UK: Mediation - An Additional Weapon In Your Dispute Resolution Armoury

Last Updated: 14 June 2001
Article by James Hartley

Co-Written By Gerald Khoshnaw

The all too familiar pattern – As a Director or manager you may have encountered the following scenario. Your business finds itself in a situation where problems arise with a supplier, customer, competitor, another contracting party or with an employee, shareholder or a fellow director. You involve your lawyers, and before you know it the matter has escalated into a full blown dispute. You find yourself being drawn into potentially expensive and protracted court proceedings which appear to have taken on a life of their own. You feel as though you have lost control of the situation. In short, this is a negative scenario in which you have found that you are not able to pro-actively manage the commercial risk.

When you detect the first signs of a commercial dispute you will know that although your company’s position must be protected, several potentially harmful factors may be about to emerge. If all attempts to negotiate a deal direct have proved fruitless lawyers will be instructed, legal costs will be incurred, the relationship between the parties may be irreparably damaged and, crucially, the valuable time of the management team will be deflected away from its main concern; running the business effectively and efficiently.

What Can You Do To Keep Control Of The Situation?

The early stages of a commercial dispute are of critical importance in terms of dispute management. It is often at the early stages when the parties’ positions can become entrenched, which can lead to a breakdown in communications. What is required is the input of an adviser with specialist knowledge of the range of techniques of commercial dispute resolution, including mediation. Your choice of lawyer is obviously important. Specialised commercial dispute resolution lawyers who are driven, as they should be, by their clients’ commercial objectives have embraced the concept of mediation. The modern and effective lawyer focuses on the creation of solutions to their clients’ commercial problems – this is very different approach to the one highlighted at the beginning of this article.

Unfortunately, some lawyers are not staunch advocates of "solution driven" dispute resolution techniques. This is particularly so in the case of mediation, either because of their inexperience of the process or because they retain the blind, competitive old-school approach of drawing up the battle lines before they consider resolution.

You should therefore chose your lawyer carefully. Take legal advice as soon as it becomes apparent that a resolution cannot be reached through direct negotiation. Consider with your adviser all of the different methods of "dispute resolution". Mediation should be considered as one of the options for dispute resolution. It can have considerable cost and speed advantages over alternatives such as litigation, arbitration and adjudication.

The Mediation Option

One method open to both parties if they agree (irrespective of what the contract states) is to refer the dispute to mediation which is usually a great deal more cost effective and quicker than the traditional alternatives. Statistics demonstrate that it is very effective, with approximately 85% of cases being successfully resolved.

Either party can end the mediation process at any stage without any obligation to the other party and without having weakened their legal position. If the mediation is successful, a binding agreement is concluded in which a whole host of commercial considerations can be addressed and resolved if the parties wish.

Mediation is rarely inappropriate and it is no longer seen as a sign of weakness to propose its use. It is private and the terms of settlement can remain confidential. If settlement is achieved you are left to get on with running your business with the stress, strain, cost and distraction of proceedings circumvented or curtailed. Your business relationship may also be preserved if both parties want to achieve that.

"Encouragement" From The Courts To Mediate

Prior to the introduction of the Civil Justice Reforms, surveys revealed that many lawyers were not discussing the option of mediation with their clients despite a desire in boardrooms to learn more about it. The reforms gave mediation a "shot in the arm". The courts have made it clear that if a proposal to refer a dispute to mediation is unreasonably refused that party may incur cost sanctions.

Proactively Manage The Risk

Knowledge of the options available enables you to work with your lawyer to adopt a risk management approach to disputes. If court proceedings are unavoidable, your lawyer should be in a position to advise you on the means by which financial risks associated with the litigation can be managed – the concept of litigation risk management.

Next time your business is involved in a dispute ensure that the option of mediation is considered. It could save you a great deal of time and money!

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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