Is my commercial dispute suitable for mediation?

What is mediation?

Mediation is a form of alternative dispute resolution (ADR) that can be used by the parties to business and commercial disputes to try to reach an out of court settlement. Mediation can, in certain circumstances, be mandated by the courts, but is usually entered into on consensual basis by the parties. It involves the appointment of independent mediator, who will facilitate a discussion and negotiation between parties to try to help them reach a consensual resolution.

Are there any restrictions on the type of business or commercial dispute that can be mediated?

All types of commercial dispute can be suitable for mediation. It can be a useful ADR tool for resolving disputes before, or during the course of court proceedings, to avoid the need for a case to proceed to a contested trial. You can use mediation to settle commercial or business disputes between individuals, between partners, shareholders and directors, and with suppliers, customers, service provides; there are no restrictions.  Mediation can also play an effective role in settling international disputes between parties in different jurisdictions.

The most important driving force is the parties are willingness to genuinely participate. The collaborative nature requires full cooperation from all parties for the process to be effective.

Reasons why mediation may be beneficial for you

Mediation allows the parties to stay in control of the process and reach a resolution that everyone can accept. This can include settlement terms that cannot be achieved through the litigation process, where the remedies and jurisdiction of the court will be constrained. The mediator will help explore the options available to the parties, but they cannot impose an outcome and there is no requirement to find a resolution at the end of mediation; the outcome is flexible and completely in the parties’ hands.

Mediation can be less expensive than dealing with the matter in court. Parties usually share the responsibility of paying the mediator and, provided the parties can reach a resolution, fees and expenses associated with going to court will be avoided.

Mediation is confidential, compared to court proceedings which are public. This may appeal to those who want their dispute to be kept from the public eye. In addition, all statements made in a genuine attempt to settle the matter are inadmissible in court so no party will prejudice their position should mediation be unsuccessful.

As the environment of mediation is collaborative it can be a good option for parties who intend, or wish, to have an ongoing relationship following resolution of the dispute. The mediator will meet privately with each party to discuss the dispute confidentially and this allows the parties to be frank with the mediator and the discussions to be more controlled. The court process is adversarial by nature and can cause relationship breakdowns to become irretrievable.

Reasons why mediation may not be the best option for you

If you do not think a party will be receptive to mediation or willing to compromise at all, or if you are not willing to consider any offers from the other party, mediation is unlikely to be a useful option. Neither party can be sure that the mediation will result in a settlement, and this lack of certainty can make the parties frustrated and disengaged if they do not come in with an open mind set to settling.

The cost of the mediation, whilst lower than taking a case to court, may still be substantial and will add to the overall cost of dealing with the dispute. Should the mediation be unsuccessful, and another form of ADR is not suitable, the parties will have to incur the costs of taking the matter to court after incurring the costs of mediation.

The parties will have to bear their own legal costs, and usually 50% of the mediator’s costs and expenses and venue costs. These costs are not recoverable from the other side at the end of the process, unless there is an agreement in relation to the costs, or they are pursued in the course of any litigation that follows. However there is no certainty on recoverability.

Is mediation a sign of weakness?

An offer to mediate should not be viewed as a sign of weakness. The courts will expect the parties to follow the relevant Practice Direction on pre-action conduct, which will set out the steps that should be taken before litigation is started. The protocols  require the parties to prospective litigation to explore engaging in forms of ADR and a party who unreasonably refuses to engage in ADR can be penalised on costs. There are now increased instances of the courts implying sanctions in these circumstances.

The parties can decide to mediate at any stage of the dispute, and the court can also order a stay to facilitate mediation at any stage in the litigation process.

A settlement reached through mediation can also give a party certainty and closure and will avoid the anxiety of the uncertainty of the result of a judgment from the court. Many businesses will understandably prefer the comfort of what might be a less than perfect outcome that is certain, than the inherent risk and uncertainty of litigation.

Our Dispute Resolution team has a wealth of experience in advising clients on whether mediation is suitable for their dispute, and how to get the most out of the process. Please get in touch if you have any questions about the points raised in this article.