Mediation in commercial disputes: finally taking the lead?

Mediation is a process in which
an impartial third party,
without the authority to
impose a solution, helps others
to resolve a dispute. It has a rising profile
across Europe as a result of the
'Mediation Directive' (April 2008)
intended to encourage its use in crossborder
commercial disputes.

In the Anglo-Saxon world mediation is
among the most popular forms of ADR,
but within Latin countries it is still seen by
some practitioners as a sign of weakness
or a desire to compromise. Arguably, they
think that once a dispute has arisen, if the
parties cannot settle they should
automatically seek a binding and final
result through litigation or arbitration.

Nonetheless there are a number of
inherent benefits to the mediation process:

I The ability of a neutral third party to
'reality-test' or propose solutions,
removing the burden of initiating
concessions;

II It offers solutions generally beyond
the power of a court or arbitration
order;

III The legitimacy of a consensual result;

IV The possibility of maintaining
ongoing commercial relationships;

V Potential savings in the time and costs
involved in arbitration or litigation;

VI Confidentiality to which both the
process and any information disclosed
will be subject; and

VII The active involvement of directors or
company legal representatives in a
solution that they may perceive as a
personal achievement.

It is becoming increasingly common
for large companies to establish their own
internal conflict resolution procedures,
with mediation a main instrument. But to
succeed parties need to fully understand
the process and to put aside ordinary
dispute resolution baggage.

Think about business interests
more than legal positions

In a commercial setting there are
underlying business interests that may not
always reflect into a legal position in a
dispute (ie potential synergies from
ongoing or future business). Parties to a
mediation are encouraged to be creative
and to bring non-legal issues to the table
to help settle their dispute. By broadening
the potential solutions, the parties are able
to tackle more efficiently the issues in
conflict – without restricting any future
options.

Be ready to move from an
adversarial to a problem-solving
approach

In arbitration and litigation the parties aim
to persuade a third party that one or the
other is ultimately right. Mediation seeks
agreement from both parties and requires
active cooperation, which in turn
promotes more focused problem solving.

Assess the weakness of your case
and the strengths of your
opponent's

Mediation may allow the parties, with the
mediator, to value their case prior to court
or arbitration proceedings. This may help
to predict potential outcomes and, more
importantly, to bridge the gap between
parties initial positions and identifying
common interests as basis of a settlement.
This presents potential cost and timesavings
as well as a monetary value
associated with preserving ongoing
business relations.

Choose carefully the mediator

The mediator's role is critical to the outcome
of the process. They may engage in a
number of techniques, including (1) asking
questions about the nature of the business
and potential synergies going forward; (2)
helping parties to exchange proposals, while
respecting their confidentiality; and (3)
helping the parties to evaluate the benefits
of proposals against the likely consequences
of non-settlement.

A judge or arbitrator might not
necessarily be a good mediator. Likewise,
an evaluative mediator, able to highlight
the weaknesses of a case, may be
welcomed while others may appreciate
someone more facilitative. The selection is
a crucial step and furthermore, given the
fragile and conciliatory nature of
mediation, it is extremely important that
the parties reach agreement on who is
appointed in order to avoid any
obstructing of their task.

Mediation is not a panacea and there
will be cases more suited to the process
than others. However, as a general rule, it
can be utilised where the parties are ready
to use good faith to reach an amicable
solution. Mediation might otherwise be a
waste of time, but it would be unfair to
blame the process entirely.