MEDIATION, AND SOME TIPS FOR GETTING THE BEST OUT OF IT By Rosemary Jackson QC, Barrister and Mediator Keating Chambers Why mediation? After more than 25 years as a barrister specialising in construction and engineering disputes I am aware that some disputes have to end up in court for one reason or another. The vast majority, however, are capable of resolution without a trial and without the need to incur the massive costs of litigation or arbitration. Where direct negotiation between the parties fails or seems impossible, mediation offers a unique opportunity to achieve resolution with the help of a qualified neutral person. All settlements involve compromise but a mediation offers the opportunity for parties to be in control of their own destiny by shaping a deal which may involve benefits not obtainable from a Judge or Arbitrator 1 and which substitutes the risk of an adverse result with the certainty of an agreement, voluntarily entered into, which the parties are more likely to honour than one imposed on them. The result is truly a win win : by compromising, the parties may have lost the chance of going to a trial/arbitration hearing at which they might have succeeded in every part of their claim/defence, but they have also eliminated the risk of an unsatisfactory or even a disastrous result and an order to pay the costs of all parties. In a commercial context a settlement may remove an impediment to further business between the parties, and will certainly free up management and other involved personnel so that organisations can deploy their human and financial capital in furthering their business aims rather than in keeping their lawyers gainfully employed. Even the lawyers and experts are winners: although the settlement of a dispute may do them out of what may be a lucrative trial, the likelihood is that there will be repeat business for the advisers who helped a client to an economic and efficient resolution. After years of begging clients not to risk financial ruin if there was any possibility of negotiating a satisfactory settlement instead, I discovered mediation and I trained as a mediator in 2001. 1 Common examples are deferral of payment until the next financial year, or payment by instalments, which may make it easier to reach a figure acceptable to both payer and payee. Or agreement of a final account whereby a contractor agrees to return to site to carry out, complete or rectify some item of work.
Ten years on, mediation is moving closer to being the norm than the exception. With encouragement from the Courts by way of case management 2 and a willingness to use costs orders to penalise those who unreasonably refuse to attempt mediation, it is becoming a standard approach for parties to explore whether there is a better way forward than simply proceeding to a trial. With willingness of Government agencies to consider mediation and the continued restrictions on legal aid, the number of disputes referred to mediation is bound to continue to increase. But, whilst lawyers are generally aware of the possibilities of mediation and other forms of alternative dispute resolution (ADR), many clients are yet to discover or be persuaded of the benefits of mediation. This article aims to provide information for those contemplating mediation but unsure of what to expect. How do you get to mediation? Fear that it will be perceived as a sign of weakness often prevents a party from opening negotiations and this may mean that an opportunity to settle is lost if both sides adopt the same attitude. Suggesting mediation, however, is not a sign of weakness but of common sense, particularly given the willingness of the courts (and perhaps in the future, arbitrators?) to penalise parties who unreasonably refuse to mediate by denying them their legal costs even though successful in the litigation (see Dunnett v Railtrack (2002) and later decisions). Pre Action Protocols to be followed before the commencement of proceedings in court also provide a risk free opportunity to explore the possibility of mediation without having to show any weakness. There are now many organisations 3 willing to appoint mediators or to refer disputes to them. Parties can appoint a mediator directly or, if unsure of who is available, can consult such bodies. 2 With Case Management forms offering parties the opportunity to seek a stay of the proceedings to enable mediation or other ADR to take place. 3 For example, Clerksroom, CedrSolve, Resolex 2 KEATING CHAMBERS 2012
Will it work? It takes two (or more) to compromise, so obviously settlement depends on all participants being prepared to invest time and effort in the process with the intention of reaching a settlement. It also, crucially depends on all participants understanding the process and preparing properly in advance. Fear of an adverse costs order will cause some parties to agree to mediate with the intention of going through the motions but with no real desire to settle. They plan to tell the Court that they tried mediation, safe in the knowledge that the reasons for failure will remain confidential to the parties. The Court will not discover that they actually had no intention of settling but the costs risk has been avoided. Experience shows, however that parties who feel coerced into mediation, or indeed who are ordered by the Courts to mediate, do nonetheless engage in the process and often achieve a settlement. The words I m only here so that you can t accuse me later of refusing to mediate often precede a settlement. Some parties are put off mediation by fear that the other side may be on a fishing trip. This will sometimes be the case but is by no means an obstacle to settlement. On the contrary, the process leads to a better understanding on both sides of the differences between them and of the real issues. Both as a CedrSolve trained mediator and as a barrister accompanying parties to mediations, my experience has been that in virtually every case, the parties benefited from undergoing the process even if they did not settle their dispute. At least the parties know where they stand, which aspects of their case need more work in order to convince the other side, and what the options are for settlement in the future. Better to find out early on that your case is weak, than to sail on optimistically and then discover, hundreds of thousands of pounds later, that the Judge takes a different view from yours. Better still if you can emerge from a mediation armed with the knowledge necessary to improve your case and your prospects. Mediation is not peculiarly suited to any particular types of disputes. Nor is it always necessary for a mediator to have particular legal knowledge or experience in the area of the dispute. Thus, whilst 3 KEATING CHAMBERS 2012
many of my mediations are construction/engineering/energy related disputes where the parties decide that they will be assisted by having a mediator with experience in that field, I have mediated disputes in other sectors such as employment, banking, and money laundering. The skill of the mediator is in helping the parties in a reality check and assisting them to rise above the legal and technical wrangles to achieve an acceptable commercial resolution. Irrespective of the types of parties involved, it is generally reported that 75% 80% of cases settle on the day of the mediation or shortly thereafter as a result of the mediation. For those contemplating starting, attending or advising upon mediation, the following tips may be helpful in maximising the chances of a successful outcome. Understanding the process. Mediation is a flexible process conducted confidentially in which a neutral person actively assists parties in working towards a negotiated agreement of a dispute or difference, with the parties in ultimate control of the decision to settle and the terms of resolution. All too often parties expect the mediator to decide who is right or to persuade the other side that they are in the wrong. Typically, unprepared parties will ask when they will get the mediator s decision. A mediator will test and probe but is not there to decide the dispute. It can be very helpful if those attending have given some thought to how they think the mediator can help achieve a settlement. By persuading the other parties that they are wrong and we are right! is not a constructive answer to a mediator asking how he/she can assist the parties. There is no set procedure but usually there will be an introductory meeting at which each party has an opportunity to address the others, having already exchanged Position Statements. At some point the parties are likely to move into private rooms for confidential discussions with the mediator but this is completely flexible and up to the mediator. The parties may spend the majority of the day together, or apart. They may be brought back together at certain points. The purpose of the exercise is to encourage exploration of what really lies between the parties, realistic self assessment of the 4 KEATING CHAMBERS 2012
merits, and eventually negotiation and settlement. Sometimes this will involved a detailed examination of technical or legal issues, whereas some mediations are conducted on a wholly commercial level. In preparing for the mediation, spend some thought on what is most likely to lead to a resolution. Be prepared to make the first move This applies both to initiating mediation and starting the negotiation process at the mediation. Don t assume that proposing or agreeing to mediation will be seen as a sign of weakness. Mediation can often be an opportunity to expose for the first time the weakness of your opponent s case and demonstrate the strength of yours. This can be particularly helpful if all correspondence seems to have been fielded by people relatively low down the hierarchy trying to settle the dispute themselves, or (worse) who are protecting their own backs if the top man with authority to settle comes along to a mediation he may hear from you the things his own team have been withholding. Mediation is a chance to expose bad advice and bad performance and to explain, face to face, why you are right. Typically, after a period of exploration of the issues, the mediation will move onto negotiation. Someone must make the first offer and parties are often unwilling to be the first to raise their heads above the parapet. In my experience the party who makes a first, well judged offer will be glad they did so as they are able to set a starting point which may steer the negotiations. It can be helpful to make a number of alternative offers, such as X now, or alternatively X+Y if it can be spread across 2 financial years. Making the first offer also avoids the doom laden experience of being the recipient of the first offer. I can think of few mediations where the recipient has not been completely dismayed by the first offer received, and I always warn parties that this will be the low point of the day for them and that they must prepare themselves and avoid the temptation to walk out in dismay. Fortunately, things can only get better from that moment onwards. 5 KEATING CHAMBERS 2012
Think carefully about the timing of the mediation. The earlier the mediation, the less clear the facts and arguments will be. On the other hand, the later the mediation, the more likely it becomes that substantial legal and other professional fees will have been incurred, thus broadening the gap between the parties. Some disputes can be settled by taking a broad brush approach, whereas others depend on the parties knowing the facts and arguments in detail. If the details are going to matter, make sure that each side knows what the other is going to say well in advance. Ambushing the other side on the day of the mediation is likely to lead to mistrust. It is also likely that the party receiving new facts, claims and arguments on the day will be unable to verify or refute them on the day and will withdraw from the process. They may come back to the negotiating table in a few weeks or months, or the momentum to settle may be lost. Don t be a cheerleader. If you are part of a negotiating team you can either tell your principal what he would like to hear or you can give him your honest assessments. Arguing the case and putting it at its highest is all very well in front of the opposition, but within your own team, and with the mediator, it is really important that the strengths and weaknesses of the case are realistically addressed, along with the risks of failing to settle. If the decision makers can gauge the risks and rewards at stake they will be in a position to decide whether to settle on a deal which both sides can live with, or whether they believe the possible rewards to be gained at trial or arbitration so outweigh the risks of losing that the best settlement on offer can be rejected. If defensiveness or fear of appearing not to support the team prevents honest advice being given, the risks cannot be assessed. Be prepared to do some lateral thinking at the mediation. Settlement does not always involve a simple transfer of money. The beauty of mediation (as opposed to litigation or arbitration) is that there is the opportunity to structure a deal to everyone s benefit. There are no limits to the ways a deal can be structured, but often a nonmonetary 6 KEATING CHAMBERS 2012
component makes all the difference: payment by instalments may enable the payer to agree to a higher total price; an agreement to settle the present dispute may be easier if it goes hand in hand with an agreement not to terminate another contract; facilities or training are sometimes be offered as sweeteners. The value of an apology or a confidentiality agreement should not be underrated. But do some thinking in advance. It is vitally important to have given thought in advance to the issues and the potential scenarios for settlement. Frequently the parties to a mediation spend a morning exploring the technical and legal issues before turning to consider the figures. There sometimes follows a protracted period during which one party will identify and quantify for the first time complicated alternative scenarios in order to arrive at a valuation of the claim. This is often essential analysis but, if not undertaken until the day of the mediation, vital time is lost and the momentum and goodwill of other party who is left waiting for hours on end for a first offer may be jeopardised. Be prepared for a long day. Human nature is such that mediations often last well into the evening. If key team members have to leave at 5.30pm or if important consultees will not be available in the evening, the momentum can easily be lost. A good supply of newspapers, energy bars and energy drinks (non alcoholic) will pay dividends. Don t underestimate the importance of saving face. In order to get the deal you need, it may be necessary to persuade the opposition that their case is weaker than they have been advised. At some point their lawyer, expert or contracts manager may have to admit that his advice may have been wrong or over optimistic, or that his actions may have led to some liability. This is not easy. You may be in the same position. Be aware of the hurdles that people have to overcome in order to be able to make the deal that they know makes sense. Structuring a settlement so as to avoid ritual humiliation can make the difference between settling and not settling. 7 KEATING CHAMBERS 2012
And finally Do consider mediation next time you have a dispute to resolve. By placing your trust in a mediator and sharing your hopes and fears with them on a confidential basis, you can help the mediator to help you resolve your dispute. And just think what you might do tomorrow if you have finally put a long running dispute behind you. Rosemary Jackson QC Keating Chambers January 2011 8 KEATING CHAMBERS 2012