The high cost of litigation is moving some disputes into the informal proceedings of mediation where reputations and business integrity can be maintained. Fiona Heyes explains
Mediation is one of the methods of alternative dispute resolution (ADR) that takes place privately with the assistance of a neutral third party. The mediator will not come to a view about the merits of the claim, but is a facilitator, helping the parties reach a consensual resolution of their dispute.
Since the process is in private, with the parties and their lawyers if necessary, discussions at the mediation are confidential and cannot be referred to at a later stage if the dispute isn't resolved. Similarly, any documents prepared for use at mediation cannot be used in any subsequent litigation.
Other methods of ADR include Early Neutral Evaluation where the parties invite a third party, possibly a judge or an expert, to give a view about the dispute or particular issues in it. Again it is non-binding on the parties. This evaluation is particularly useful for resolving particular issues such as those involving an interpretation of law or a technical issue requiring expert input.
Increasingly common
There has been pressure by the courts for some time to encourage parties to embrace ADR. The courts in their attempts to actively manage cases will encourage the parties to use some form of alternative dispute resolution procedure to resolve cases. It will become increasingly common to use mediation early in a dispute. Litigation should only be the last resort and is only for those with deep pockets.
Mediation clauses, for example an agreement that no parties will commence court proceedings until they have attempted to settle the dispute by mediation, are being included in all sorts of contracts, including insurance policies. Such a process may be imposed upon a party. However, there is merit in taking the initiative and suggesting early mediation.
It could be assumed that mediation is only a step to be explored once proceedings were up and running, following disclosure of a party's documents, exchange of witness statements and any expert evidence. That is not the case. There are benefits in using mediation before proceedings have even been issued. The benefits of mediation in terms of cost saving and continuation of the relationship between the parties in dispute are greater the earlier a resolution is reached.
The benefits of bringing in a neutral third party to assist in the resolution of a dispute at this stage is clear:
entrenched at this stage
settled while preserving the commercial relationship and market reputation
Opposing parties
It is important to involve the mediator early. There is a cost element to this, but it is important in getting the opposing parties to "buy into the process". The input of the parties themselves, not simply their legal representatives to the process, is again very important to its success. If you have spent time meeting the mediator and assisting in preparing a summary of the key issues in dispute human nature is such that you are more inclined to want to see a resolution.
In our experience it is useful to agree, often in conjunction with the mediator, what sort of information the case summary should contain and also what documents should be provided by either party. There is no need for each party to provide copies of all documents. The reality of the situation is that only very few are relevant. It is also important to have a legal advisor who is completely familiar with the business, the legal issues involved and the mediation process.
Legal costs
Mediation is becoming increasingly common and is being used as a tool to resolve a wide variety of disputes. The benefits to the commercial relationship of being able to reach a resolution that both parties can live with at an early stage and without spending a fortune in legal costs should not be underestimated.
Very few disputes are unsuitable for mediation and if a resolution is not reached on the day it may be reached shortly afterwards.
Land case saved £500,000
This case is an example of the flexibility of the mediation process and the costs savings that can be achieved.
The case involved a £4m claim involving some land. Proceedings had been served but the parties had not provided copies of all their documents and there was no expert evidence or witness statements.
Everyone recognised it would be extremely expensive to take the next step and so the parties agreed to mediate. The mediation took place over two days and the case settled.
Mediation was a flexible enough process to incorporate as part of the settlement the transfer of pieces of land owned by the other defendants. That offer unlocked the deal and made a much reduced cash offer commercially acceptable to the claimant. Costs of approximately £500,000 were saved.
