Commercial interests
Court or arbitration proceedings impose a resolution of the dispute in accordance with the parties' legal rights and obligations. Whilst a settlement agreement achieved by mediation will probably reflect those rights and obligations, it can also reflect the parties' commercial interests. Business relationships can potentially be re-built as part of the mediation process.
Examples of settlement terms unlikely to be available in court judgments or arbitration awards are:
• funding part of a settlement payment by giving a discount on future supplies up to a fixed value; or
• agreeing to work together to tender in joint venture for a new project.
Flexibility
Court or arbitration proceedings are subject to various procedural rules which must be strictly complied with. In contrast the parties to a mediation are free to fix their own procedures which can be as flexible as they wish.
Easily understood
As well as being inflexible, court and arbitration proceedings are inherently difficult for a non-lawyer to understand. The mediation process on the other hand is not only transparent but involves an essential skill possessed and practiced by most successful businessmen – namely the ability to negotiate effectively.
Speed and reduced costs
If the parties want to resolve their dispute quickly by a mediation, it can be set up and implemented within a matter of days. Court or arbitration proceedings at best take weeks and at worst take months or even years to reach a final conclusion.
The need to prove a claim in court or arbitration proceedings plus their inflexibility mean that their cost is always very substantial and is often prohibitive. Disputes will typically be resolved by mediation for a fraction of that cost.
Multi-party disputes
Disputes in the construction industry often involve a number of parties. Whilst court proceedings can be, and often are, used to resolve such disputes, their lack of flexibility is generally perceived as a significant disadvantage by the participants. Arbitration simply cannot be used to resolve such disputes. There is, however, no limit on the number of parties who can participate in a mediation. Perhaps more importantly there are no obvious disadvantages of a multi-party mediation.
Airing grievances
Participating in a mediation provides the opportunity for each party to describe to the other party not only its claims but also its grievances. Experience indicates that the airing of grievances is an important, and sometimes a necessary, aspect of the dispute resolution process.
Whilst grievance airing is in some ways simply the equivalent a party having its ‘day in court’:
• it is much less costly and quicker to achieve by mediation; and
• it can be done ‘face to face’ and without the procedural restrictions on what can be expressed which are imposed by the court.
Reality checking
The mediator should be able to assist the parties to:
• face the reality of their position in a non-threatening and non-judgmental environment; and
• cut through previous communication failures and personality clashes.
Success
Mediation has a proven track record of success. Anecdotal evidence indicates that the majority of disputes referred to mediation are resolved by that process. Reasons for success Cynics might say that this success rate merely reflects the parties' willingness to settle.
Perhaps it is more realistic to say that mediation delivers what parties to a commercial dispute want – namely the settlement of disputes:
• under their control;
• at a minimum cost;
• on a basis they can accept; and
• in a negotiating environment they can understand.
Please note: These key points are only intended to give general guidance and are no substitute for specific legal advice on any given situation.