Getting the most out of mediation

October 2013 | SPECIAL REPORT: INTERNATIONAL DISPUTE RESOLUTION

Financier Worldwide Magazine

With the increase in complexity of contracts, legal disputes have become much more common in this day and age. Correspondingly, the methods adopted by parties to resolve these disputes have also increased. While litigation through the courts still remains the traditional form of dispute resolution, parties have been working towards various modes of alternative dispute resolution.

The major attraction of these alternative methods lies in the speed, cost-efficiency, confidentiality and flexibility that parties can get from these forms of dispute resolution. The most popular methods include arbitration, expert determination, mediation and conciliation. A hybrid form of dispute resolution, mediation-arbitration, or med-arb, has also recently gained prominence.

In this article, the focus is on mediation, which specifically stands out as an option to protect the parties from incurring the significant costs associated with litigation and arbitration. Mediation is a process whereby an independent person is appointed to help the disputing parties reach an acceptable solution. Mediation comes into the picture when the parties are unable to negotiate their way out of a deadlock or are otherwise unable to reconcile their differences. The central focus of the exercise is co-operation between the parties in resolving the situation as opposed to undertaking an in-depth analysis of past mistakes. The mediator does not assume a judge’s role to decide right from wrong but instead tries to build communication and consensus between the parties.

In order to get the most out of the mediation process, the parties need to bear a few things in mind. As it is a voluntary procedure, it presents a golden opportunity for the parties to help shape their agreement for the future, with some careful thinking. First and foremost, the parties need to assess if the timing is right to launch into mediation and if mediation itself will be the best way to resolve the dispute. A correct assessment as to their respective positions (with the aid of lawyers), will help the parties get off to a good start in the mediation process.

Once the parties have decided to go down the route of mediation, preparation becomes key to achieving success. A clear grasp of the facts and law not only ensures efficient use of time, but also gives the parties an idea about their bargaining positions and consequently helps them to decide their minimum goals to be achieved from the mediation. The parties need to evaluate all possible outcomes of a settlement and while working towards achieving the best case scenario, should be prepared for the worst case as well.

Mediation is a two-way street. Parties have to come to the table with a clear idea of what they want and be prepared to explain their grounds and reasoning. Similarly, they also have to come to the table with an open mind and be willing to listen to the other party’s views. Issues may be understood in a different light during the mediation and each party can reassess their importance at that point.

Willingness to compromise is also important to a successful mediation. This compromise needs to be reflected in the approaches of both the parties and their respective lawyers. The parties need to appreciate the risks of litigation and accordingly structure their views appropriately when compromising on certain points during mediation. Only a mutually acceptable solution will be feasible in attaining a sustainable ‘win-win’ situation for all parties concerned.

Each party’s perceptions can change organically during the process of mediation itself. Therefore, understanding the other party’s point of view and attempting to balance the pros and cons when negotiating a particular point is important. This will help the parties when reviewing their own position and possibly coming to a mutually acceptable solution. By giving up a minor point, each party may in turn benefit from a bigger gain. This approach of trying to achieve a mutually beneficial result is crucial for any successful mediation.

Parties also need to take particular care to appoint lawyers with extensive experience of advising on and representing clients in all forms of ADR, and in particular mediation. Trained lawyers who are abreast of developments in the field and are accredited mediators can be hugely influential in shaping the proceedings. Experienced lawyers who have represented clients in ADR procedures in a wide variety of sectors including construction and engineering, banking and financial services, insurance and reinsurance, transport, international trade and professional negligence become crucial while handling mediation in particular industry sectors.

As stated above, the concept of med-arb is now being considered by some parties. Med-arb combines the process of mediation and arbitration. The first step involves the appointment of a mediator who tries to help the parties reach an agreement but if the parties cannot reach a compromise, arbitration is then commenced with the same mediator acting as the arbitrator who will eventually render a final and binding decision. Med-arb provides the advantage of having a two-step approach to dispute resolution before the same individual. However, it can be disadvantageous if the mediator harbours pre-conceived notions (having been present in the mediation) with respect to any party’s position.

In summary, the key goal during any mediation should be to achieve a settlement to the dispute. This can be attained by focusing on common interests and putting oneself in the other party’s shoes. Knowing how to articulate one’s goals will help each party in defining and redefining the settlement goals as the mediation progresses. Mediation will produce a workable solution if the parties engage with each other in order to achieve a desired outcome. A mediation settlement will not only help resolve immediate disputes between parties but may also help them in maintaining good business relations and in furthering future interests. Thus, in multiple ways, mediation can serve to benefit the industry at large and with careful planning can serve as an effective means of dispute resolution.

Sherina Petit is a partner, Nikhil Lakhani is an associate and Aditi Aparajita is a trainee solicitor at Norton Rose Fulbright. Ms Petit can be contacted on +44 20 7444 5573 or by email: sherina.petit@nortonrosefulbright.com. Mr Lakhani can be contacted on +44 20 7444 5979 or by email: nikhil.lakhani@nortonrosefulbright.com.

Sherina Petit, Nikhil Lakhani and Aditi Aparajita

Norton Rose Fulbright