What is Commercial Mediation?
Mediation is a method of dispute resolution whereby a neutral third party Mediator assists the parties to work towards a negotiated settlement of their dispute. The overriding purpose is to reach an early lasting settlement, avoiding the time, cost and general disruption that tends to be caused in conventional court proceedings.
The Mediator is exclusively responsible for setting the process, which is designed to encourage the parties to examine a wider range of issues beyond pure legal arguments, to prioritise between the issues and to create solutions that are workable. Frequently impasse has caused a dispute to escalate and the intervention of the Mediator can help to change the dynamics and overcome deadlock for instance through discussion and brainstorming of options.
The Mediation process tends to be more flexible than traditional court proceedings because the parties have greater control over their destiny. At present the process is voluntary and confidentiality is maintained throughout, which means that the dissemination of any commercially sensitive material (including the terms of settlement itself) can be controlled.
The role of the Mediator is not to make any determination of conflicting evidence or of legal principles, but is purely facilitative to put in place a structure to help the parties work towards a settlement.
- The parties either through their lawyers or directly between themselves will agree to jointly appoint a Mediator. The Mediator will be entirely independent of either party. The Mediator will not advise either party as to its position, nor will the Mediator adjudicate or make any decision in relation to the dispute which is binding on the parties. Mediation is an entirely voluntary process and remains so until such time as a binding settlement is reached.
- The parties will sign a Mediation Agreement, governing the conduct of the Mediation including for instance confirming that all discussions and documents used in the Mediation will be are treated as confidential and "without prejudice" and will not be used in later proceedings if the mediation does not settle. The parties will then fix a time for the Mediation to take place, which can, but does not have to include legal representatives (for instance if the parties are suitably experienced and/or want to save the expense of legal representation).
- The costs of the appointment of the Mediator are paid in advance of the Mediation and are normally shared equally between the parties, as are the costs of room hire and refreshments.
- Before the Mediation, the Mediator will speak to the parties and agree what papers are to be available on the day and agree any other relevant arrangements. This is to help make best use of the available time at Mediation and to ensure that the parties understand their responsibilities.
- The parties (including everyone with authority to settle the dispute) will attend an agreed venue for the Mediation. The Mediator will invite the parties to make an opening statement to each other (this tends to be read from a script) and in this statement give its perspective on the dispute and highlighting points of particular concern. The parties will then break out into separate meeting rooms to hold a series of confidential meetings with the Mediator.
- The opening joint session is optional, and at the discretion of the Mediator, and may be left out if there are strong reasons why the parties cannot meet face to face, but in general terms it is possible that the next time that the parties will meet face to face will be to sign a settlement agreement or where the Mediator finds it necessary to close the process because the parties are simply too far apart and the deadlock cannot be broken.
- In the separate meetings, the Mediator will work with each party in turn in order to discuss the problem. These discussions are entirely confidential, and this encourages the parties to be frank with the Mediator with total confidence that any weaknesses or private concerns that they may have will be not be communicated to the other party, and with this spirit of openness, the Mediator can help each party to have a critical and realistic examination of their case in private session, helping each party in their understanding of the strengths and weaknesses of their position, as well as the potential for loss, expense, time, distraction and uncertain court outcomes.
- During the course of the private meetings information may emerge which the Mediator may consider would be helpful to disclose to the other party in order to move the matter forward to settlement. The Mediator will first ask for the express authority of the party to disclose such fact, and this may help the parties to build a better understanding as to the root causes of the dispute.
- The process will continue until either it reaches a settlement, either party decides to withdraw, or where it is clear to the Mediator that any impasse cannot be broken.
- If a settlement is reached, a binding agreement will be drawn up that will be signed by the parties in a final joint session.
It is often said that Mediation produces win-win solutions. Here are some of the reasons why Mediation is preferable to Court proceedings:-
- Timing A Mediation can generally be organised within a matter of weeks; Court Proceedings can take years. A Mediation can be held before Court proceedings are commenced or before a dispute has escalated out of control.
- Cost A Mediation generally involves preparation of a few days plus up to a day for the Mediation itself. Court proceedings are renowned for a significant cost outlay.
- Confidentiality A Mediation is entirely confidential, and the parties can agree to keep the outcome confidential and so avoid setting unhelpful precedents. Court proceedings are in general conducted in the public spotlight unless the Court orders otherwise.
- Stress Court proceedings can be stressful and time consuming. Mediation is more informal, and the Mediator will attempt to redress any imbalance between the parties to ensure that a party who is unfamiliar with dispute resolution procedures is on an even footing with a more seasoned litigator.
- Flexibility and stronger outcomes A Mediation traditionally will produce an outcome for both parties that is win-win. Court proceedings tend to produce either a win-lose (where there is only one winner) or lose-lose outcome (where neither party comes away with a positive result). A win-win solution makes it easier to preserve good working relationships between the parties or alternatively it can make the termination of relationships more amicable. A settlement can for example include provision for public statements or an apology, but for instance in a professional negligence claim, in a way that enables a professional reputation to remain intact. It can also lead to agreed structured payment terms, or the restructuring or renegotiation of an existing contract, or wider business activity between the parties.
- Settlement The vast majority of mediations produce a settlement where the parties are genuinely committed to the process. If they do not settle, sometimes the effect of the Mediation is act as a catalyst for the dispute to resolve shortly afterwards.
Mediation can be used in almost any kind of dispute except cases where there are allegations of fraud or criminal conduct.
These could include:-
- Commercial contracts
- Building and Construction
- Boundary and neighbour disputes
- Commercial Property disputes between Landlord & Tenant such as Rent Reviews, Dilapidations, or disputes in the terms of a new or existing lease
- Partnership and Shareholder disputes
- Professional negligence
The short answer is that it is not a sign of weakness. In fact it is quite the reverse. Experienced business people tend to have a clear focus on what they want to achieve for their business and the dispute must be seen in that context.
Most parties to litigation are not professional litigants, and are involved in it simply because they have considered that there is no reasonable alternative. However litigation can be uncertain and early resolution of a dispute through Mediation makes good business sense, particularly with the added control that the parties have over the outcome.
Mediation also enables the parties not to become side tracked in costly and time consuming litigation and instead to focus on driving their business forward in an increasingly competitive business environment.
In proposing Mediation, the parties are merely following good business practice, and are doing what is required of them by the rules of Court, which require the parties to consider whether the dispute may be capable of mediation.
Mark Walkington is a Partner who specialises in Commercial Business Services with almost 20 years' of experience in dispute resolution. He is an accredited Civil and Commercial Mediator through a leading national and international authority in Mediation.
Mark will mediate disputes primarily in London and the South East of England, but will also mediate where required throughout the UK, Ireland, or abroad where for instance a contract is governed by the laws of England. The venue for the Mediation will be agreed between the parties.