In an earlier article mediation was touched on as one of a range of methods of dispute resolution, it was placed close to one end of a spectrum of formality with arbitra-tion and litigation at the other, more formal end. The more formal; the more costly, and time consuming, it becomes to resolve one’s dispute. In this article we fo-cus in more detail on mediation to which an increasing number of people are turning as an alternative to the time, trouble and expense of a full-blown arbitration or litigation.
Where we talk here about mediation, others may use the term conciliation. For most part the two terms are inter-changeable and for present purposes we will use the term mediation. There are however some proce-dures that call themselves a conciliation yet lack one of the fundamental characteristics of media-tion/conciliation, which is that the mediator/conciliator acts only as a facilitator and does not seek to impose his/her decision on the parties.
The mediation process
Mediation is a non-binding procedure where, as noted, the mediator acts as a facilitator between the parties as opposed to imposing his/her decision. The mediator ‘oils the wheels’ assisting the parties reach their own settlement, which is then encapsulated in a settlement agreement. The mediator might use a range of tech-niques to bring about this degree of consensus be-tween hitherto warring parties.
These techniques will include individual and joint sessions with the parties. In the individual sessions the mediator could give a candid view as to the merits or demerits of certain positions being adopted and argu-ments being advanced by that party. By exploring these matters with both parties individually the mediator can see how close or far apart the parties really are; where there is room for manoeuvre and where there are ‘no go’ areas by one party or the other.
A mediation will typically take place over one or two days, there may be short introductory submissions be-fore the start of the mediation, but these will simply be by way of introduction for the mediator and will by no means be full-blown pleadings as one might find in arbi-tration or litigation.
Some advantages
Anyone who has been involved in the quite consider-able costs of an arbitration or in litigation can readily see the first advantage of mediation in that the proce-dure can be completed for a fraction of cost of those involved in the more formal arena.
A further advantage, and one that can be just as im-portant, is the characteristic of mediation whereby the parties maintain ‘ownership’ of the dispute. Again by comparison with other, more formal, models of dispute resolution such as arbitration or adjudication the parties effectively hand over ‘ownership’ of their dispute to a third party who’s decision will be binding upon them. No matter how robust a case one thinks one has, is it is always with some trepidation that the envelope contain-ing the adjudicator’s decision or arbitrator’s award is opened. Then, turning to the back page that contains the money award, one gets a rush of joy or despair de-pending upon how closely the third party decision maker has agreed with all your carefully crafted argu-ments.
In mediation this element of Russian roulette is re-placed by having much more control over ones destiny, shaping the end result to one which, whilst neither side can have all it wants, can be lived with and the possibil-ity of both parties leaving the mediation feeling that they have a fair result. This can even be enhanced by the much more open nature of mediation that will allow, for example, an opportunity to bid for upcoming work to be woven into the agreement. In short, in mediation there is far greater potential for preserving ongoing busi-ness relationships.
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In recent years the perceived advantages of media-tion have led developments for their incorporation into courts procedure rules and into major standard form contracts. |
Some disadvantages
Weighed against these advantages of cost saving and ‘ownership’ is the possibility that one side or other might simply use the mediation as an opportunity to flush out their opponents arguments only so they can be better prepared come the eventual arbitration or liti-gation. Where there is suspicion of such tactics it will lead the other side to play their cards close to their chest, which runs counter to the degree of openness which is necessary for the process to work.
Court-instigated mediation
In recent years the perceived advantages of mediation have led developments for their incorporation into courts procedure rules and into major standard form contracts.
In several jurisdictions now there are provisions within the court procedure rules where parties are ‘en-couraged’ to mediate before the substantive part of the trial gets under way. This stems from a recognition that the service of the courts is a scarce public resource which should not be squandered before the parties have at least made a serious and genuine attempt to settle their differences amongst themselves. The sanc-tion for a failure attempt at mediation is that costs will be awarded against the party who failed to genuinely engage in the mediation. That is, even if a party is ‘suc-cessful’ in obtaining a court’s judgment in their favour, if it can be shown that they failed to properly engage in mediation they will have to bear their own and the other parties costs from the point where the matter could possibly have been settled through mediation. With the high cost of taking a matter to court these costs could make serious inroads into any monies recovered from the judgement on the substantive matters at issue and serve to really concentrate parities’ minds as to the benefit of meaningful participation in a mediation.
Such rules have been operating in England for sev-eral years now and have been rigorously enforced in a series of decisions in the Court of Appeal. For other ju-risdictions within the European Union, if they have not done so already then such rules are due to be imple-mented courtesy of an EU Directive, currently still in draft form[1], which will compel state legislatures to in-troduce court instigated mediation within their respec-tive civil procedure rules.
Standard form contracts
Many standard form contracts now include a provision for mediation, for example the 1999 FIDIC forms all contain at Clause 20.5 a compulsory stage in the ‘stepped’ dispute resolution scheme whereby parties must at least consider what they term, ‘amicable set-tlement’. Whilst amicable settlement could include di-rect negotiation between the parties, scope for the use of mediation is highlighted by the practice notes in re-spect of this clause that states:
“The provisions of this Sub-Clause are intended to encourage the parties to settle a dispute amicably, without the need for arbitration; for example, by direct negotiation, conciliation, mediation, or other forms of alternative dispute resolution.”
Whilst the inclusion of such contract clauses, and in-deed court instigation of mediation is laudable, it may in fact detract from one of the key factors in a successful mediation, that is the willingness of both sides to be involved in the process. With mediation being consen-sual in nature, a party who is dragged kicking and screaming into the process only because the contrac-tual or legal process is unlikely to have the right frame of mind in which to make the compromises, which are inherently necessary for the mediation to be successful. It may be preferable that any entry into the process is on an ad hoc basis, recognising that each dispute is different and the ‘right’ time to mediate might not be that according to the contractual or legal timetable.
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…entering upon mediation needs to be done with the correct frame of mind and a recognition and willingness that there will be a need to make some compromises. |
‘Institutional’ mediation
As a measure of the progressive acceptance of media-tion as a method of dispute resolution many of the in-ternationally renowned institutions that have tradition-ally been associated with ‘heavyweight’ arbitration have in recent years introduced mediation procedures, or other procedures, which will encompass mediation. The International Chamber of Commerce (the arbitral forum of choice under FIDIC contracts), the London Court of International Arbitration and the Stockholm Chamber of Commerce now all have mediation procedures. Pre-sumably the ‘kitemark’ of such august bodies upon the mediation procedure will provide some measure of comfort with those who may be sceptical about its adoption.
Combination procedures
The acceptance by these international arbitration insti-tutes of the desire of many of its users to have the op-tion of mediation has led to the possibility of what can be termed combination procedures to be adopted. Put simply, in a combination procedure the parties begin their arbitration then at a certain stage, with agreement of the parties the tribunal can stop acting as arbitrator and attempt to mediate the dispute. If the mediation is successful, fine, if not the tribunal reverts to arbitration and renders its award in the normal manner.
Such an approach has been traditional in oriental cul-tures where to an extent the need to involve a third party to impose a decision is seen as something of a sign of failure. The Chinese arbitral institution CIETAC was the first to introduce such combination procedures within its rules. The principle criticism by many com-mentators of this approach is that there may be certain evidence or information disclosed to the tribunal during a mediation phase which is then impossible to ‘un-remember’ when the mediation fails and the tribunal needs to make its award on matters only disclosed in the stricter environment of the arbitration. For example one party may have given some indication at the level it would settle the dispute, this then becomes the ‘target figure’ for the tribunal in drafting its award.
Despite this criticism even those ‘western’ arbitral in-stitutions noted above have all included provisions whereby an arbitral tribunal can switch to mediation mode and back so long as the parties agree. For exam-ple the Rules of the Mediation Institute of the Stock-holm Chamber of Commerce (SCC) make the proviso that a mediator appointed under the rules cannot act as arbitrator in future arbitrations relating to the matter in dispute, unless the parties agree otherwise. Thereby, it is submitted, opening the door for the use of combina-tion proceedings where the parties agree. Article 12 of the SCC Mediation Rules opens up another interesting option whereby following the mediation the mediator is then appointed as arbitrator by mutual consent of the parties and the settlement agreement is issued as what is known as a ‘consent award’. The advantage of such a move is that the settlement now has the force of an arbitral award which makes it much more portable in terms of enforcement.
Whilst the combination approach is much criticised, it does illustrate the measures which, with the application of some imagination, can dilute the cost of taking an arbitration to its fullest conclusion and perhaps take on board some of the advantages of mediation such as the possibility of maintaining a business relationship. The criticisms that the tribunal may, in effect, be taking se-cret evidence can be overcome by the giving of a rea-soned award in the event that the arbitration has to run its full course, in that way the logic of the tribunals thought process can be scrutinised to ensure that its award is based only on evidence and argument dis-closed during the ‘arbitration stages’ of the proceed-ings. Most importantly combination proceedings can only be instigated with the agreement of both sides, there is therefore no compunction on any party if they feel at all uncomfortable by adopting what might be seen as these novel approaches.
Conclusions
Mediation is finding more favour with those who find the sometimes astronomical costs, time and management input required to run a ‘traditional’ arbitration or litiga-tion is too much to bear. However, entering upon me-diation needs to be done with the correct frame of mind and a recognition and willingness that there will be a need to make some compromises. It is not unusual too, that where a mediation has not resulted in a settlement agreement, one is reached fairly soon af-terwards following a short period of reflection.
In short, in mediation there is far greater potential for preserving ongoing business relationships. quote 1 In recent years the perceived advantages of media-tion have led developments for their incorporation into courts procedure rules and into major standard form contracts. quote 2 …entering upon mediation needs to be done with the correct frame of mind and a recognition and willingness that there will be a need to make some compromises. quote 3 Mediation Mediation 2
