• Avinder Laroya

What is Mediation? How Can Mediation be Used Effectively in Business?

Updated: Feb 8, 2021

Why you should read this:

This article is aimed to provide clarity on the mediation procedure compared to court litigation. Mediation is an alternative dispute resolution procedure; the procedure is voluntary and enables the parties to be involved in the decision-making process rather than accept a judgement from a court appointed Judge.

The mediation process allows for quick, cost effective resolution than litigation and can be beneficial in business disputes to preserve relationships and allow greater control over the outcome.

The Areas This Article will be Covering:

1. The Mediation Procedure

2. The Benefits Of The Mediation Procedure

3. When Should Commercial Mediation Be Considered?

4. Does Commercial Mediation Work?

1. The Mediation Procedure

The mediation procedure is flexible and allows fluidity dependent on the case in hand, there are four steps the process is likely to follow. These steps are managed by the mediator, so they will support you by leading the way.

Step 1: Preparation

Whether mediation is a requirement in your commercial contract, or you’ve agreed between the parties that mediation is the ADR method you’d like to utilise, preparation is key. An accredited mediator will firstly need to be appointed – we recommend seeking a mediator with experience in commercial contracts and disputes (click here to contact Ms. Laroya to discuss her mediation services).

A mediation agreement will be created to ensure both parties have consented to enter into the mediation procedure and have the authority to agree on any settlement made during the mediation session.

Parties usually provide a written brief to the mediator before the mediation of their position in relation to the dispute.

Step 2: Opening session

Mediation is a flexible procedure, usually, each party will sit in their own respective rooms and the mediator will move the mediation along by visiting each party’s room individually. If the circumstances allow a joint opening session can be held to allow the mediator to explain the process of the day, the requirements under the CPR rules, and allow parties to make opening statements. An agreed agenda for the day can also be made at the joint session.

Whether the sessions are held in a single room or as a joint session, the mediation is an opportunity for the parties to learn more about their differences and for the mediator to facilitate discussions to narrow the gap.

The mediator’s role is to facilitate discussions to ensure there is a structure to enable the flow of dialogue between the parties and will provide energy to focus discussions and adapt their approach accordingly.

The opening statement will be made by both parties summarising their written account.

Step 3: Caucus sessions

Caucus sessions are the main focus of the mediation procedure and are private meetings, where parties sit in separate rooms. The mediator will travel between them. Different techniques will be used to facilitate the mediation process and information will not be passed from one party to the other via the mediator unless specifically requested.

The mediation process is confidential and the role of the mediator is particularly important during caucus sessions when parties are free to express themselves due to the confidential nature of the procedure, the mediator will establish trust quickly and remind parties that what is discussed is held in confidence unless express permission is provided to reveal information to the other party.

Usually, during the caucus, the parties enter into breakthroughs and agree on terms of settlement that they have discussed with the mediator. The mediator’s role is to ensure the parties keep focused and that the parties are moving forward. The mediation process is voluntary, and the parties are free to leave at any time during the procedure. Settlement only occurs if the parties agree to it.

Step 4: The conclusion

Parties will have worked together through the facilitation of the mediator to come up with a solution to their dispute and if this is the case, the party’s lawyers will draft the agreement at the end of the session which each party will sign at the end of the day.

The settlement agreement is a legally binding contract. If the negotiations aren’t successful, then parties can continue to pursue matters through other procedures such as court litigation.

2. The Benefits of the Mediation Procedure

Disagreements are inevitable in business. They can arise as a result of a wide range of issues, from contract performance and missed deadlines to differences of opinion between key decision-makers, like directors and shareholders.

The common factor of all commercial disputes is the impact on the parties involved when the issues are not addressed. Unmanaged disputes can cause unnecessary delays to operations, which in turn can increase costs and decrease productivity for one or both parties and fractious relationships can worsen beyond repair.

Mediation is a flexible process designed to resolve conflicts or disagreements in a wide range of situations. Commercial mediation is a form of Alternative Dispute Resolution (“ADR”) and can be particularly useful various types of dispute, including:

· Internal disputes between business partners, directors and/or shareholders;

· Complaints or legal claims from disgruntled employees, internal teams, customers or service users;

· Contractual disputes within the supply chain, for example, breach of contract matters.

For the purposes of commercial mediation, a neutral, independent mediator is appointed. Mediation is unique in comparison to other forms of ADR in the sense that mediators don’t come to a decision on the case in hand, nor do they judge the strength of each party’s case. Instead, a mediator is present as a facilitator whose main objective is to support both parties in reaching an agreement between themselves.

3. When Should Commercial Mediation be Considered?

Mediation is a particularly flexible and accommodating method of resolving differences. The use of a neutral and independent mediator can support parties in reaching their own conclusions, with encouragement to consider the other party’s point of view. It can be used at any time during a dispute, but the sooner the process has begun, the sooner a resolution can be found. Early mediation also ensures no unnecessary costs are incurred and relationships are salvaged wherever possible.

Should your dispute have reached the arbitration or litigation stage, the arbitrator/judge has the power to postpone the case pending the outcome of the mediation process at the agreement of both parties. Should a settlement not be reached during mediation, the mediator can report back to the arbitrator or judge upon the request of either party.

4. Does Commercial Mediation Work?

According to the Centre for Effective Dispute Resolution (CEDR), the leading mediation services provider in the UK, around 89% of disputes referred to them are settled successfully through mediation with the support of a certified mediator. An encouraging 74% of overall mediation cases settled on day one, supporting the use of this method of dispute resolution. To read more about the reported success of mediation cases overseen by the CEDR, click here.

Even in the event that the dispute cannot be resolved through mediation, parties leave the process with a greater understanding of the issues from the conflicting perspective. Each parties’ concerns, both commercial and legal, will have been discussed and challenged where necessary by the certified mediator, which is a solid foundation for further methods, such as arbitration or litigation.