Commercial disputes: what is mediation?

With the Courts steadily putting increasing emphasis on parties mediating, it is reasonable to ask, what is exactly is mediation in the context of commercial disputes?

Mediation is a form of alternative dispute resolution which can be used as a means to resolve any dispute, from straight-forward two-party disputes to complex, multi-layered and multi-party matters.

Mediation is about bringing the parties together to find a commercial resolution to their dispute rather than relying on the adversarial nature of litigation.

Mediators – who they are and what they do

Once the parties have agreed to mediate, the first order of business is to appoint a mediator. Mediators are independent trained professionals who will work with each party to guide them towards a resolution. Often mediators have backgrounds as solicitors, barristers or in other professions which are relevant to the type of cases they mediate e.g. accountants, quantity surveyors or land surveyors.

The mediator’s independence from either party is paramount, as it allows them to take a step back from what are usually highly charged situations and from the minutiae of the case, providing a space for commercial offers and settlements to be put forward.  They are there to work with both parties impartially and will therefore not take sides. Nor will they rule on your case as a judge would. Most will not even offer an opinion as to its merits or those of the defence.

Whilst each mediator has their own style and approach, it is likely that they will highlight privately to each party the weaknesses in their own case, in place of offering an opinion on the merits.

Be prepared

The most crucial preparation for a mediation, is to make a realistic assessment of what you want to achieve. The key to successful mediation is to divorce yourself from the events that lead to the dispute, who said what and when, and instead focus on what you want to get out of the resolution – whether this is a monetary goal or more commercial in nature. Take a good look at the numbers and produce your best, middling, and worst (but still acceptable) outcomes. This will allow you to look at offers a little more dispassionately and not get caught up in the drama and tension.

Before the recent rise to prominence of mediation, the mediator would ask each party to produce a short mediation position statement setting out their case/defence. These documents were then exchanged with the other side prior to the mediation. However, this exchange of position statements is gradually falling out of favour, as it leans too heavily towards the adversarial mindset of litigation, when the aim of mediation is resolution not necessarily winning and losing.

Now, often the mediator will instead ask the parties to provide them with a confidential statement (i.e. not to be shared with the other side), which sets out their position and goals for the mediation. The mediator can then use these confidential statements to assist them in working with the parties on the day to reach resolution.

What happens during mediation

Mediations usually follow a basic pattern, however this is only a guideline and depending on the needs of the parties the structure of the day can be changed. Unlike court proceedings, a mediation is more informal and less rigid in structure.

Initially, the mediator will briefly speak to each party separately, along with their legal representatives. They will set out what a mediation is, their role in it and perhaps provide some tips on how to make the most of the mediation. They will also likely ask the parties to consider their position and how they want the day to unfold. The mediator may ask whether the parties want an opportunity for everyone to sit down together round a table and make quasi-opening statements. In this situation each party gets the opportunity to put their point across. However, it can also put barriers in the way of resolution and settlement. Therefore, much like the position statements, this practice is falling out of favour as often all it achieves is riling tempers.

After the first meeting and subsequent to any group roundtable discussion (if there is to be one), the mediator will then spend a longer period of time with each party individually. The aim of this is to get their view on the issues and encourage the parties to examine their best-case scenario, worst case scenario and their bottom line i.e. what would they be happy to walk out having agreed to. Everything discussed with the mediator is confidential, the mediator will not reveal anything a party says to the other parties without express permission.

Once the mediator has an understanding of the relative position of the parties, they will then shuttle between them in their separate rooms, encouraging each party to consider making a settlement offer and taking those to the other side. All the while providing each party with commercial insight, allowing the mediator to cut to the heart of the matter and facilitate settlement.

Finally, if an offer is made and accepted, the parties’ legal representative will draw up a settlement agreement for everyone to sign before leaving.

FAQs about mediation

Is mediation confidential?

Yes, everything discussed at a mediation is completely confidential. If no settlement is reached, one party cannot tell the judge what offers were made or concession granted at a mediation.

A court may, in rare circumstances, go behind a mediation agreement and hear evidence on what happened at the mediation, if the settlement agreement is not clear enough. This usually only comes into play where a matter has settled at mediation and one party breaches the mediation settlement agreement, resulting in further litigation

Do we have to settle at mediation?

No, whilst settlement is clearly the goal of mediation, you are under no obligation to settle or accept any offer made by the other parties. Mediation is voluntary, the mediator has no power to keep anyone there if they wish to leave.

How long does the mediation process last?

Mediations are usually conducted in one session. It is unlikely that a mediation will take place over more than one day, but it is possible where a matter is very complex and has multiple parties. However, the length of the session depends very much on the parties and issues at stake. As a rule of thumb mediation usually lasts a full day but can run to as long as 14 hours.

If you have a dispute that you think may benefit from mediation, please contact a member of our highly experienced Dispute Resolution Team.