Commercial mediation - an overview
What is mediation?
Mediation is one of the most widely recognised forms of alternative dispute resolution (“ADR”). It takes the form of a formal negotiation, assisted by a neutral third party who guides the negotiation process, acts as the parties’ go-between and helps them arrive at a settlement if possible.
Unless and until a formal settlement agreement has been entered into, a mediation is non-binding. The consensual nature of process means that either party can walk away from the process at any time.
The advantages of mediation compared to more formal forms of dispute resolution include that:
- the process is flexible and can take account of commercial issues (such as a desire to maintain a business relationship) as well as the legal strengths of the parties’ positions
- a good mediator will be able to introduce novel ways of resolving disputes that the parties may not have considered
- the fact that parties have gone to the trouble of arranging the mediation means they are more likely to enter into negotiations with a view to settling, rather than “going through the motions”
- discussions with the mediator are private and confidential. Any offers or concessions made in the mediation are “without prejudice” and cannot be revealed by the other side in later proceedings in court
- mediation may save the costs of a formal litigation process.
When is mediation unsuitable?
Mediation may be less suitable where:
- a fundamental principle is involved which requires judicial determination to set a precedent or interpret legislation, e.g. a civil rights matter or judicial review
- emergency protective relief, such as an injunction, is sought by one of the parties
- one party has clearly demonstrated its refusal to negotiate.
How does it work?
The mediation process usually comprises the following steps:
- the conduct of the mediation is agreed between the parties and mediator
- in advance of the mediation the parties exchange statements setting out their case and the matters on which they rely to support their arguments
- the mediation often opens with a joint session at which all parties meet with the mediator and present their opening statements
- in most jurisdictions, the parties then retire to separate rooms and the mediator meets each separately. During this phase, the mediator often shuttles between the parties, probing each side’s position and giving advice/ views on the strengths of the party’s case. The parties communicate with the mediator on a confidential basis, perhaps authorising the mediator to give particular information to the other side but also revealing information that only the mediator is allowed to know
- the mediation will continue with private and group sessions until either a settlement is reached, the parties agree to suspend the mediation, they and/ or the mediator realise that one will not be achieved, or the time runs out.
Mediations are most commonly fixed for a day but may be longer or shorter. If the parties are able to reach a settlement of their dispute, this will be reflected in an agreement which is, generally, signed by them on the day. It is usually a requirement of the mediation agreement that someone with authority to bind each party is present at the mediation. If the mediation does not succeed in resolving the dispute the parties may walk away. However, this does not preclude them from meeting again with or without the mediator now that the issues have been narrowed and/or they have a better understanding of their opponent’s case. Alternatively, if it is clear that no agreement will be reached, the parties are free to resume more formal dispute resolution methods, such as court or arbitration proceedings
A voluntary process or court ordered?
In most jurisdictions, the choice to engage in mediation remains entirely that of the parties – on the whole, courts do not have the power to force parties to enter into negotiations. Some argue that the success of mediation relies on the willingness of parties to reconsider their positions, so it would run contrary to the spirit of the process for unwilling disputants to be forced to enter into discussions. Others disagree, and some studies indicate the settlement rate of enforced mediation is comparable to that of purely voluntary mediation. However, courts are increasingly taking the view that parties should at least attempt to settle their differences before resorting to court proceedings.
This is particularly the case in European Union member states following the introduction of the Mediation Directive. Other jurisdictions have gone even further. In Australia the court may order mediation even without the parties’ consent, while in Italy, Japan and Indonesia, parties are required to attempt mediation before being permitted to commence certain types of proceedings.
Where parties have agreed a mediation clause in their original contract, they may be held to it or face cost consequences. This is the position in the UK, U.S. and in Singapore, where parties are even obliged to mediate in good faith. In others, a mediation clause will rarely be upheld by a court if one decides not to abide by it, although the failure to do so may be treated as a breach of contract and penalised by damages, as is the case in Spain and Sweden.
The format of this interactive review
Mediation is recognised throughout the commercial world, but there remain differences in how the process operates in different jurisdictions and, in particular, in how far the legislature or court system will go to compel parties to mediate. This interactive comparative review considers how mediation works across 21 jurisdictions. It asks, for each jurisdiction, the following questions:
- What is the status of mediation in this jurisdiction?
- How is a mediation conducted?
- Is there any obligation on litigants to mediate?
- Does the court have powers to support a mediation?
- Does failure to mediate attract adverse cost consequences?
- Are mediations confidential?
- How are settlement agreements enforced?
- Is there a system of accreditation and/or regulatory body for mediators?
This comparative review is intended to highlight issues rather than to provide comprehensive advice.