Benefits of Mediation in Commercial Disputes

Lawyers are often stereotyped as being interested in prolonging an expensive Court action, more often the opposite is true. In this article, we set out some of the benefits of mediation in commercial disputes.

Lawyers know that Court cases are expensive and the results are often uncertain. Lawyers interested in preserving long-standing relationships with their clients will often recommend alternative options instead of going to Court – mediation being just one of these options.

What exactly is Mediation?

Mediation is one form of alternative dispute resolution (ADR). Other ADR processes include early neutral evaluation, expert determination, and arbitration.

In essence, mediation is an informal conflict resolution process brought before a neutral and independent third party, the mediator. It gives the parties a confidential opportunity to discuss their issues, perhaps clear up misunderstandings, and find areas of agreement in a way that would never be possible in a civil court case.

It is a voluntary process, and typically the mediator has no authority to make a binding decision unless both parties agree to give the mediator that power which is dealt with before the mediation starts. An example of a process where a mediator can make a binding decision is sometimes referred to as “Med-Arb” and is, basically, a hybrid of mediation and arbitration.

When parties should consider mediation

In practical terms, mediation is likely to be quicker and more cost-effective than the more formal processes of arbitration or court proceedings; although most courts nowadays have an internal mediation program where a Registrar (and sometimes a judge) will act as mediator.

In our view, mediation should be considered as early as possible after a dispute has arisen. In some cases, mediation might even be used to assist in difficult negotiations as a means of preventing a dispute from arising. It is appropriate in almost all circumstances, regardless of whether a dispute involves complex issues and/or multiple parties.

It is sometimes said that mediation is a process to be continued, rather than a task to be completed. Even if the first mediation isn’t successful, there is often some benefit, such as narrowing the issues that are truly in dispute. In this way, even if there is no settlement, mediation can in some cases actually make litigation more cost-effective because the “battle lines” can be drawn around a more confined area.

Mediation can be implemented prior to, or in conjunction with, other forms of dispute resolution such as arbitration or court proceedings. Given the potentially enormous costs (both financial and emotional) of full-scale litigation, the modern litigator’s motto really should be, “If your first mediation doesn’t succeed, try, try, try again.”

Benefits of mediation over formal court processes

There are many benefits of mediation, including:

  • You get to decide:

The responsibility for coming to an agreement remains with the parties to the dispute. The mediator doesn’t make the decisions, and you don’t need to “roll the dice” in the courtroom. Of course, it is very important to consider obtaining legal advice before attending mediation so that you understand your legal rights and are in a position to make decisions that are in your best interests.

  • The focus is interests:

Mediation looks to the underlying causes of the problem and tries to identify each party’s underlying interests, as opposed to their legal position, so that the parties can come up with creative and mutual solutions.

  • For a continuing relationship:

Neighbours, divorcing parents, employers and their employees, business partners, and family members often have to continue to deal with each other cooperatively, despite their dispute. Going to court can divide people and increase hostility. Mediation looks to the future. It helps end the problem, not the relationship.

  • You can say what you need the other side to hear:

Each person is encouraged to tell their own story in their own way and the mediation process is structured to help each party see things from the other person’s perspective – the parties don’t have to agree with what the other says but a little bit of understanding goes a long way towards settlement.

  • Higher satisfaction:

Participants in mediation report higher satisfaction rates than people who go to Court. Because of their active involvement, they have a higher commitment to upholding the settlement than people who have a judge (or even an arbitrator) impose a decision on them. There tends to be a high level of compliance with mediated agreements.

  • Informality:

Mediation can be less intimidating than going to Court. Since there are no strict rules of procedure, this flexibility allows the people involved to find the best path to agreement. Although it is normal for any dispute resolution to be taxing emotionally, mediation is a process that can be much less confronting and is conducted in a much more comfortable environment than litigation.

  • Faster than going to court:

Years may pass before a case comes to trial, while a mediated agreement may be obtained in a couple of hours or in sessions over a few weeks.

  • Lower cost:

The Court process is expensive, and costs can exceed benefits. Mediations are available at low cost for some types of cases. If you can’t agree, other legal options are still possible. Even a partial settlement can lessen later litigation fees.

  • Privacy:

Unlike most Court cases, which are matters of public record, mediations are confidential.

Where mediation is not the solution

Some cases don’t readily lend themselves to mediation. For instance, mediation may not be appropriate in circumstances where an injunction or other urgent Court orders are required to protect your rights. This is something you should always discuss with your lawyer.

Also, both parties have to be fully engaged in the mediation process. Mediators are entitled to terminate a mediation in certain situations, such as where one party is acting in bad faith and using the mediation process to try to get an advantage in court.

Conclusion

Mediation is an alternative to financially and emotionally costly and time-consuming court proceedings. It is suitable for people who are willing to communicate with the other party and attempt to better understand and settle their dispute with the help of a trained third party.

Our director Rob Lilley is a nationally-accredited mediator and Professional Member of the Resolution Institute. Rob accepts briefs to mediate a wide range of commercial and civil disputes.

If you want to know more about our mediation services or to discuss the potential benefits of mediation in your particular circumstances, please contact us on (08) 9380 9288 or email robert@dclawyers.com.au.

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