Mediation - Is it the answer for my business?

11 May 2006

Mediation - Is it the answer for my business?

In the past, when faced with a dispute, those involved have been advised to resolve their differences through the courts. That is, after all, what they are there for. Whilst very many may like the idea of having their day in court, the realities of litigation, both practical and commercial, are very often dissuasive. Litigation can be expensive both financially and in terms of time. It is very unusual for a business relationship to be preserved once the parties have embarked on a court battle and for both sides to a dispute, no matter how strong their case appears, litigation involves an element of risk.

All of these factors have collectively led to a move away from the courts towards alternative dispute resolution or “ADR”. ADR can take any number of forms, relatively informal discussions between solicitors, meetings with all parties and their lawyers, relatively formal arbitrations or, the form currently being encouraged by the courts, mediation.

Mediation will not be the answer in every situation but it does have some benefits over litigation.

What’s so good about mediation?

Mediation can be arranged quickly and can, if the parties reach agreement, bring a dispute to a conclusion within days or weeks as opposed to months or years. This avoids the parties ‘festering’ and allows businesses to get on with pursuing their commercial interests instead of tying their resources up in matters which should be historical. Whilst mediation is informal when compared with the formalities of court procedures, it is still a definite forum for discussions which means that the parties are focussed on trying to resolve their differences. The organisation, investment in preparation and involvement of a third party, all mean that the matter does not “drift” as it may do in the absence of an arranged date, time and location.

How is a mediator selected? Can I choose?

The disputing parties usually jointly select, often with the assistance of their lawyers, a mediator with expertise appropriate to the dispute. Typically, one party will put forward three alternatives, and the other party will select one of those three. Litigation will always be resolved by a judge, a lawyer. Depending on the nature of the dispute, a mediator from another profession or walk of life may be more aptly qualified to steer the parties towards an agreement. For example, in a building dispute the parties may chose to call upon a surveyor who is qualified to mediate. He will bring building expertise and experience to the dispute and may be in a position to be more inventive so far as suggesting solutions is concerned. When given the details of the nature of the dispute, mediation agencies can provide CV’s for mediators with specific backgrounds.

What happens on the day of the mediation?

Usually an entire day is set aside for the purposes of a mediation. For a dispute involving two parties, the mediator will usually require there to be three rooms available, one for the mediator and one for each of the parties and their representatives. There is no requirement that lawyers attend although, very often, if the dispute has been referred to a mediation, solicitors will already be involved and are often present to steer the parties through the process.

Each mediator will set his or her own procedure, although it is normal for there to be an opening session in which both parties, in the presence of the mediator, express their side of the story. This gives disputing parties the opportunity to get their point across in informal and unthreatening surroundings, an opportunity which is rare in the context of court proceedings.

After the initial session, the disputing parties will return to separate rooms and the mediator will spend time with one party alone, and then the other. A technique often used by mediators to help the parties reach agreement is to point out privately to each the weaknesses of their case. He or she will also suggest compromises and endeavour to persuade each to see the other’s point of view. As the day goes on, the gap between the feuding parties should reduce until hopefully agreement is reached.

Until a final agreement is reached, the process is not binding. However, if an agreement is reached, written record of that agreement will be signed by the parties and will be binding like any other contract.

Who pays the costs of the mediation?

There will be some costs if the parties to a dispute wish to mediate. There will usually be a charge for the mediator’s time on the day and, unless one of the parties can provide the necessary three rooms free of charge, there may be a venue charge. These charges are usually split between the parties equally in the first instance. Those costs might also be discussed at the subsequent mediation and payment of them may be a condition of any agreement reached. In addition, if solicitors attend, their charges will also be incurred, again, these may fall to be dealt with in any agreement reached.

What if I don’t want to mediate or if it doesn’t work?

Mediation is an entirely voluntary process. No-one can be ‘forced’ to mediate and the mediator has no power over the parties other than that given to him or her by the parties themselves in the mediation agreement. This means that the parties remain in control, whereas at trial, the parties place their dispute in the hands of a judge who has the power to impose a binding decision on them. Whilst judges have wide powers to grant different remedies, their hands are tied by rules and case law. At a mediation, the parties can come up with novel solutions personal to their own situations and business interests.

It is now common for mediation and litigation to co-exist in the lifetime of a dispute. If a party has decided to issue court proceedings, both the court rules governing the conduct of the case and the judiciary are persuasive of the parties considering mediation. If one party suggests a mediation and the other declines the court may penalise a party for unreasonably refusing to try to reach a compromise. It can do this by making a costs order against the unreasonable party. The mediation is usually embarked upon ‘without prejudice’, this legal terms means that nothing that the disputing parties say in the course of the mediation can later be used against them in the ongoing or pending legal proceedings. If an agreement is reached, all well and good, but If no deal is agreed, both parties can go back to their corners no worse off for having tried.

Will mediation always be the best way forward?

Mediation will not always be the answer but in many situations it will be a very sensible option. There is no point in a mediation unless both parties are willing to compromise to some degree. Sometimes parties will already have tried to settle their dispute and are not willing to make any further concessions. In those circumstances litigation is necessary as a last resort. Sometimes urgent court intervention is needed to protect commercial interests and only formal court orders or injunctions will do, but most claims for damages will be suitable for mediation.

Sometimes the question is not whether the parties should mediate but whether it is the right time to mediate. Tactically, a party may be better advised to wait for court proceedings to get to a certain stage before agreeing to mediate. This may be because certain documentation has not been disclosed, vital evidence not yet obtained or because certain issues in those proceedings should be decided before talking about financial matters.

Whether it be through mediation or litigation, a party still wants a good result. This means that significant and complex cases must still be properly prepared.

Are all the litigators going soft?

Definitely not! But you will find that lawyers advising in today’s legal and business environment have had to adopt a more sophisticated approach to resolving disputes, recognising which issues should be conceded and when, in their clients’ best interests. Picking your battles with care is essential, everyone prefers being on the winning team.

For more information contact George Crofton-Martin.

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