Practical considerations when mediating a business dispute

If your business is involved in a dispute and it is proving impossible to reach an agreement, then it may be time to seek professional advice from a third party. Rather than heading straight to court, an alternative approach is to attempt to seek a resolution via mediation.

It is widely accepted that mediation is quicker and more cost-effective than the traditional trial-based litigation process. As David Hacker Litigation Partner explains, ‘mediation can also have added commercial benefits, especially if you can maintain or even enhance the commercial relationship’.

Approaching mediation requires businesses to consider several important factors which can often make or break a mediation.

Keep the end in mind

The principle consideration for any business approaching mediation is to remember the importance of resolving this dispute. The success of a company often rests on a narrow financial margin, and if the key individuals in a business are distracted from growing the business it can have a profound effect on both the balance sheet and future opportunities.

It is important for businesses to reflect on why they are mediating at the start of the process and throughout the entire exercise as tactics are deployed.

Establish your red lines

Having determined that mediation is an appropriate course of action, your solicitors will need to work closely with you to establish how the dispute could be resolved within the realities of your business operations.

This is a commercial exercise in which the business will need to consider their preferred outcome; the best offer which can be advanced as well what the business perceives as the worst outcome. This is an exercise which can be rehearsed well in advance of mediation but is also relevant as each party makes offers or rejects offers advanced to them.

Timing

Apart from construction disputes, where the parties are required by pre-action conduct to meet at least once before court proceedings are commenced, there is no general rule requiring parties to mediate at any specific stage in a dispute.

It is important to understand the dispute from both sides of the table and businesses will need to take a pragmatic view on timing. However, the golden rule is that the time is right when you have had enough time to review your opponent’s position in the dispute and you have had opportunity to assess and discuss the other side’s position with your solicitor.

Choosing a mediator

Having agreed to enter mediation the next consideration is who should the mediator be. Often one of the parties in the dispute will provide a list of potential mediators or propose that an independent third party; such as the Institute of Arbitrators, selects a mediator for the dispute. Your solicitor will be best placed to advise you on capable and experienced mediators.

Choosing a venue and timing

Using one of the solicitors’ offices may seem an easy option, but this may not be perceived as neutral by the other party. Alternatives include a hotel or business centre venue. If the mediator is a barrister their chambers may be prepared to host the mediation.

Often the mediator will guide the parties as to the timing of the mediation. A relatively simple dispute can be resolved within half a day, but a more complex mediation can take up to several days. The parties in a dispute should be minded that this is a valuable investment of time if it avoids costly and protracted litigation.

When to settle?

In mediation no one party can truly be seen as a winner; the purpose of mediation is to reach a compromise. In a mediation, the final position is driven by the parties but facilitated by the mediator. It is common practice during the process for the mediator to remind the parties as to their position and where they have come from and what could be a practical step to achieving settlement. The mediator will draw proceedings to the close when they feel the parties have achieved the outcome they both seek.

In some circumstances mediation will not result in an agreed or satisfactory settlement. This should not always be perceived as a failure, as often mediation without settlement will still carry some success. For example, it may be that the mediation has narrowed down the issues in dispute which saves cost and time in the long run. Alternatively, it may demonstrate to the parties in litigation that a second round of mediation could be beneficial to achieving settlement.