10 Minute Guide: mediation - a valuable tool for settling disputes

Mediation has emerged in recent years as a useful tool for resolving sometimes intractable disputes. If you have a looming dispute, then this 10 Minute Guide will give you the basic background for understanding mediation and its strengths and weaknesses.

Introduction to the issues

Any dispute can be messy and involve not only the expenditure of much money but also time in the pursuit or defence of legal proceedings. Of course, this might be necessary, but often there are alternatives to litigation and mediation represents one such. Many who claim advantages for the process will make extravagant claims for the process. One claim often made is that the overwhelming number of cases which go to mediation will result in settlement either at the mediation meeting or shortly thereafter: this is correct. Most figures show that around 80% of such cases are settled.

However, other claims are often made which are harder to evaluate - that it is very cheap, quick and easy. These claims are not necessarily true. In a complex case, preparation for a mediation can be akin to preparation for a court hearing - not, it is true, for a full court hearing, but the amount of time to prepare properly should not be underestimated. Equally, if you are going to get the best out of anything, including mediation, you need to set aside the right amount of time to do so. As for its being simple - it is not a cosy chat, it is all about negotiation and we all know how difficult and exhausting that can be.

Having said all of which, mediation is part of the arsenal for dealing with disputes, and it is wise to be informed about what it involves.

Basic understanding of mediation

Without trying to give an all-encompassing definition, mediation can be described as a consensual process, without a fixed set of procedures, which allows the parties to conduct negotiations to resolve an issue in contention between them with the help of a third party neutral in circumstances of confidentiality.

There are many aspects to that description which need to be fleshed out and this 10 Minute Guide will try to give some more background to the essential elements.

Some aspects can be dealt with immediately. Mediation is confidential - the mediation agreement should provide for this. More than this, it is ”without prejudice”, meaning that the documents prepared for the mediation, and the details of the discussions at or relating to the mediation cannot (with some very limited exceptions) be disclosed to any judge later. The idea is to allow the parties complete freedom to discuss their dispute without the fear that anything they say may become evidence in the case later.

The mediation itself is about coming to an agreement - so it is not just about who “wins” or “loses” - the parties could use the mediation as a chance to renegotiate their contract, or enter into a new contract. One of the keys to preparing for a successful mediation is to try to consider all the possible outcomes - not just the strictly “legal” ones (i.e. which party “wins” or “loses”). Lack of preparation can waste the possibilities of a successful mediation meeting.

Mediation is consensual

Mediation is something which is agreed to be done by the parties themselves. More than that, it is up to the parties as to how they wish to proceed - so the procedure followed at the meeting is ultimately up to them. The mediator is there to help with these arrangements, of course, but there is no fixed and firm way of going about things.

Having said which, mediation can be “forced” on the parties in a way. The contract at the heart of the dispute may contain some sort of dispute escalation clause, which includes mediation as a requirement. Case-law has decided that such clauses are effective, providing that they are clearly drafted, and that the courts will enforce them.

Another way in which the parties may be “forced” to mediate is a result of the judicial preference for mediation, which is shown by the courts’ adjourning a case for a short while to allow mediation to take place. While the courts will not now order mediation, they may well apply costs consequences against parties which refuse to mediate without good reason. These costs consequences can mean that even a successful party in the litigation can be denied all or part of its costs if it refused to mediate and cannot point to a good reason for doing so.

Refusing to mediate without a good reason to do so is something to be considered carefully. Good reasons can be where the mediation has no chance of success, or where one party is trying browbeat another to obtain money, or where the facts are insufficiently clear before issuing proceedings, or where one party reasonably believes it has a strong case and the costs of mediation are not worthwhile - the case-law on this subject is extensive and these are just some of the factors to be borne in mind.

Mediation is flexible

There are no set processes to be used - there are, of course, standard procedures published by the main dispute resolution bodies, but when it comes to preparing for the mediation meeting, how the time is spent is up to the parties and the mediator. Procedure at the mediation meeting itself is very flexible indeed, and much will depend on the mediator as to what he or she suggests.

In broad terms, having agreed mediation, either because the original contract provided for it, or because one party has suggested it or a court has recommended it, the parties must decide whether to appoint the mediator by agreement or go to one of the dispute resolution bodies. Larger cases may suggest having more than one mediator - so one mediator with commercial background, and another with relevant industry or technical background. If there is a contractual dispute escalation procedure, it may specify a particular dispute resolution body, but the parties are always free to come to their own agreement. There are many bodies providing mediation schemes, perhaps the best known is the Centre for Effective Dispute Resolution (or CEDR) based in London, England.

Each party will then prepare for the mediation, and this will normally involve:

• Getting the mediation team together: mediation could involve discussions not only between senior commercial people, but also between the technical teams
• Given that one possible outcome of a mediation will involve a renegotiated or new contract, senior people need to be on standby at the end of a telephone to make decisions - possibly a problem in multi-jurisdictional mediations
• Preparing the mediation submissions: these will set out the basics of your side’s case, but can include supplementary information - remember, this is not a legal case - and the submissions can also draw the other side’s attention to what you regard as the possible basis for a settlement
• The submissions will often include some of the key documents - but it is important not to go overboard, as typically a mediation will not become bogged down in factual disputes, and sending too much material to a mediator can confuse the issues you really want the mediator to understand
• As well as the submissions to be exchanged with the other side, you might like to consider confidential submissions for the mediator’s eyes only, and these submissions will contain perhaps confidential information about either of the parties, or set out what you see as the stumbling blocks in the dispute
• Risk assessment: you will want to look at the strengths and weaknesses of your case and come to a realistic view of your chances of winning or losing at a full hearing, and from there try to put some value on how you would see any possible settlement
• Following on from that, you would need to consider how you would like to play the negotiations, what are the fallback positions, how and when you are going to make demands, how you would meet any possible suggestions from the mediator or the other side and so on

The parties will then normally exchange submissions, any confidential submissions will be sent to the mediator and the mediator will normally contact the parties prior to the mediation meeting itself.

The meeting will normally start with a joint session where each party has a chance to present at a very high level its case, and again the opportunity should be taken not only to develop the legal case but also to present what you see as the possible outcomes for the mediation.

After this, the parties leave to go to their separate rooms, and the mediator then undertakes shuttle diplomacy between them. Having said which, the mediator may suggest that the parties come together for a further joint session to discuss one or more particular aspects of the case, or that particular people from the parties should have their own joint session - such as the technical teams meeting together, or the senior commercial people or legal teams. The mediator may want to see particular people separately: it is a very flexible process.

Above all, mediation has a reputation for being “fuzzy” or weak - but these sessions can be and often are focused and tough negotiation, and mediation can last for a whole day or more, with the parties negotiating into the night.

The mediator’s role

The first point to stress is that the mediator is not there to decide which party wins or loses - in fact, the mediator’s role is not to evaluate the case or come to a binding decision at all, but rather to facilitate negotiations between the parties. Stating an opinion on the merits could have the adverse effect of the mediator appearing to lose neutrality or objectivity.

As such, the mediator is not advising the parties, which must look to their own advisers. The mediator controls the mediation meeting in a sense - but the mediator cannot order anyone to do anything, and it is up to the parties to cooperate with each other and with the mediator to make the best use of the time. In fact, if one of the parties wishes to pull out of the mediation, it is perfectly free to do so - subject to the possibility that the court may impose costs consequences on a party which unreasonably does so.

The mediator will normally speak with the parties’ lawyers in advance of the mediation: this is an opportunity not to be wasted. It is a good opportunity to identify key issues, discuss the individuals involved and the aims of that party in the mediation. All too often, these discussions before the mediation are seen by the parties’ lawyers as just limited to administrative matters. Much can be achieved in advance of the mediation itself.

So should you do mediation?

There are certainly advantages – if a case can be settled by mediation, it will be cheaper than going to a full trial. Again, mediation, coming as it does before a trial, will be quicker. The parties are in control of the mediation process, unlike a court case, where the judge is in charge of the process. As we have seen above, a mediation is also supposed to be confidential, again unlike a court case, which is of its nature public.

Some other advantages are perhaps not so obvious at first sight. Settlements at a mediation do not have to follow the possible orders that a court would make (normally damages), but could encompass renegotiation of the contract in dispute, or a completely new agreement. In this way, mediation can not only preserve existing relationships but actually strengthen them. Many parties are unwilling to try this, often turning up at a mediation expecting that the mediator is restricted to considering only the sorts of remedy that a judge would order – another instance where proper preparation for mediation is essential to make the most of the process.

Having said all of which, there may be some valid concerns about going forward with a mediation, some of which may be real concerns.

• The mediation may not lead to a settlement. This is of course true, although the figures produced by mediation bodies routinely show that most mediations in fact lead to settlements (the figure is normally around the 80% level). If a settlement is not achieved, then at least the issues may have been narrowed in the course of the mediation and the parties will have a better view of their – and their opponent’s – cases.
• Why not just negotiate? There is no need for a mediator. Again this is possibly true, but when lawyers negotiate, they often adopt fixed stances based on their own view of the case. A mediator as a true neutral can come in and by using various techniques get the parties to re-appraise their positions. Such techniques might involve “reality testing”: while a mediator is unlikely to give a personal opinion about the merits of a case, clever questioning may prompt a re-assessment of the case. Equally, the way the mediator does this, and who is involved in it may be key: sometimes, a senior person from one of the parties may be at the mediation and witnessing reality testing of their own lawyers may be the first chance they have had to see how their case really stands up (or not). More to the point, it is the very fact that each party is able to discuss their case and their aims with complete candour with a neutral third party can be the catalyst for movement and ultimate settlement.
• It is never the right time to mediate. It is sometimes said that mediation only succeeds when each party has a complete idea of their opponent’s case – so mediation can only take place after disclosure, witness statements and exchange of experts’ report. By then, costs will have been incurred, making mediation seem less likely to succeed. It is certainly true that mediation can take place too soon: at a bare minimum, each party must have a good understanding of its own and the other’s cases at a factual level. However, it is a mistake to assume that any mediation will consist of a detailed trawl through the evidence. In fact, if a mediation goes that way, it is probably becoming bogged down in detail and will likely not succeed. A skilled mediator will know how to steer a mediation from becoming too obsessed with the detail and try and get things back on track. That being so, as long as the parties understand the case and, more to the point, have a strategy for how they would like to dispose of the dispute, a mediation may take place with good chances of success even before disclosure. Of course, this could be very different where one party holds a lot of the evidence and is not prepared to disclose it to the other: in these circumstances, the other party might well feel uncomfortable in entering in to an agreement where it does not have the relevant facts to hand.
• Mediation shows weakness and a lack of confidence in your case. We have seen already that the courts will not look kindly on a party which refused to mediate without good reason. However, there is a residual fear that by suggesting mediation a party might be perceived as weak, or as begging for a quick and dirty settlement. This may of course be true, but by no means always. It is a mistake to think that the first person to make any sort of offer is showing weakness – in many cases, it is the first offer which sets the parameters for future negotiations. Thus, by proposing mediation against a background of understanding your case and your opponent’s, of identifying your aims for any negotiation, you could be putting yourself in a stronger position, not a weaker one.

(1) Copyright Richard Stephens 2011. The law is stated as at 7 April 2011.

This note is intended to provide general information about legal developments in England & Wales and you should not apply any of the advice or information contained in it to specific situations without seeking professional advice first.