Using Mediation To Resolve Business Disputes

There are a few simple truths about business nobody tells you.  One, you will never work harder for anyone than for yourself; two, the customer is not always right, but because they can now write Google reviews which can make or break your enterprise, it is best to let them think they are; and three, business disputes if not managed carefully can drain you of time, money, and peace of mind.

Many people who contact a law firm to assist them with a commercial dispute believe they are starting down a no-return road towards the courthouse.  This is not the case.  In fact, very few business disputes end up in court or a tribunal.  The vast majority are settled via alternative dispute resolution methods, such as negotiation, and mediation.

What is mediation?

Mediation is a form of alternative dispute resolution which involves an independent third-party assisting those in dispute to reach a resolution in a flexible, voluntary, and confidential manner.  The latter is particularly important in the commercial world, where reputation and brand protection are vital.

The most common style of mediation is facilitative mediation, where a mediator will work with the parties to facilitate an agreement, rather than provide a decision on the facts and/or merits of the case.  This puts those involved in the dispute in control of the proceedings, leading to resolutions which are more likely to stick.  In addition, when parties to a dispute are in control of how the disagreement is resolved, commercial relations have a greater chance of remaining positive.  Long-term relationships, arrangements in small or sensitive markets, and joint ventures relationships can be restored.

What are the advantages of mediation in commercial disputes?

Other advantages which stem from choosing mediation to resolve business disputes include:

  • Cost-effectiveness – mediation is cheaper than formal litigation, not only in terms of legal fees but also the risk of paying the other side’s costs and the resources needed to manage a case which is headed for trial.
  • Choice of mediator – it is for the parties themselves to choose a mediator. This provides scope to choose someone who has experience and expertise in the parties’ commercial sector.
  • Confidentiality and privilege – agreements to participate in mediation usually attract the protection of confidentiality and privilege.
  • More flexible remedies – unlike litigation, mediation is based on a win-win philosophy. This approach provides for more flexible and commercially astute solutions, for example, extensions being granted or new financing.  This can lead to further commercial opportunities between the parties.
  • Cultural sensitivity – if required, a team of mediators can be engaged who represent a diverse range of cultural backgrounds. Bi-lingual mediators can also be brought in to ensure there is no misunderstandings due to language gaps.
  • Low risk – unlike litigation, there is no risk attached to attempting to resolve the dispute via mediation. Even if the dispute is not settled in mediation, going through the process can help narrow down issues, helping parties understand each other’s position and perspective, thereby increasing the chances of an early settlement.

Is a decision made in mediation legally binding?

Yes and no.  In a commercial dispute, any agreement reached in mediation is only legally binding once the parties have agreed on a settlement of their dispute, AND it is deduced to writing AND then signed.  Therefore, an agreement can be reached, but one party may refuse to sign the final written document, and there is no legal method to compel them to do so, even if they verbally agreed to the resolution.

Are mediation proceedings without prejudice?

Negotiations and correspondence involved in the mediation process are protected by without prejudice privilege.  This means that if the matter goes to trial, the court cannot view what went on during or in connection with the mediation, unless the parties choose to waive their rights to without prejudice privilege. Correspondence relating to the mediation will be marked “without prejudice” by the parties Solicitors.

Who pays for mediation?

Unlike formal litigation, there is often no risk of bearing the other side’s cost in mediation.  The usual way mediation is paid for is:

  • The parties agree to share the mediator’s fees, expenses (e.g. travel) and other costs of the mediation (e.g. venue, food and refreshments).
  • The parties agree to bear their own legal costs (this includes preparation for, participation in, and representation at the mediation).

However, payment arrangements can be flexible, for example, one party may offer to pay all the mediator’s fees as an enticement for the other side to agree to mediate.  In addition, parties will often agree in advance that if the case does not settle in mediation, the cost of the process will be included in the overall costs to be assessed by the judge at trial.

In summary

Mediation provides a cost-effective, commercially astute, non-confrontational solution to resolving a business dispute.  Your Solicitor will provide you with further information regarding how mediation works and the advantages and disadvantages of the process.

Please note, this article does not constitute legal advice. 

Hart Reade Solicitors are a full-service law firm with offices in Eastbourne, Hailsham, Polegate and Meads.  We hold a Lexcel Accreditation from the Law Society of England and Wales.  To make an appointment with one of our dispute resolution Solicitors, please phone our office on 01323 727 321.

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