How do you settle commercial disputes without going to court? - Paris Smith Skip to content

Peter Taylor | 24th April 2019

How do you settle commercial disputes without going to court?


Peter Taylor | 24th April 2019

How do you settle commercial disputes without going to court?

Mediation can hold the key

What is mediation and how does it apply to commercial disputes?

Mediation is a forum for settlement of disputes in which an entirely independent specially trained third party (the mediator) meets the parties who are in dispute to help them negotiate a settlement of their dispute. Other common forums for resolving disputes include court proceedings, arbitrations, adjudications of construction disputes, settlement meetings.

Disputes which are the subject of mediation have a strong chance of settlement according to statistics. The role of the mediator is most commonly as a facilitator of the settlement negotiations.. He or she may test and probe the parties on their arguments but without seeking to evaluate the strengths and weaknesses of the respective arguments.

Mediation is often used in commercial disputes as an alternative to expensive court proceedings. It is particularly useful when the parties wish to preserve a relationship which court proceedings might irretrievably damage. Solutions which the commercial parties might agree in a mediation can be far wider than the limited outcomes which a Court could order.

What does the mediator do? How is the mediator selected and appointed?

The mediator is to facilitate settlement negotiations between the parties in a private and confidential environment. Mediation can take place before any court proceedings are commenced or during the course of court proceedings before a trial takes place. If the parties agree to try to resolve their dispute through a mediation, then they will usually seek to agree who is to be appointed as the mediator. One party will usually nominate up to three trained mediators from which the other would select one or may propose another name as a mediator. If the parties agree the principle of mediation but cannot agree on the mediator then they could agree that the mediator be appointed by a specialist mediation body such as CEDR or ADR Group.

The mediator will speak to each party or their advisers confidentially during the days prior to the mediation, explain how the mediation day will work, what documents he or she would find useful by way of background. The mediator will produce a mediation agreement for the parties to sign to confirm that they agree to a mediation, that they agree that everything that is said at the mediation is confidential and cannot be used in court proceedings if a settlement is not reached. The reason for the confidentiality is to enable the parties to talk freely and share their feelings and views without feeling fettered or constrained. That said, the mediator will ask each party to show respect to the other. The crux of the mediation is that nothing is binding on either party unless or until the terms of a written settlement agreement are agreed and signed. It has been known for a verbal settlement to be reached but for one of the parties to celebrate too much with alcoholic beverage before the written settlement agreement was agreed and signed. In that instance confirmation of the settlement had to be postponed until the following day when all parties were in a fit state to understand the terms of the written agreement and sign it!

The mediation will take place at a venue agreed between the parties usually with enough rooms for each party to have a private space and for there to be a room in which the parties can come together with the mediator. It is imperative that the mediator is independent of the parties and not only impartial but seen to be impartial during the mediation, in what he/she says or does.

He/she will not offer advice to the parties who may attend with their lawyers if they require legal advice. During the course of the mediation the mediator will hold private meetings with each party to discuss the dispute, and explore settlement options. He or she will be careful not to convey to any other party of the contents of such private meetings without the express permission of the party with whom the discussions have been held. The mediator may test or probe a party’s stance during such private meetings and invite a party to consider how a message/offer which the mediator is requested to convey to another party might be received. The mediator will not pressurise the parties to settle but will reinforce the opportunity for settlement and a conclusion to the dispute and the costs which would be incurred if court litigation were to be pursued instead..

What are the benefits of mediation of commercial disputes?

Mediation enables the parties to propose and agree settlement terms which are much wider that those available to a Judge or an Arbitrator. For example it could include a variation of an existing commercial agreement or establishment of a new one.

Mediation is undoubtedly quicker and cheaper than other forums for settlement of disputes such as court litigation or arbitration. Even if a settlement is not reached then it frequently has the effect of narrowing the issues in dispute, or the parties getting a better understanding of the other party’s position and the merits of each side’s arguments. In so doing whilst a settlement may not be agreed at the mediation, it brings the parties closer. Often a settlement can be agreed in the following days or weeks.

Are there any disadvantages of mediation?

In practice there are few adverse consequences of mediation. If mediation is unsuccessful then the parties will have borne the cost of the exercise and may feel that it was fruitless. However, most mediations are successful in achieving a settlement so the benefits to be gained will generally be considered to vastly outweigh the costs to be incurred.
Seldom is there a case which a lawyer would say is a slam dunk winner. It may be that a case has a strong chance of success at Court. One must bear in mind that by the time one has gone through the court process to get to a favourable order, the opponent’s financial position might have changed, possibly as a result of legal costs incurred, and the ability to pay any judgment significantly reduced.

What is the procedure in mediation?

The parties to a dispute will seek to identify potential neutral mediators and agree one to be approached. Thereafter agreeing a date and venue for the mediation which is convenient to all parties, bearing in mind the mediator will also have diary commitment s is the next step.

The mediator will provide a mediation agreement confirming the names of the parties, the date of the mediation, cost of mediation and the nature of the dispute to be mediated. The mediation will set out the basis principles and rules of the mediation.

During the days leading up to the day agreed for the mediation, the parties will submit to the mediator an agreed bundle of documents which will provide the background to the dispute and may be helpful to have available during the mediation. The parties may also give the mediator information and documents privately which they do not want to disclose at that stage to the other party but of which they wish the mediator to be aware. The parties in the dispute will exchange a summary document setting out their view of the dispute and what solution they are looking for.

On the day of the mediation the mediator will introduce him or herself to each party, and reinforce the confidential nature of the mediation. The mediator may often start with a meeting of all parties and invite each to deliver a statement. That is often an opportunity for each party to express how they feel, and in doing so enable the parties to look forward to a settlement rather than spend too long dwelling on the past. During the day the mediator will meet each of the parties privately and discuss the dispute, aspects of it, challenge stances being taken and seek proposals for settlement to put to the other party/parties.

If the parties agree terms of settlement, then the parties and, their lawyers will draft a settlement agreement prior to the parties agreeing and signing it.

How much does mediation cost?

The costs of mediation include the costs of the mediator to prepare for the mediation, understand the issues, liaise with the parties and conduct the mediation. Depending on the issues, the complexity and the level of experience required of the mediator these fees will generally being the range of £1750.00 plus VAT to £5,000 plus VAT depending on the case. There will be the costs of preparing a bundle of the key documents for the mediator prior to the mediation and also a short case summary/position statement by each party. There may be the cost of room hire and refreshments for the day to include. Generally the costs of the mediation will be shared by the parties involved in the dispute. The cost of mediation is therefore very modest compared with the costs of litigation or arbitration.

Is mediation binding?

Mediation is only binding when and if a written settlement agreement is signed by all parties to the mediation. It then becomes a contract between the parties. The mediation is akin to choosing a new car in a garage. You are not committed to it until you have found the one you like, or seen the settlement terms with which you can agree, and signed on the dotted line. No, the parties are not bound by anything in the mediation unless and until they agree to a settlement and sign a settlement agreement.

What does the outcome of a successful mediation feel like?

Parties to mediation have often expressed a sense of relief that a dispute is over. Some have shared a bottle of champagne that they have been able to settle their differences, a concept which might have been unimaginable at the start of the day! An experienced mediator would describe a successful mediation as the parties finding a solution with which they can each live but none are overjoyed.

If you would like more information on mediation then contact me or find out more by visiting our Mediation Services page.

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