Mediation

What is mediation?

Mediation is a flexible, voluntary and confidential form of alternative dispute resolution, in which a neutral third party assists parties to work towards a negotiated settlement of their dispute, with the parties retaining control of the decision whether or not to settle and on what terms. Unlike a judge or arbitrator, the mediator will not decide the case on its merits, but will work to facilitate agreement between the parties.

The mediation agreement will usually require the parties to treat all discussions and documents as confidential and “without prejudice”. Usually, what is said or written cannot be used in later proceedings if the mediation does not settle, but there are some limited exceptions.

The confidentiality of the process can avoid embarrassing precedents being set, as might happen in court proceedings.

Except in unusual circumstances, the parties themselves should attend the mediation. They are usually accompanied by their lawyers. In the case of a party that is a company or association, its representative will need to have authority to reach a binding settlement at the mediation.

Mediation provides a private forum in which the parties can gain a better understanding of each other’s positions and work together to explore options for resolution. During the mediation, the mediator meets privately with each party to discuss the problem confidentially. This allows each party to be frank with the mediator and have a realistic look at their case in private, without fear that any weaknesses discussed will be communicated to other parties.

Mediation is a flexible process that can be used for several purposes, including to:

• Identify matters in dispute (scoping).
• Negotiate the terms of a deal or transaction (deal mediation).
• Help determine public policy, rules and regulations (policy making mediation).

Most commonly, mediation is used to narrow issues in dispute, to contain conflict from spreading, and to resolve disputes. The mediation process allows more creativity over settlement options than the court or arbitration process.

Mediation can be used in almost any kind of case, for example, banking, clinical negligence, commercial contract, computer/IT, construction, consumer/fair trading, insurance, personal injury, planning (and other disputes with government departments) and professional negligence.

The mediator

The mediator, a neutral third party, plays a crucial role in facilitating agreement between the parties.

The parties can agree on the appointment of mediator or, if they cannot agree, they can ask a third party (such as a mediation service provider) to select a suitable mediator.

The parties are free to select the person they consider most appropriate to mediate, depending on the nature of the dispute. The mediator may be a lawyer or someone with technical expertise or experience in a particular sector. For more detailed consideration of points to consider when selecting a mediator

Mediator selection

Although the parties will be responsible for decision-making in the mediation, and will control the outcome, the mediator will control the procedure and ensure that it is structured in a way that is fair to all parties.

Some important points to note about the mediator’s role include:

The mediator remains impartial throughout. The mediator’s neutrality provides him with credibility in the process.

The mediator is not an advisor to any of the parties. It is not the mediator’s role to tell the parties what their rights are, or how they should resolve the dispute, and he does not have authority to impose any binding decision on the parties. There will only be a binding outcome to the mediation if the parties reach agreement. Self-determination is a fundamental principle of mediation. The process relies on the ability of the parties to reach a voluntary agreement. A party may withdraw from mediation at any time.

The mediator usually has discussions with the lawyers (or the parties if they are not legally represented) in advance of the mediation. This allows him to ensure that the formalities have been complied with, and to identify the key issues. This helps to ensure that time is not wasted at the mediation.

The mediator will greet the parties on arrival at the mediation session and show each party to its own private room. Usually, the mediator will formally open the mediation with a joint session, attended by all parties and their lawyers. During this session, he provides an overview of the process, his role and the procedure. Each party then has an opportunity to make an opening statement, giving its perspective on the dispute and highlighting points of particular concern. After the opening, the mediator will have private discussions with each party.

Who pays the costs of the mediation?

Who should bear the costs of the mediation is a matter for agreement between the parties. One common approach is as follows:

The parties agree to share the mediator’s fees, expenses (for example, travel) and other costs of the mediation (for example, venue, food and refreshments).

The parties agree to bear their own legal costs (preparation for, participation in and representation at the mediation).

It is important to consider whether this is the most appropriate approach, as other options are available. For example:

There may be cases where one party will agree to pay the entire mediator’s fees and expenses, as a way of encouraging another party to mediate. Banks and insurance companies do so in some cases.

It is increasingly common for parties to agree that, if the matter does not settle at mediation, the court should assess all the costs (including the legal costs incurred for mediation). This means that the losing party will pay the legal costs of the other party, including the costs of preparing for and attending mediation.

Clause 9 of the model mediation agreement for the Centre for Effective Dispute Resolution (CEDR) (one of the UK’s leading mediation providers) includes the following provision on costs:

“Unless otherwise agreed by the Parties and CEDR Solve in writing, each Party agrees to share the Mediation Fees equally and also to bear its own legal and other costs and expenses of preparing for and attending the Mediation (“each Party’s Legal Costs”) prior to the Mediation. However, each Party further agrees that any court or tribunal may treat both the Mediation Fees and each Party’s Legal Costs as costs in the case in relation to any litigation or arbitration where that court or tribunal has power to assess or make orders as to costs, whether or not the Mediation results in settlement of their dispute.”

The American Arbitration Association (AAA), one of the US’s leading mediation providers, has similar rules).

The CEDR drafting notes emphasise that, although a court or tribunal with power to assess or order costs might order that the mediation fees and any party’s legal costs of preparing for and attending the mediation should be costs in the case awardable on the merits of the litigation, that does not enable the court to enquire about what happened at the mediation to inform that decision. What happened at the mediation will remain confidential unless the parties waive privilege. For an example of a case where, exceptionally, a court was able to refer to conduct during mediation, because the parties waived privilege.

Potential advantages of mediation

Mediation offers a number of advantages over court proceedings, including:

• Saving time and costs. More than 90% of court cases settle before trial. Mediating might allow the parties to avoid incurring time, energy and cost in bringing, or defending, court proceedings.
• Achieving resolution quickly. Mediation can be attempted at any time. It can be effective to mediate early, before a dispute has escalated.
• Party autonomy. The parties negotiate their own settlement in mediation, and therefore maintain control over the outcome of the dispute.
• Objectivity. It can be difficult for parties to be objective about the strengths and weaknesses of their case. The mediator, as a neutral third party, can reality test each party’s understanding of the strengths and weaknesses, as well as the potential for loss, expense, time, distraction and uncertain court outcomes. During private sessions with the mediator, the parties have an opportunity to review the strengths and weaknesses of the case, and to consider various alternatives.
• Confidentiality. Court actions are matters of public record, but what transpires during a mediation is confidential. Whether mediation occurs before or after court proceedings are commenced, the entire mediation process is “without prejudice”. Generally, what is said in mediation, and the documents produced for mediation, cannot be disclosed in later proceedings if the mediation does not settle, although there are certain limited exceptions provided by law. The confidentiality of the process can avoid embarrassing precedents being set, as might happen in court proceedings.
• Preserving relationships. Mediation is flexible enough to address all parties’ interests. This can make it easier to preserve good working relationships between the parties. It can also make the termination of relationships more amicable.
• Creative settlement. A court giving judgment will focus on the legal position and decide the case on the merits. Settlements achieved in mediation can consider much wider issues and take account of personal and commercial interests. For example, mediated settlements can include provisions for public statements or apologies, structured payment terms, restructuring of existing contracts, or requirements for ongoing cooperation.
• Lasting settlement. Mediated settlements tend to hold up over time as the parties themselves have created them. If a later dispute arises, the parties tend to be more likely to use ADR to resolve their differences.
• High success rate/satisfaction levels. Mediation has a high success rate. Mediators who responded to CEDR’s Fifth Mediation Audit in May 2012 reported that just over 70% of their cases settled on the day, with another 20% settling shortly thereafter, giving an aggregate settlement rate of about 90%. Mediation in the US yields similar results. Parties are generally very satisfied with the mediation process.

Addressing concerns about mediating

Parties can be reluctant to mediate for a variety of reasons. Some common misconceptions include the following:

• Mediating is a sign of weakness. In fact, mediation is usually a sign of strength − the strength of knowing what the lawyer and the client want to achieve, and pursuing that objective via a negotiated outcome. The key to negotiating from a position of strength is the ability to identify what the client and the opponent really need to achieve. Where parties seem reluctant to mediate, a mediation organisation can be used to approach each party and discuss the potential benefits of mediating. It is important to note that the civil procedure rules that apply in England and Wales (including the pre-action protocols and the Practice Direction – Pre-Action Conduct) require parties to consider mediation before commencing proceedings. Failure to comply with this can lead to costs sanctions. Referring to this usually helps to focus the parties’ minds.
• Lawyers and clients can negotiate directly so mediation is unnecessary. There can be barriers to effective communication when negotiations are direct (between lawyers or between clients). The intervention of a neutral third party can change the dynamics and help to overcome these barriers. The mediator can use a number of techniques to manage the negotiating process, free up communications, encourage a problem-solving approach/brainstorming of options, and overcome deadlock. Parties tend to be unwilling to disclose information about their view of the case to an opposing party during direct negotiations. The mediation will include private and confidential discussions between the mediator and each party, during which the parties are more likely to be willing to disclose what they really hope to achieve. This can free up negotiations.
• Direct negotiations have failed so mediation won’t succeed. Direct negotiations may become “positional”, with each party assuming entrenched and unrealistic positions and becoming increasingly defensive. A mediator can focus each party on a problem-solving approach, directing energy away from threats, attacks, or challenges to the credibility or good faith of a party in the dispute, towards a focus on the issues to be resolved and the potential implications of a failure to settle the problem. The mediator can also help the parties to avoid common “negotiation traps”. One such trap in direct negotiations is that a lawyer or client may be dismissive of an opponent’s suggestions or offers simply because they have been proposed by “the other side”. This trap is sometimes called “reactive devaluation”. The mediator allows the parties to explore, in private, a whole range of options and suggestions and, in difficult cases, the mediator may even suggest ideas and options as if they were his own, to overcome a party’s reluctance to consider proposals from an opponent.
• The mediator is seen as just a messenger. A mediator’s task is considerably more sophisticated. It includes coaching, developing strategies and reality testing. The mediator is an active participant in the mediation process, and will use a range of techniques to engage people in the process and encourage them to consider a range of options for settlement. The techniques range from skilful questioning, acknowledging, summarising and re-framing, to coaching the parties on negotiation techniques.
• You can’t mediate until full disclosure is provided. Lawyers especially tend to argue that early mediation, before the disclosure process has been completed, is not appropriate. In practice, mediation simply requires knowledge of enough information (about the facts and the relevant law) for the lawyer to be able to advise the client on the strengths and weaknesses of the case, the alternatives to settlement, and any options for settlement of the dispute. The earlier that mediation takes place and an agreement is reached, the lower the costs will be. The mediation process can help to identify what disclosure is essential, rather than the parties simply carrying out full disclosure, or a “search for the smoking gun”. The key to mediation is establishing what the parties need to achieve. That will have an impact on the information required. It is likely that full disclosure will not be necessary.
• Mediation will have been a waste of time and money if the case doesn’t settle at mediation. Even a failed mediation can help to narrow the issues and increase the likelihood that the case will settle without the need for trial. The parties will certainly have a better understanding of each other’s positions and perspectives, and the potential barriers to settlement. A failed mediation can also generate options and opportunities, which can be discussed after the mediation. In practice, a large proportion of cases that do not settle during a mediation settle shortly afterwards.
• Mediation only delays the progress of litigation. Agreeing to attempt mediation does not stop court proceedings unless the parties agree and the court stays the proceedings. Awareness of the implications of failing to reach settlement during the mediation (for example, in terms of the costs and management time that would be incurred going to trial) can help to focus the parties’ minds, and encourage them to engage positively in the mediation process.

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