Spotlight on Mediation: Easy Dispute Resolution in a Difficult Economy

This is the first in a series of articles looking at the effective use of mediation to resolve disputes.

There is no such thing as a truly easy way to resolve a dispute. Commercial disputes are often fuelled by high-stakes and high emotion. Positions are often entrenched and the parties (and sometimes even the lawyers) seem only capable of finding more things to disagree about. A failure to reach an agreed resolution drives the parties towards Court proceedings which will ultimately end up in a trial with a winner and a loser (and sometimes, financially at least, even winning can also feel like losing).

Litigation lawyers are braced for an upswing in disputes which inevitably follows a downturn in economic conditions. Businesses facing unprecedented challenges in the market will often be motivated to monetise disputes when in better times, they might have been inclined to focus on new opportunities.

This time however, the litigation landscape may be slightly different. Claims under £10,000 in value will be subject to a mandatory mediation scheme, consistent with a long foreshadowed move to mandatory mediation in almost all civil claims. It’s not yet known when that will happen but it does now seem to be a question of when, not if.

For the uninitiated, mediation is a formal(ish) process whereby the parties meet (usually physically but sometimes virtually) with the benefit of an independent and importantly neutral third party mediator. The mediator’s role is to bring the parties together and spend most of their time as a travelling diplomat, shuffling between the parties exploring where there might be common ground and room for compromise. A good mediator will challenge both parties’ world view and sell the virtues of a negotiated settlement over the risk of being on the wrong end of a Judge’s decision.

It is surprisingly successful. Legal issues can (and often must) be parked behind the commercial drivers. Ill-feelings tend to give way to a desire to at least agree to disagree and then work out what that means for settlement.  Anecdotally we can say that most claims settle at a mediation or shortly after. Some statisticians put the success rate at 80%+. Contrary to the headline above, the process is by no means easy and in fact is often exhausting, but when compared to litigating a dispute to trial, the pros far outweigh the cons.

The Courts share this view. In fact, if a party to a dispute unreasonably refuses to engage in a mediation, the Court will, very often punish that party by making a cost order against it. For example, a party could win at Court but be told by the Judge that they cannot recover any of their legal costs after the point in which they refused (or sometimes as is the case, ignored) an invitation to mediate because the Judge (amongst other factors) speculates that the claim would have settled at a mediation and the balance of the costs of litigation could have been avoided.

Timing can be key to a reaching a resolution at a mediation but parties should be open to the principle of mediation from the outset of any dispute. A great number of disputes can and often are settled at a mediation before Court proceedings are ever issued. Most lawyers will encourage their clients to mediate and know that, if approached correctly, mediation will be their client’s best opportunity to resolve a dispute.

For further information, please contact Liam Tolen or Luke Fitton in our Commercial Disputes team.