What is Commercial Mediation?
Commercial Mediation is a private and confidential dispute resolution process in which an independent and neutral third party, the Mediator, seeks to help the parties to reach a mutually acceptable negotiated agreement. The process usually involves some level of briefing of the Mediator before the Mediation itself, which typically lasts a day. The Mediation is attended by a ‘decision maker’ for each party as well as their legal advisors, relevant experts and insurers (if any). The process is voluntary and either party can withdraw at any time. However, if a settlement is reached it is legally binding.
What is the Role of the Mediator?
The Mediator is a facilitator appointed by the parties. The Mediator does not decide who is right or wrong or issue a judgment in favour of one party. The Mediator’s function is to support the process, gather information and assist in problem-solving. The Mediator seeks to isolate the issues, help the parties to evaluate the strengths and weaknesses of each other’s case and encourage the parties to work co-operatively towards settlement. This is done in private meetings between the Mediator and each party and as appropriate in joint meetings where both parties (or some of their representatives) attend with the Mediator. The Mediator will assist the parties to negotiate a settlement in the same way, through the use of private and joint meetings.
What are the Key Advantages of Commercial Mediation?
Control – Mediation is based on both parties taking control. ‘Ownership’ of the dispute and the outcome remains with the parties. They are actively involved and can express their own points of view throughout the entire process. By taking control and finding a solution that works for them, both parties avoid the risk of having a less satisfactory solution imposed on them by the Court.
Confidentiality – The process is confidential and without prejudice to any proceedings. Information and documentation shared privately with the Mediator cannot be passed to the other party during the Mediation without express permission. Furthermore, the outcome of the Mediation is only publicised if the parties so agree.
Flexibility & Commerciality – Mediation concentrates on commercially based settlements and focuses party’s minds on the realistic resolution of problems. Parties are encouraged to make non-binding concessions and to propose their own formulae for resolving the dispute. Mediation provides parties with an opportunity to negotiate a tailored solution that will suit their mutual needs; often the solution will deliver more for both parties than any Court judgment could. It is a particularly valuable process where there is an ongoing commercial relationship, which parties wish to preserve.
Time saving – Commercial Mediation offers a speedy alternative to litigation. Typically the Mediation will take place within four to six weeks of the Mediation Agreement being signed and in urgent situations even more quickly. While the lead time to get a case to hearing in the courts varies, it usually takes between 3 and 6 months in the Commercial Court (which has jurisdiction for claims over €1 million and certain types of claims) and between 18 and 24 months in the High Court.
Financial Saving – Commercial Mediation provides a very economic alternative to litigation. Given the speed of the process it enables parties to move on with their businesses more quickly and the resulting saving in terms of management time can be very significant. Equally the legal costs and expenses associated with the process are significantly less than the costs of litigating a dispute to trial. The expenses include the established, it has been estimated that the cost of mediation is approximately 20% of the cost of going to court. In Commercial Court cases and in personal injury cases respectively, mediation may be suggested or imposed by a Court during the course of proceedings and refusal to participate or do so in good faith may have negative cost consequences.
What is involved in the Mediation Process?
Mediation typically involves five phases, one in advance of the Mediation and the others on the day of the Mediation.
(1) The Preparation Phase – This involves selection of the Mediator and agreeing the terms of the Mediation, which are set out in a mediation agreement (typically 3 or 4 pages long). The terms will include time and venue for the Mediation, details of the Mediator’s fees, the nature of information or documentation (such as short case summaries) to be exchanged by the parties in advance of the Mediation, details of who will attend the Mediation on each side, role of the Mediator as facilitator rather than decision maker and confirmation that the process is confidential and without prejudice to any proceedings. Preparation is the key to successful mediation and the intensity of preparation will usually be no less than that which is put in immediately before a trial. For both parties a risk analysis is crucial and the best and worst case outcomes ought to be identified in advance of the Mediation. The Mediator will use this preparation stage to build the confidence of all parties in the mediation process and in him/her.
(2) The Opening Phase – Many mediations start with the parties meeting in a joint (‘plenary’) session at which everyone is introduced, the Mediator outlines the procedure for the day and the parties typically make a short opening statement to each other setting out their position and objectives. Mediators decide on a case by case basis whether it is appropriate to have an opening joint meeting and if so what form it should take.
(3) The Exploration Phase – Private meetings take place between each party and the Mediator. The Mediator will seek to explore the nature of each party’s case, their aims and objectives and engage in ‘shuttle diplomacy’. Mediation often needs to deal with the challenge of parties’ desire for revenge or vindication of their position. The Mediator will tackle this challenge by exploring what each side’s true motivation is and will use this exploratory phase to build trust and help each party to hear what the other is really saying. In this way the ground is prepared for settlement negotiations between the parties by clarification of their respective issues and agendas.
(4) The Negotiation Phase – Direct and indirect negotiations begin with the assistance of the Mediator who challenges each party, in order to explore the strengths and weaknesses of their position The Mediator will use his/her skills to present, re-frame and help settlement possibilities. Working groups of experts or lawyers may be established as parties discuss the issues in an attempt to break the deadlock.
(5) The Concluding Phase – Lawyers representing both sides draw up the agreement recording the settlement. The mediator will seek to ensure that a Settlement Agreement is both viable and sustainable. The objectives are that the Settlement Agreement satisfies the parties, deals with all the issues, is workable and practical and minimises the possibility of future dispute. Once the settlement is reached, it becomes legally binding.
What is the Success Rate of Commercial Mediation in Ireland?
Commercial Mediation is in its relative infancy in Ireland. Nationwide statistics are very hard to come by. Some of the facts we do know are as follows:
• The construction industry embraced Mediation and included a Mediation clause as the first option for parties in dispute resolution in its standard contracts. A survey conducted by the Construction Industry Federation indicates that Mediation was chosen for 60% of disputes between 2001 and 2005 and of these 81% were successfully resolved giving rise to an estimated saving of €200m to the industry.
• Figures available from the Commercial Court indicate that between 2005 and 2008 where the parties agreed to mediate their disputes after commencing proceedings in the Court 63% of those cases settled following Mediation.
What if No Settlement is Reached?
If settlement is not reached at the Mediation it is often reached shortly afterwards. At worst the Mediation will usually assist in a streamlining of the issues in any subsequent litigation. Nothing is lost by exploring possible settlement of a case at Mediation. The cost of preparing for the process stands to each party’s benefit in any subsequent litigation and as the process is confidential and without prejudice, concessions made cannot be relied upon or referred to in the litigation.
When is Mediation not advisable?
We believe that Mediation should be considered as the first option for resolving disputes, whatever their nature. We also believe that in the majority of cases Mediation can be suitably deployed. There are though two obvious instances where Court intervention may be necessary, namely when a precedent point arises that needs to be determined for the future (such as interpreting a clause in a contract that is in wide use) or a party needs urgent Court relief (such an injunction to stop a particular event occurring).