Over the past six months, we have experienced a significant rise in the uptake of mediation as an alternative means of dispute resolution on a variety of issues, including large project-based disputes where parties need to maintain a good working relationship for the remainder of the project.
What is mediation?
Mediation is a process whereby an independent, specially trained third party mediator facilitates private and confidential settlement discussions between parties. Mediation is designed to resolve disputes to the (relative) satisfaction of both parties at an early stage, at a lower cost than full litigation proceedings, and with the best possibility of maintaining parties' relationships. A survey conducted by the Centre for Effective Dispute Resolution (CEDR) in 2010 found that 75% of mediated cases are settled on the day of the mediation, with a further 14% settling shortly thereafter. These statistics are certainly borne out in our recent experience.
We have been involved in advising clients in four separate mediations throughout the UK over the last six months, all of which were resolved successfully on the day of the mediation. Three of these cases were highly complex, technical disputes involving multi-million pound claims where parties had been millions of pounds apart prior to attending mediation. The success rate in these recent mediations is especially remarkable considering that in two of the cases; there were no significant settlement discussions beforehand. On the basis of these and other cases, we are in no doubt as to the potential of mediation for effectively resolving even the most complex and high value of disputes.
Mediation has the benefit of being able to offer creative solutions, explanations and apologies; examples of things that parties often desire (sometimes without clearly knowing it), but which are not readily available though other dispute procedures. Mediation at its best allows both parties to achieve what they consider to be a successful outcome. Only in rare exceptions is that possible in an adversarial process such as court, arbitration or adjudication. Mediation can therefore allow relationships to remain intact and parties may continue to work together to deliver a particular project for example. Also, a successful outcome may not be measured in an overall resolution, but may comprise resolving part-issues, or identifying the true issues in dispute.
Benefits of mediation
- The final settlement in a mediation process should be a win/win scenario achieved through negotiation. This is in stark contrast to arbitration and litigation, which involves one party against another trying to take advantage of the other's argumentative loopholes.
- Mediation can be successful within days, even if there were no significant settlement discussions beforehand. Litigation and arbitration are lengthy processes and likely to disrupt long-term business relations.
- The costs of mediation are relatively minimal compared to arbitration and litigation expenses. This is the greatest motivator for parties to consider mediation.
- Mediation gives parties the option to accept or reject settlement proposals giving them an element of control over the process not otherwise available.
- The entire mediation process is confidential and the outcome cannot be disclosed without the agreement of both parties. This is in contrast to litigation where a public judgment will be issued, accessible to all.
Limitations to mediation
- The likelihood for success of mediation rests on the parties' willingness to make concessions in order to achieve a positive outcome. A skilled mediator can persuade and encourage parties, but without a desire to cooperate and actually resolve the issues, little progress will be made.
- Mediation is not legally binding unless both parties enter into an agreement to make it so. As such, an unwilling participant may seek to use mediation as a delaying tactic, an information gathering exercise, or simply to demonstrate to the Court that they attended mediation, which may be a relevant consideration in any award of legal expenses.
- Mediation is not suitable for every case. It is unlikely to be successful where parties are unable to make concessions due to external factors; or where judicial intervention is necessary to obtain interim orders at short notice, or to determine a question of law that is central to the dispute.
- If parties enter the mediation process prematurely, they may not have gathered sufficient information about their own, or the other side's position, to be able to engage in meaningful discussion about how to resolve the issues. There may also be technical issues or legal principles that require to be ironed out first so that neither party goes into mediation with a fundamental misunderstanding of the key issues.
Mediation is inarguably a successful process. In our view, it is a viable alternative to formal adversarial proceedings in the Scottish courts, at arbitration or adjudication, which are often expensive and lengthy. However, it should be noted that mediation is not a panacea and cannot automatically resolve all irreconcilable differences between parties.