What is business mediation?
Mediation is a sophisticated and extremely efficient form of managed negotiation.
It leads to superior outcomes and in particular, it settles business disputes in a way that litigation cannot.
Success in litigation is solely about who is right in law. The legal system tends to see every dispute primarily in terms of financial value.
However, human beings usually have secondary agendas too.
Examples of these invisible influences are:
- the determination of one or both parties to win at all cost
- the need of a party to prove his ability to further advance his career or maintain his status
- to qualify for a bonus payment which depends on a particular outcome for this dispute
- the feeling of a party that he is not being heard, or not appreciated, or simply misunderstood
Mediation takes into account the underlying reasons why each party has its position, not just who is right and wrong in law. As a result, a mediated outcome is likely to be better for both parties.
There are many advantages of mediation. For most businesses, the following are the reasons why mediation is considered in the first place.
Mediation identifies value that is otherwise left on the table
A good mediator can often identify the elements that are holding a party back from settlement and those encouraging a party to see the benefits that are obscured by a litigation approach.
The role of the mediator is to be a neutral observer who can cut to the heart of the matter in order to open up discussions as to how to resolve the dispute.
However, the parties come to the process voluntarily. The presence of the mediator assists in providing a neutral and safe environment where they feel comfortable to find a solution out of court.
Even though the mediator is not able to provide legal advice, the fact that he is a lawyer gives comfort in that the parties are likely to trust his impartiality and his ability to prevent psychological bullying by the other side.
Certainly, we are absolutely convinced that you should avoid going to court. Whatever your solicitor might tell you about legal costs when you first instruct him or her, it is certain that the figure will double after six months and will double again a few days before your trial (full hearing).
Characteristics of mediation
The mediator’s impartiality
A mediator will often have to consider impartiality. It is rare that the two parties come to mediation with a balance of power between them.
Each of the parties will have advantages over the other. For example, one might have enough money to be able to fund litigation easily. The other might have a better understanding of the law.
The question for the mediator is to what extent should he re-balance the power to the weaker side?
He has a conflict between his duty as a mediator for total impartiality on the one hand and his empathy and instinct for fair play on the other hand.
We would assume that most mediators would make no attempt at re-balancing the power in respect of any external circumstance or characteristic, but would help a party who was unable to express himself or herself clearly, or who was subject to bullying by the other, or who was somehow disabled from making his or her case clearly.
Mediation is voluntary
The parties have to agree to go to mediation. There is absolutely no compulsion. That means there can be no emotional antagonism to the process itself. The very fact of having come to agreement on this process alone starts to change the emotional response of the conflict parties towards the idea that cooperation might be a way out of their dispute.
Sometimes that co-operation is not immediately forthcoming. Maybe your conflict-party does not understand the procedure or maybe the gigantic cost of litigation. To help with this, we have written a short article with example texts you could use to persuade him/her to take your dispute to mediation.
Mediation is confidential
In a world where social media empowers the good, the bad, and the ugly, it is increasingly difficult to keep your personal and business affairs confidential.
To want to do so should not imply that your motive is devious or dishonourable – let alone unlawful.
Nonetheless, when an error or misjudgment or even an unpopular decision in business can provoke a hailstorm of unpleasant reaction to descend on the personal lives of yourself and your family, the importance of privacy becomes one of the necessary pillars of your success and happiness.
No-one necessarily even knows that you have been to mediation, let alone the outcome.
Probably the single most important reason to go to mediation for a business dispute is the gigantic saving over the cost of litigation. No matter how financially strong your business is, it generally goes against the grain to waste money on litigation.
Far more importantly for a large and successful company is the saving against the loss of management time. As you may already be aware, a substantial litigation dispute can tie up senior management for years – and that is without considering other roles whose time is inevitably spent on research and document management.
For a small business, the high cost of litigation simply puts it out of the question.
Increasingly however, mediation is driven by the courts.
That is to say the pressure placed on a litigant by a judge is stronger and stronger. If a litigant refuses to go to mediation, as the law now stands, he or she may be penalised in not obtaining his costs even if he or she wins his or her case.
In contrast, a full day of mediation, allowing the mediator time at the start to assess the documentation and the legal issues, will probably cost less than 5% of the cost of litigation,
With mediation, you choose your settlement terms
Compare that with a last-minute settlement in a court case where you are under far greater pressure to make concessions that are not of your choosing, and in respect of which you have already spent many thousands of pounds in legal and other fees.
You should also take into account recent changes in the law that resulted in the winner’s costs restricted to probably not much more than half the total spend. When those statistics are considered it is amazing that any cases get to court at all.
There are plenty of other reasons why mediation is better than litigation, or even arbitration.
When you come to a mediation deal it is all your own work
In litigation your choices are circumscribed by the remedies allowed by law and of course by the perception of the Court of the facts that you put before the judge. The Court judgement is likely to be limited to an order relating to money, without reference to other areas of undoubted importance to you.
Your solicitor and/or barrister will also be diffident about complicating what he sees as the main issues. A good legal case requires presentation with crystal clarity. If there is to be any secondary issue it must be important enough to be presented alongside the main issue so that it does not “muddy the waters”.
That does not apply in mediation, where you can explore every avenue to obtain the best outcome for both parties. That sense of empowerment gives you a certain emotional attachment to process. What happens next is likely to do so in the way you have directed.
Of course the same applies to your conflict party.
As far back as 2005, Lord Justice Dyson said:
“Mediation provides litigants with a wider range of solutions than those that are available in litigation: for example, an apology; an explanation; the continuation of an existing professional or business relationship perhaps on new terms; and an agreement by one party to do something without any existing legal obligation to do so.”
Where business mediation is heading
Parallel with the increasing pressure to mediate imposed by the judiciary and supported by the Lord Chancellor we now have generally increased awareness of the EU Directive on Mediation which came into force in 2013.
Now that mediation has been adopted as a child of the EU, increased regulation is certain to follow. As a result of the EU directive, the UK Government added a few arrows to the already full quiver of encouragements to mediate.
What are the steps in the mediation process?
The mediation process is often divided into 5 general steps. These are:
- planning and information gathering before the meeting
- introduction and statement of position
- shuttling - the mediator moving between each party individually to generate options
- final joint meeting
- recording the agreement
At the planning stage, the mediator works alone to gather information about your dispute to help you decide exactly what sort of mediation you would like and how long you should allow for it. You book a diary date.
At the meeting, the mediator makes introductions, explains the process, summarises the dispute as far as he or she can, and sets the rules of the process. He or she then asks each party to explain his or her position.
Possibly after allowing the parties to discuss and continue to negotiate, the mediator will separate the parties and engage in a series of private meetings.
The Mediator decides on the appropriate time to call the parties together to draw in the strings of agreement, finalise the precise terms and draw a binding memorandum of understanding.
An online mediation follows the same principles but far more flexibly because there are fewer constraints on fixed times, dates and number of hours of mediation time required.
What sort of business mediation?
There are a number of broad options available to you in dealing with your business mediation. The ways in which mediation can take place include the traditional live one-day meeting, shorter meetings when so required and of course the many possibilities of using telephony and online communication.
However we can provide you with examples of how we would approach different situations and give you some guidance on how you might instruct the mediator to conduct your mediation in the way you want.
Long-term and continuing mediation
We mention long-term or continuing mediation for the sake of completeness. As a process, mediation is extremely flexible. There are no rules as to when or how it can be used.
Of course if you have a dispute which comes into one of the categories we have mentioned below you need to talk to your mediator about precise arrangements rather than simply booking a date in his diary.
Sometimes a dispute cannot be resolved in a single discussion. That could be because:
- the subject matter is ongoing, as in a construction dispute which is holding up the entire project and which requires assessment by third party experts, inspection on the ground or other features which will cause delay.
- the precise terms of settlement can be calculated only conditionally upon the happening of some other event. Software, and high-technology manufacturing are often subject to this situation.
- terms of settlement have to be approved by some party or organisation who cannot easily be represented at a mediation meeting. This is almost always the case when one of the parties is a governmental organisation. However it can just as easily apply to a subsidiary of a holding company.
What we refer to as long-term or continuing mediation is any circumstance requiring multiple meetings over a period of time on account of the subject matter. International disputes constantly require continuing mediation.
Boardroom and partnership mediation
Not all business disputes are between two companies.
Some of the most intractable problems arise within the company or any other unit of organisation which could as easily be a partnership, a sports club, or a governmental organisation.
In these cases the dispute’s often prefer to settle their disagreements around a table rather than traipsing off to some third-party premises on a distant future date.
Employment disputes are a constant source of lost productivity in every organisation.
Although every business will have an in-house system for dealing with complaints and arguments between employees, it frequently happens that the problems are intractable and that the usual internal mechanisms are unsuitable or simply do not solve them.
Mediation is a perfect solution for employment related disputes. It may not be necessary to make the usual formal arrangement with diary dates many weeks ahead. Both sides will usually be very enthusiastic about settling the dispute at the earliest opportunity, before both the cash cost and the stress levels become unmanageable.
Involvement of your solicitor
The question of how far your solicitor should be involved in your mediation is very contentious.
The starting point is that a solicitor in general practice has a fundamental duty to act in the best interest of his or her client and against the opposing interest.
He or she will therefore often have difficulty in reconciling his perception of his or her client’s chance of winning all that he or she wants in court, against a mediation event that might well settle only at some level of compromise.
The psychology of mediation
The soft skills of a successful mediator could be described as an understanding of psychology, intuition, empathy and other social skills that expand with experience of life.
Many professionals expand the soft skills required for their particular profession. That includes lawyers. Such skills are not merely necessary but critical for the success of a professional mediator.