Mediation is one of the main forms of Alternate Dispute Resolution (ADR) and is becoming increasingly popular among commercial parties. The Centre for Effective Dispute Resolution’s (CEDR) 2014 Mediation Audit estimated that mediation grew by about 9 per cent in the previous 12 months. Cases totalled around 9,500 in 2014 compared to less than 2,000 in 2003.
Mediation has caught the attention of businesses looking for swift, flexible and cost effective solutions to commercial disagreements outside the courtroom. CEDR believes that out of £9bn in claims by value, £2.4bn of savings was made in management time, relationships, productivity and legal fees in 2014.
Whilst ADR includes a variety of different singular and hybrid processes such as conciliation, mediation, arbitration etc, it is mediation that is particularly attractive to parties who are apprehensive about the rigid and formal procedures of court proceedings. Arbitration clauses are also increasingly in vogue in commercial contracts but the binding nature of arbitration decisions imposed by a third party, with limited provisions of appeal and higher expense, are less attractive in many cases.
The process of mediation
Mediation involves the initiation of a mutually agreed process to address issues that have arisen between the parties in a less formal setting than litigation in court. It usually takes the form of individual and joint meetings in the presence of a neutral mediator. The process is usually swift and the mediation is usually agreed to be confidential such that the contents of the discussions cannot be later used in court if the mediation is unsuccessful.
As already noted the process is less formal than court proceedings and engaging legal representation is not a requirement, although it is common to have legal representation at a mediation. The mediator may be an expert in the concerned field and can address the day-to-day practical and commercial problems involved as opposed to highlighting legal positions and arguments.
During a mediation the parties will in general either agree a resolution of all or part of the dispute; agree to continue the settlement discussions with or without the assistance of the mediator, or agree that mediation is unlikely to resolve the dispute. It is commonly agreed that a mediation will not be binding unless and until a settlement agreement is reached. If a settlement agreement is reached it can take the form of an agreed Consent Order (if there are Court proceedings underway) or a settlement agreement which can be enforced by a court and is treated as any other contract. It is very important to make sure that the settlement agreement accurately reflects the agreement between the parties and is carefully drafted.
How is mediation consistent with commercial objectives?
Brief and concise - The process of mediation is usually relatively brief as well as concise and in general allows a greater focus on commercial outcomes than legalities. CEDR’s figures show that 75 per cent of cases settle on the day of mediation and 11 per cent shortly thereafter. This compares particularly favourably with court proceedings, where cases can go on for years before reaching a conclusion, owing to time-intensive trials and perhaps appeals.
Lower Costs - This is one of the paramount elements that may well make mediation a better business choice, as the amount of funds and resources consumed during mediation are in general small when compared to the costs involved in the traditional litigation system. Mediation also allows scope for agreeing how the costs are to be divided between parties, in contrast to the adversarial regime where one party is usually ordered to bear the majority of the costs.
Confidentiality - The entire process of mediation is usually agreed to be confidential, and therefore information revealed during the mediation cannot in general be used as evidence against the parties in future proceedings. This allows the parties to provide information to the mediator to allow them to comprehend the fundamental issues of the problem and allows parties to interact with candour among themselves and with the mediator. In addition, the mediator cannot in general divulge any information to the other parties without express permission.
Reinforcing Relationships - When commercial disputes are dragged to court, relationships can reach a cul-de-sac where the viability of future business between the parties is compromised. When contrasted with such relationship-rupturing procedures, mediation may offer scope to reinforce relationships because the negotiation process is flexible and allows commercial factors to come into play. This may well allow for creative solutions and avoid entrenching adversarial positions. Thus mediation can translate more easily into an arrangement where parties arrive at a mutually acceptable and beneficial agreement.
It is often a smart business choice to resolve disputes via mediation in order to avoid drawn out and expensive procedures that generally result in one losing party. ADR is actively encouraged through policy too - the courts can penalise parties with costs sanctions if they fail to take recourse to mediation in cases where it is applicable, see for example the case of PGF II SA OMFS Company 1 Limited . Thus traditional justice delivery systems and their users are increasingly embracing the practical considerations advanced by the process of mediation.