An Introduction to Mediation: a better alternative?
Despite best efforts, sometimes litigation is just unavoidable. Issues can arise between commercial organisations or between individuals which simply cannot be resolved. Add to the mix personalities, ego, stubbornness and a desire for some litigants to “have their day in Court” the outcome is often lengthy, expensive, uncertain and highly personal litigation.
An alternative to court?
Mediation has been well used and developed and is now a popular alternative. Whilst traditionally used in family law proceedings, mediation is now common-place in civil litigation. Mediation has gradually taken on much more of an important role in commercial disputes, not only because it provides a forum for parties to settle their differences but because the essential nature of mediation means that parties can often achieve outcomes which are simply not possible in front of the Court. Parties sometimes struggle to grapple with the concept that no matter how vindicated their legal position is, no Judge, in commercial cases, can order the other side to make a full apology or to admit that they were incorrect from the outset or behaved reprehensibly.
What is Commercial Mediation?
Mediation is voluntary and a confidential way of resolving disputes. An independent qualified third party (usually a barrister, solicitor or other suitably qualified professional mediator) is jointly appointed by both parties.
Where does it take place?
Mediations traditionally last for one day and either take place at one of the party’s lawyers’ offices or in a neutral venue should the venue itself become a bone of contention.
How long does mediation last?
The parties attend on the day and whilst the mediator has no decision making capability, as a neutral third party, their job is to “test” each respective parties’ case throughout the course of the mediation and to convince each party of the benefits of a negotiated settlement. Perhaps, most importantly, a good mediator should focus the parties’ minds (with the lawyer’s assistance) about the downside if an agreement is not reached on the day and the matter proceeds through the courts – a sobering thought for litigants when they hear this from a third party with no axe to grind.
What is a mediator like?
If sensibly selected by both parties having regard to areas of expertise and experience, the mediator should be someone who can remain impartial throughout, does not provide any advice to either of the parties, can act as an intermediary between them and most importantly act as a facilitator in the negotiations to make sure that the mediation is as effective as possible – it is shuttle diplomacy at its best.
There are many reasons why parties should mediate but lots of reasons why no one wants to be the first one to suggest it. When mediation was less en-vogue, parties were reluctant to be the one to suggest mediation for fear of looking weak. These days, with the Court Rules Practice Direction on Pre-action Conduct at the forefront of every case, parties are required to set out at a very early stage their position with regard to mediation or alternative dispute resolution. Whilst lawyers may craft the language of letters of claim in careful terms, there should be a reference to the parties exploring alternative dispute resolution before either one goes near a Court room or pays an expensive Court fee for the privilege.
What are the positives of mediation?
The benefits of mediation include helping the parties work through a deadlock situation and understand each other’s position better, allowing each party to speak openly and without fear in a without prejudice and completely confidential forum. It gives the opportunity to genuinely try to put the past behind them and find a solution that everyone can live with.
Mediation can produce outcomes that might not be possible via determination by the Court. Often parties can talk about a new form of agreement going forward between them if, for example, an old commercial arrangement has fallen apart and that existing arrangement has to be terminated and a new relationship forged for the future.
Mediation has also been an increasingly useful tool in keeping very public and possibly damaging disputes out of the public eye as the process is confidential.
The overwhelming advantage of mediation is that there are almost no formal rules. Whilst, of course, parties are expected to behave responsibly, professionally and courteously at all times and the mediator will strictly enforce a code of good behaviour; the usual constraints the parties are bound by in Court proceedings do not apply. This can be critical where parties are encouraged to talk to each other rather than just sitting and observing the other being subject to lengthy cross examination at trial. Mediation allows parties to freely express their views in a controlled and supervised environment.
Why is mediation better than the court route?
As mediation is voluntary and no agreement is concluded until it is then put into writing, if mediation is unsuccessful time and costs are added to the process of resolving the dispute.
However, our experience is that even where a mediation on the day is unsuccessful in resolving the dispute, very often cases are resolved swiftly thereafter when the parties have had time to reflect, re-assess the substantial length of time and costs that are going to be incurred going forward and then may take a more pragmatic view to resolving their dispute.
We have seen no downside in going to mediation provided that the dispute is one which is capable of being settled by way of sensible negotiation and the timing is right – as the old saying goes “everything is negotiable”.
Who pays the costs?
Whilst this is very much for agreement between the parties, the usual approach is that the parties’ agree to share the mediator’s fees and expenses and bear their own legal costs for preparing for and attending the mediation.
How does the court react to a refusal to mediation or failed mediation?
Each trial Judge adopts a slightly different approach. All of them may well raise at one point during the course of the proceedings whether the parties have considered some form of alternative dispute resolution. If the answer is a resounding “no” then the Judge will want to know why. More common are instances where matters fight to a conclusion and one party raises with the Court the fact that the other party did not take up an offer of mediation or simply refused to engage in any kind of discussion about alternative dispute resolution. Judges can take a dim view and impose cost penalties, no matter who has won the case if such a refusal is revealed.
Judges will usually be satisfied to know that the parties have attempted mediation but will not be interested in whether the mediation was unsuccessful or how a party behaved during the course of the mediation.
The reality is, however, that any party who unreasonably refuses to consider mediation is very likely to end up being penalised when it comes to the costs of the proceedings being determined by the Court so it is an essential consideration.
What we advise
We advise our clients to suit their own individual needs. Each case that we take on has a bespoke strategy developed with our client. We always raise the prospect of mediation at the outset and at appropriate stages throughout a case.
In the last 2 years alone, Hamlins has successfully been involved in over 25 mediations. The vast proportion of those mediations either end up with a settlement on the day or settle shortly thereafter. It has proved very successful for our clients.
There are, of course, cases which simply cannot settle for various reasons. However, we have always found that the mediation process, if not resulting in a settlement, often hands our clients a significant benefit in having either identified weaknesses in the other party’s case that may not have been apparent until mediation or by making our own client re-evaluate their position (legally and commercially) on parts of their case that they have not previously concentrated on.
Antony Perlmutter is a Partner in our Dispute Resolution team who has sucessfully taken clients through mediation.
For more information see the Disputes Resolution service.