement, Mediation and Negotiation Facilitation”

1.During the arbitration proceedings, the parties may take the initiative to reach a settlement on their dispute, apply for mediation to the Court of Mediation of the ICDPASO or other mediation institution recognized by the Court of Arbitration, or apply for negotiation facilitation to the Negotiation Facilitation Center for the ICDPASO.

2.If the parties reach a settlement agreement in accordance with the provisions of the preceding paragraph, they may request the Arbitral Tribunal to make an arbitration award/consent award or apply for withdrawal of the arbitration in accordance with the settlement agreement.

If the Arbitral Tribunal has not been formed, the Court of Arbitration may appoint a sole arbitrator to form an Arbitral Tribunal, which shall hear the case in accordance with the procedures it deems appropriate and make an arbitral award or a consent award; the specific procedures and time limit shall not be subject to other provisions of these Rules.

3.The Court of Arbitration or the Arbitral Tribunal may require the parties to make a declaration to ensure the lawfulness and authenticity of the settlement agreement and commercial activities related thereto, and not to damage the interests of a person other than involved in the case or the public interests.

4.If the Arbitral Tribunal has reasonable doubt about the lawfulness and authenticity of the settlement agreement, or believes that making an arbitral award or a consent award in accordance with the settlement agreement may damage the interests of a person other than involved in the case or the public interests, it may dismiss the request of the parties to make an arbitral award or a consent award in accordance with the settlement agreement.

II. Juridical Basis for "Combining Arbitration with Settlement, Mediation and Negotiation Facilitation"

The combination of arbitration with settlement, mediation and negotiation facilitation represents an integration of alternative dispute resolution mechanisms. It originates from the consensus arising from party autonomy and reflects the "party-centered" approach in alternative dispute resolution, which fully respects the parties' intentions. However, party autonomy is not unlimited. "Public interests" constitute one of its boundaries—party autonomy must not violate public interests. If the Arbitral Tribunal considers that the content of a settlement agreement might harm third-party interests or public interests, it may, by dismissing the application, refuse to convert the settlement agreement into an award through arbitration proceedings.

In practice, harm to third-party interests and violation of public interests are two core risks examined by the Arbitral Tribunal when reviewing settlement agreements, as detailed below:

Harm to Third-Party Interests refers to situations where a settlement agreement directly disposes of the property rights, legal status or lawful interests of a specific person not involved in the case, or imposes obligations on such person, without that third party's participation or consent. Common situations include, but are not limited to: the agreement disposes of real estate, equity or intellectual property rights registered in a third party's name, or creates security over a third party's property; the agreement stipulates that a third party assumes debts or guarantee obligations without the third party's signature confirmation; the agreement releases a debt owed by a third party unrelated to the case to one of the parties, harming that party's creditor rights; where a debtor is insolvent, the settlement confirms fictitious debts or grants priority repayment rights to unsecured debts, thereby diluting the recovery shares of other genuine creditors.

Violation of Public Interests refers to situations where the content of a settlement agreement conflicts with fundamental legal principles, core social values, public morality, public safety or national interests of a country or region. Common situations include, but are not limited to: circumventing mandatory legal provisions, such as using "property-for-debt" arrangements to avoid property purchase restriction policies; harming national tax interests, such as maliciously avoiding taxes through property division; disrupting market order, including content involving monopolies, unfair competition, illegal fundraising, money laundering or other illegal activities; endangering public safety and health, such as providing only symbolic compensation for environmental pollution while exempting remediation obligations; violating public morality, such as seriously harming the lawful rights and interests of vulnerable groups including workers and minors; endangering national security, such as involving state secrets.

Article 71(3) of the PRC Arbitration Law (revised 2025) provides: "If a people's court finds that the award violates public interests, it shall set it aside." The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) contains a similar provision in Article V(2): "Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that: (b) The recognition or enforcement of the award would be contrary to the public policy of that country."

III. Analysis of Core Features of Article 34

The ICDPASO Rules embed settlement procedures within the arbitration process through institutional design, creating a flexible framework for amicable dispute resolution.

(A) Article 34(1): Flexibility in Initiating Settlement

"During the arbitration proceedings" means that parties may initiate settlement procedures at any time from service of the notice of arbitration until before the award is made. The ICDPASO Rules provide multiple "settlement channels," including not only the common "party-initiated settlement" but also "application for mediation" and "application for negotiation facilitation."

"Application for mediation" refers to applying to the "Mediation Court or other mediation institution recognized by the Court of Arbitration." This differs from "mediation conducted by the Arbitral Tribunal" under Article 35. Under this provision, mediation is conducted by the ICDPASO Mediation Court or recognized mediation institutions, not by the Arbitral Tribunal. If conducted by the ICDPASO Mediation Court, mediation follows the ICDPASO Commercial Mediation Rules, with mediators drawn from the ICDPASO Panel of Mediators or other qualified persons.

This resembles the Arb-Med-Arb mechanism in international ADR practice. For example, the appendix to the SIAC Rules contains an agreement between SIAC and SIMC. This AIA Protocol provides parties with a structured Arb-Med-Arb dispute resolution mechanism, detailing the connection between arbitration and mediation. Mediation is conducted by independent mediators under separate mediation rules, not by the Arbitral Tribunal. The core concept is that parties may initiate arbitration, then transfer to mediation at an appropriate stage; if mediation succeeds, the settlement agreement can be converted into an enforceable arbitral award.

"Application for negotiation facilitation" means the ICDPASO Negotiation Facilitation Center acts as a neutral third party to assist parties in improving communication and clarifying issues. Unlike mediators or arbitrators, facilitators do not propose solutions or make decisions. Their role focuses on repairing negotiating relationships and laying foundations for early settlement. This marks the first time "negotiation facilitation" has been explicitly linked to arbitration proceedings in international arbitration rules.

In complex disputes involving multiple stakeholders and issues spanning economic, technical, social and environmental dimensions, where parties have failed to reach agreement through multiple rounds of negotiations and trust is extremely low due to serious disagreements, applying to ICDPASO for negotiation facilitation enables a neutral third party to break deadlocks and restart dialogue, improving dispute resolution efficiency. Additionally, the ICDPASO Prevention Experts Database provides critical professional support for negotiation facilitation, offering expert facilitators covering different industry sectors, ensuring neutrality and expertise.

(B) Article 34(2): Post-Settlement Options

After reaching settlement, parties may request the Arbitral Tribunal to make an "award" based on the settlement agreement. This is the most common approach. Once converted into an award, the settlement agreement gains wide recognition and enforcement under the New York Convention in over 170 contracting states, providing the strongest legal protection for settlement agreements, particularly in international commercial disputes requiring cross-border enforcement. Similar provisions for converting settlement agreements into awards exist in the UNCITRAL Rules①, ICC Rules②, LCIA Rules③, and SIAC Rules④.

If parties are long-term partners wishing to maintain relationships or have future cooperation possibilities, settlement agreements may also be converted into "consent awards" instead of awards. Article 64(2) of China's newly revised Arbitration Law provides: "Consent awards have the same legal effect as awards." Consent awards offer greater flexibility. Settlement agreements may contain commercial arrangements that cannot be implemented through awards, such as non-monetary obligations like confidentiality commitments or apology statements, or non-monetary performance methods like debt-for-property arrangements. These flexible terms can be fully incorporated into consent awards, which become effective upon signature and receipt by both parties.

To fully respect party autonomy, in addition to awards and consent awards, this provision reserves the option for "parties to apply for withdrawal of the arbitration case." For example, if a settlement agreement involves highly confidential commercial information and parties prefer that even the Arbitral Tribunal not know the specific content, they may prefer to "withdraw the case." Additionally, costs for case withdrawal are relatively lower.

"Party application for case withdrawal" is an innovation of the ICDPASO Arbitration Rules compared to other international commercial arbitration rules. Other rules typically provide for "Arbitral Tribunal order terminating proceedings" as the settlement resolution path. For instance, the UNCITRAL Rules provide that when parties reach settlement, the Arbitral Tribunal shall order termination of proceedings⑤; the LCIA Rules provide that upon written confirmation to the LCIA Court of final settlement, the Arbitral Tribunal shall be discharged and proceedings terminated⑥; the SIAC Rules also provide for termination by order of the Arbitral Tribunal or Registrar⑦. Compared to the authoritative conclusion of an "Arbitral Tribunal order terminating proceedings," "party application for withdrawal of the arbitration case" emphasizes party voluntariness and non-finality, reflecting parties' disposition of their procedural rights. Such withdrawal does not necessarily preclude future arbitration. This aligns with China's newly revised Arbitration Law, demonstrating the Rules' foresight. Article 62 provides: "After applying for arbitration, parties may settle disputes themselves. If a settlement agreement is reached, they may request the Arbitral Tribunal to make an award based on the settlement agreement, or withdraw the arbitration application." Article 63 provides: "If parties reach a settlement agreement and withdraw the arbitration application but later repudiate, they may apply for arbitration based on the arbitration agreement."

If settlement is reached before the Arbitral Tribunal is constituted, must the case go through the complete procedures of "Chapter 3 Arbitral Tribunal" before the settlement agreement can be reviewed and an award or consent award made? Article 34 provides a clear answer. The Court of Arbitration may appoint a sole arbitrator to form an Arbitral Tribunal, which shall proceed "in accordance with the procedures it deems appropriate," not subject to other provisions of these Rules. "Appropriate procedures" must at least satisfy minimum due process standards: giving both parties opportunities to present views and according equal procedural rights. Regarding specific procedures—such as whether hearings or evidence examination are required, or time limits for making awards—these need not follow the Rules' general provisions. The "sole arbitrator appointment" and "procedural flexibility" design is another innovation of the ICDPASO Commercial Arbitration Rules, significantly simplifying processes and reducing procedural barriers to party settlement, creating an efficient institutional arrangement.

(C) Articles 34(4) and (5): Settlement Must Not Harm Third-Party or Public Interests

Recent years have seen increasing cases where arbitration settlements harm third-party or public interests (such as bankruptcy creditors or consumer groups), attracting judicial and academic attention. ICDPASO proactively incorporated such risk prevention mechanisms into its Rules, directly responding to this global concern. Paragraphs 4 and 5 establish a two-tier progressive risk prevention system, escalating from light to heavy, ensuring measures match risk levels.

Paragraph 4 requires parties to declare the lawfulness and authenticity of the settlement agreement and related commercial activities. Its core purpose is preventing potential harm to third-party or public interests. Especially in early arbitration stages (before hearings, evidence submission or full debate), the Arbitral Tribunal cannot fully identify such risks. This declaration mechanism serves as preliminary procedural protection, using parties' formal commitments to compensate for limitations in early-stage review and providing a basis for potential future liability.

If Paragraph 4 embodies guiding principles, Paragraph 5 represents escalated risk levels. If the Arbitral Tribunal, after review, has "reasonable doubt" about the settlement agreement's lawfulness and authenticity, or considers issuing legal instruments might harm third-party or public interests, it may exercise veto power and dismiss the parties' request to make instruments.

"Reasonable doubt" means the Arbitral Tribunal, based on information, evidence and general experience gained during proceedings, considers that the settlement agreement or its underlying basis might violate laws or harm public interests. While not reaching "conclusive proof," it suffices to alert a prudent, professional arbitrator and warrant further action. It does not require the Arbitral Tribunal to possess conclusive evidence that harm will inevitably occur; reasonable, uneliminable doubts suffice. This serves as a "safety valve" above party autonomy, protecting more important legal order and public interests. It ensures that awards and consent awards based on settlement agreements not only reflect party consensus but also withstand lawfulness and legitimacy scrutiny. Note that dismissal here applies to the "request to make an award or consent award based on the settlement agreement," not the underlying arbitration claims. Therefore, it does not create res judicata effects regarding the legal relationship involved.

IV. Practical Advantages of Article 34

(A) Innovative Rules, Building "One-Stop" Dispute Resolution Service Framework

Article 34 pioneers the explicit integration of "negotiation facilitation" with international arbitration rules, forming a complete amicable dispute resolution chain together with settlement and mediation. This design moves beyond the traditional limitation of arbitration rules to adjudicatory functions, enabling ICDPASO to provide parties with "one-stop" services ranging from communication improvement and disagreement resolution to final adjudication. Parties need not switch between different institutions or procedures but may flexibly choose the most appropriate resolution method based on the evolution of the dispute, significantly enhancing overall dispute resolution efficiency and user experience.

(B) Innovative Procedural Conversion Mechanism, Unifying Party Autonomy and Efficiency

Article 34 designs highly flexible procedural conversion channels. Parties may not only initiate settlement, mediation or negotiation facilitation at any time, but after reaching settlement, may choose based on their needs to convert the agreement into an award, consent award, or directly withdraw the case. Particularly the mechanism for expedited handling by a sole arbitrator under "appropriate procedures" when settlement is reached before tribunal constitution represents innovative simplification of traditional arbitration procedures, fully reflecting the ICDPASO Rules' advanced concept of pursuing procedural efficiency while respecting party autonomy.

(C) Granting Enforcement Effect to Settlement Agreements, Overcoming "Settlement Without Resolution" Dilemma

Settlement agreements reached by parties can be converted into arbitral awards under the Rules, thereby gaining cross-border enforceability under the New York Convention. This is particularly important for international commercial disputes. This mechanism elevates contractual consensus between parties to judicially enforceable instruments, effectively preventing agreement frustration through subsequent repudiation, providing solid institutional safeguards for parties choosing amicable resolution methods.

(D) Two-Tier Risk Prevention System, Balancing Party Autonomy and Public Interests

Article 34 establishes a two-tier risk prevention system comprising "declaration guarantee" and "review and dismissal." This mechanism fully respects parties' procedural autonomy while ensuring the Arbitral Tribunal can conduct necessary review of consensus that might harm third-party or public interests, encouraging settlement while preventing system abuse. This forward-looking balance between party autonomy and public interests demonstrates the ICDPASO Rules system's maturity and social responsibility, effectively enhancing award credibility and enforceability.

V. Conclusion: Creating a New "One-Stop" Dispute Resolution Paradigm, Leading Innovation in International Arbitration Rules

The fundamental innovation of ICDPASO Rules Article 34—"Combining Arbitration with Settlement, Mediation and Negotiation Facilitation"—lies in creating a party-centered, flexible and safeguarded "one-stop" dispute resolution paradigm. By integrating negotiation facilitation, mediation and arbitration procedures, these Rules transcend the traditional limitation of arbitration institutions to single adjudicatory functions, achieving a conceptual upgrade from "dispute adjudication" to "dispute governance." Its innovative procedural conversion mechanisms, institutional design granting settlement agreements cross-border enforceability, and two-tier prevention system balancing party autonomy and public interests not only provide parties with comprehensive and efficient dispute resolution solutions but also represent an important trend in international commercial arbitration rules evolving toward more open, intelligent and responsible directions.