Media and Mediation: Putting Wheels on the Deals [Deal Mediation]

In previous articles placed on this web site, I have explored my interests, as a media lawyer, in the appropriate use of mediation in media disputes. In this article I seek to colour in another section of the media/mediation map by looking at the logical precursor to dispute resolution: Deal Mediation.

What do I mean by this? I am describing any situation where a mediator is employed by parties in constructive negotiation. It is the use of the neutral third party to facilitate the deal. It could be argued that reconciling two conflicting positional bargaining entities, and coming up with an agreement, has exactly the same elements as those we generally recognise in "dispute resolution". I will explore whether that analysis carries any weight, but in any event I am focusing on the negotiation process that results in a commercial contract.

It has been said that mediation is in many cases merely specialised diplomacy. In terms of behavioural patterns, it cannot be denied that there must be overlap between the roles of the diplomat in the role of the mediator. There are differences. The diplomat has a brief to act for some sovereign entity. Though the mediator may exercise the role through shuttle diplomacy, the greater degree of objectivity and neutrality is essential. As I describe later, in deal mediation I see a potential separation between the "not and bolts" of the commercial deal and the negotiation of the dispute procedures to be established and given contractual status. In media deals, the mediator is role may be confined to the latter. This would distinguish the deals from some of the areas where deal mediation is established, such as BOC contracts for large engineering works (there are documented studies of dam building projects between governments and multinational firms, for example).

My early interest in this area of mediation was prompted by a very persuasive presentation given at a CEDR forum in 2003. Michael Leathes of BAT gave almost as much weight to mediation as a tool in successfully brokering a deal as he did in its efficacy in reducing the burden of litigation. Hitherto my focus had been on disputes and I decided to review the conventional literature on mediation.

When it is distilled down, it must be accepted that mediation is not rocket science. Its procedure can be adequately described in a few paragraphs. There is scope to muse on what the proper "dos and don'ts" are for a mediator. There are some technical issues, such as liability of mediators, whether confidentiality can be breached by the court or otherwise, and so on. Much has been written on schemes in operation and statistical analysis of the uptake of mediation. What I did not find very much of was "deal mediation".

I found little more than a paragraph in my standard handbook on the subject. I had expected to find more in "International Mediation" but even in that volume it was not confronted directly. I wondered why it was not there. Admittedly, it was not an option that had previously demanded my attention, so I will assume, until told otherwise, that most mediators, and lawyers who are mediation-friendly, have possibly not paid enough attention to this area. If mediation has a relatively low profile (that is rising), its chronological antecedent, deal mediation, is trailing in its wake.

A fairly seminal article is that published by Hager and Pritchard¹, stating very succinctly:

"Deal mediation is a new potentially powerful tool for lawyers to negotiate global deals and for others who seek their agreements in complex environments. It has as much to do with issues of culture, values, trust and adaptability as it has to do with law and contract."

This article can be traced through a number of mediation projects, including community mediation in Africa². In an area where published discussion is limited, that article casts a long shadow.

The advantage of having a neutral involved in the establishment and continuation of a relationship has some conceptual appeal, whether it has widespread commercial appeal will probably depend on, as usual, the financial considerations.

In terms of media sector awareness, the objective must be to highlight those areas of the media where lengthy complex disputes are not uncommon, and ask the deal makers and executive players to think long and hard on whether involving a mediator is an added expense or simply another level of insurance.

It makes sense to look first at those media contracts that have some of the characteristics of the deals described above. One of the most obvious would be large software projects. I have looked at this example as one of the disputes where mediation lends itself very readily³. It is therefore entirely logical to engage a mediator in the negotiation of such a contract and the early policing of the disagreements that almost inevitably arise.

Taking some note of experience in the tobacco industry, I would alert all those dealing in franchising or licensing, particularly with an international angle, to the consideration of a mediator. It does no harm in any checklist to add in considerations which you may later delete as the deal involves.

Distribution agreements frequently hit the rails and there may be many, in the music business particularly, where the availability of a neutral to police detailed disputes may save time and money. In almost every commercial deal delay is prejudicial to all parties, with distribution in film or music, it can be fatal.

Initial soundings raise⁴ more questions than anything else. In addition to likely lawyer resistance, it may be expected that commercial clients will require statistical evidence of the benefits of a cost brought forward (the mediator) if it is to be set off against a contingent cost later in the life of the agreement.

This points back to the central theme of my notes on this site: to use mediation effectively requires an expert analysis of any given dispute, or, in this case, commercial agreement. My thoughts repeatedly turn back to those cases where I have seen a high likelihood of dispute materialise into complex and time wasting litigation. The situation of a new software programme being installed by a broadcaster, or similar organisation, is most prominent in my thoughts.

It may be that in such cases the mediator does not mediate the actual commercial nuts and bolts of the deal, but monitors the procedures which are put in place to regulate time-consuming disputes.

It may be argued that this is no more than spending money on having a mediation clause drafted. I would suggest that there is more methodology and structure that can be put in place than a simple standard clause.

A recurring issue is the confidence of the parties in a mediator. To have that mediator known and in place at the outset of negotiations is an advantage which may cost nothing at all. For a nominal fee, the mediator may comment on the mediation clause and any consequential procedures that are put in place. In many situations, these steps may avoid a pre-dispute dispute (about appointing a mediator or a mediation organisation). When a problem does arise (and in the situation which I am thinking of, that is usually when the UATs [User Acceptance

Tests] are showing that the new system is not working) the parties can swiftly move to the mediator. There is so much variation in how these sorts of tests are sets are administered that I have no doubt that the presence of a mediator could forestall litigation and certainly speed up the testing process.

In considering transnational agreements, mediation perhaps almost fuses with the diplomacy. Current practice suggests that the vast majority of international deals and trading functions quite happily with standard patterns of negotiation. Nevertheless, anecdotal evidence suggests that in new trading relationships -- for example with former Eastern bloc countries -- there may be limits on accessibility and opportunities for mediators from countries which both of the contracting parties have good relations with two facilitate agreements which might not otherwise happen or at least bring them to a conclusion in the form which is more likely to endure. It is precisely in these sort of situations where any minor disagreement could escalate and the function of the fully-briefed mediator, acting as a "long stop", may forestall a rupture in a contractual relationship which might otherwise occur.

I am beginning to consider it almost a necessity to offer the sceptics view of any suggestions I make for greater use of mediation. In terms of objections, the usual suspects may be brought to bear. In this case, the lawyers "we do a good job anyway" argument may sound very loud indeed. It is one case where I would have to accept that mediation is an extra cost. Rather than displacing the inevitable and greater cost of litigation, it is an insurance premium against a contingent problem in the future.

To meet those (and other) objections, I would restate that I am not offering deal mediation as a new or universal practice. Precisely in line with my views on dispute mediation, I suggest that it is the responsibility of contracting parties and their advisers to begin to see those situations where the early use of a mediator is in their own commercial interests. From the above, some possible categories of commercial deal, both within the media and outside it, begin to suggest themselves.

I believe it is relatively easy to conclude that the reasons why mediation is a "good thing" for disputes with certain characteristics apply equally in deal mediation. There are indicators that can be identified as warning signs. When those feature in your commercial ambitions and potential negotiations, it would be prudent to consider the mediation option, to cost this as a medium to long term adjunct to the contractual relationship, and then reach a decision on whether to use it or not. Inevitably, contingencies are being weighed and there is no accurate way to measure whether the employment of the mediator has been a commercial benefit. I do not consider that that uncertainty should rule out the process of considering the use of the mediator in both assisting the negotiation of a deal and then providing a continuing lifejacket to keep that deal afloat.

My research into this area continues -- and I would be grateful for any response from readers who have experience of deal mediation generally, especially in the media. I am also happy to draw the fire of any who wish to speak from the Devil's Advocate camp!

^{1 See www.dundee.ac.uk/cepmlp/journal/html/vol6/articles6-12.html
2 See www.africaleadership.org.library.stability.othr.htm
3 See "Media and Mediation: Contracts" – on this website
4 Pettersson, Scott: CEO LEADR, see www.leadr.com.au}

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