MEDIATION IS THE MOST APPROPRIATE WAY TO SETTLE BUSINESS DISPUTES WHERE THE PARTIES NEED TO MAINTAIN AN EXISTING RELATIONSHIP.

This article was written by myself as a result of a mediation course attended in Malaga, provided by HUNT ADR. You can find this article published at Hunt ADR blog here.

The aim of this article is to give my personal and professional opinion about whether mediation is the most appropriate way to settle business disputes where the parties need to maintain an existing relationship.  I strongly believe so.

It is usual that issues and problems arise in business relationships even when they are well established and when they generate good financial benefits for the parties. This could be due to the different ways both parties do business, their personal opinions, cultural factors…etc. When one of the parties has a problem with the other, that does not involve money, they will usually keep the problem to themselves, allowing the issue grow and grow without anyone trying to resolve it. It is only when there is a money related issue that the bomb explodes. What then?

One option is litigation. Your lawyer will contact the other party, communicating to them that you will to take legal actions as soon as you can. Then you will take your ex-business partner to the court and after a long time, money spent, and suffering, you will win or lose the case. Even with a huge chance of winning, you may end up paying the courts fees and expenses.

Another option for resolving disputes is Arbitration. It is not as aggressive as litigation, but still one party will be in front of the other, and one will lose and the other will win. So, it is very likely that the business relationship may be mortally wounded.

But why not mediation? There are many advantages to mediation over other forms of alternative dispute resolution (ADR) or civil litigation.  Below are some of the characteristics that make mediation the most appropriate way to resolve disputes.

• Mediation is a more cost- effective approach, and cheaper than taking the other party to court. Mediation is a less intimidating process than going to court. Mediation is much less expensive than hiring a lawyer. Even if you must hire a private mediator who charges by the hour, you will be sharing the cost with the other party instead of paying a lawyer on your own. Mediation is also quick, it usually only lasts a few hours, compared to the many hours a lawyer would spend preparing your case and arguing with the other side in court.
• Mediation is a voluntary process but the English courts, by law, encourage parties to mediate. If parties refuse to mediate, they may be penalised by the courts when it comes to deciding which party should bear the legal costs of the litigation. Also, by agreeing to mediation, the parties can protect their position as regards the costs of pending English litigation.
• If the parties reach a settlement, it will be fair and impartial to both. They will have decided on what they agree and disagree, and both parties will have the same feeling of success or disappointment relating to the settlement. Each party can describe the dispute from his or her perspective. If the issue must be solved by a judge who does not know the relationship between the parties, one of them will win and the other is going to lose, and it is very common that even a party who has won, mat not feel entirely happy with the decision. Parties will find their own solution, which will be adapted to their needs.
• Mediation is fast: The kind of issues related to business relationships need quick solutions. A mediation can take place as soon as both parties agree to it, saving very precious time. Business does not wait and going to court can take ages.
• Very important, mediation is confidential. When litigation occurs, private business information can become a matter of public record. Everything discussed in mediation remains confidential between the parties and the people involved, mediator included. The parties will sign a confidentiality agreement. If they decide to go to court, all the process would be, by law, public, Therefore anyone interested can be informed. That means that all the valuable business-related information would be accessible and public, and your business could be in danger. Also, take into account the business reputation. As reputation is important to businesses, confidential dispute resolution mechanisms might be more beneficial. Mediation can help ensure that business disputes are resolved more discreetly, minimising damage to the reputation or sales of the business. It is not well seen for a company to be involved in problems with partners and business associates. Who would trust someone like that?
• Mediation keeps the business relationship alive. It does not matter who will win or lose the case before a judge. Whatever happens, the relationship is over. You would not maintain your business relationship with someone who took you to court. However, on the other hand, after a mediation, the relationship will not only survive, but it could be much stronger. Parties will know and understand each other better after the mediation. They will have strengthened their understanding of each other’s position and cooperation. It is likely that new opportunities will arise, and with them, the possibility of making good money. Mediation looks to the future. This means it is easier for you and your partner to continue working effectively together to ensure successful business operations.
• Mediation is voluntary. If a mediation takes place it is because both parties agreed on that. At any point during the mediation, if one party wants to leave, they are free to do so. However, if you go to court, you are “trapped” into it, and you will be not able to leave.
• The mediator is the professional who assists the parties during negotiations. He or she will be the third party. A mediator helps to facilitate effective communication between you and your business partner. The mediator’s job is to assist the parties to reach an agreement, and not to induce them in any way. He is not an arbitrator or a judge. Mediators are neutrals and they are facilitators. They have no interest in the result of a dispute. Their only job is to assist parties to reach an agreement that reflects their interests, one that resolves the dispute with terms that both the parties are happy with. A “win-win” situation for both parties.
• Although mediation has some formalities, it does not have, generally speaking, a lot of rules. The important thing is to settle. Parties can go themselves, even without lawyers (who can assist anyway if needed).
• In mediation, both parties have the opportunity to check the background and experience of the mediator unless a mediator is previously designated in the dispute resolution section of their contract. In civil litigation, you cannot choose your judge.
• Location: Mediation can take place anywhere. Usually both parties will agree on a place which is halfway between them, like an hotel. But there is nothing wrong if they decide to do it in the office of one of parties, thus again saving again money for both.
• Mediation and feelings: Each person or party will tell their side of the story. Since the parties can discuss both legal and personal issues, they will come to understand each other better. That way, once personal issues and feeling have been ventilated, legal consequences can be discussed.
• Mediation works: The overall success rate of mediation is an aggregate settlement rate of 89% (86% in 2016), as per the Mediation Audit 2018 in the UK. In most cases, the settlement is achieved the very same day of the mediation.

These are just a few of the main reasons why mediation is usually the best choice when you are involved in any type of partnership business dispute.

Mediation, however, does require cooperation from both parties so if either of them is not willing to make a good faith effort, then mediation will be a waste of time. It is very important to know as well when mediation is not a proper solution and to consider the consequences of not settling through mediation. The disadvantages of mediation are as follows:

• Above all, mediation will not work if is the parties are not committed to find a solution. One or both parties may be completely unwilling to cooperate, or even to compromise. Both parties must agree to working for a solution.
• Remember that if you decide to try to solve your problem through mediation, a settlement is not 100% guaranteed. Both parties may spend time and money hiring a mediator, attend the mediation a couple of days with the intention of resolving the problem out of court, and still end up going there. So no money or time would have been saved, but rather some more spent.
• A mediator does not have the power or authority to impose a decision on the parties. Once both parties have reached an agreement, only they can assure the agreement is performed. In case they do not perform, or the matter is still unresolved, they may still need to go to Court; there may be concerns about the enforceability of a mediation agreement.

In conclusion, Mediation is a strongly recommended way to solve problems that arise between business partners in the majority of cases. If you already have experience of this you will know what I am talking about. If not, why not give it a try? You have nothing to lose, and much to win.

 

Antonio Esteban

Lawyer

Civis Abogados

Calle Salitre 51, Entreplanta

29002 Málaga

Tel [0034] 952 220 733/678 30 83 58

a.esteban@civisabogados.es