Commercial Mediation – what is it?

Commercial Mediation is a private and confidential dispute resolution process in which an independent and neutral third party, known as a mediator, endeavours to help the parties to reach their own mutually acceptable negotiated agreement. In normal circumstances the mediator would be provided with a statement of the case or position of each party in advance of the mediation meeting. A mediation will generally last for a day but could be longer or shorter. Each party to a dispute must be represented by a person authorised to make an agreement and very often additional parties will be present, such as lawyers, experts and anyone else who is in a position to advise or otherwise assist.The process is completely voluntary and if a party chooses to withdraw, he can do so at any time without providing a reason. If a settlement is reached, once it is reduced to writing it becomes legally binding.

The mediator’s role

A mediator is a neutral person appointed by the parties to a dispute for the purpose of facilitating negotiations and settlement. He is not a judge or an arbitrator and therefore makes no decisions as to rights and wrongs, nor does he favour either party. He is there to support the process by gathering information and assist the parties in resolving their problems. He achieves this by endeavouring to ascertain the real issues behind the dispute and by assisting the parties to evaluate their own strengths and weaknesses and those of their counterparts and, ultimately, to co-operate in working towards a mutually acceptable agreement to settle the dispute. The format of a mediation will usually follow an initial joint meeting where the parties set out their cases and thereafter the mediator joins each party separately to discuss their positions in confidence. If it looks like joint sessions could be valuable the mediator may well suggest this for the purpose of direct negotiations. Mediation has a number of specific attributes which set it apart from other forms of negotiation:


The mediation process is confidential and without prejudice. That is to say that information produced in a mediation, whether in writing or verbally is not available to be used in any exterior proceedings unless it was available in that respect anyway. The mediator will require all parties to sign a mediation agreement which provides for confidentiality. This will provide that the mediator will keep confidential his discussions with each side unless specifically authorised to disclose something and which specifically provides that neither side can call a mediator to give evidence in any court proceedings relating to the matter. Even the outcome of a mediation will be confidential unless the parties agree to publicise it.

A flexible and commercial process

Mediation is about getting away from the legal process and is intended to enable to parties to use their imagination to create flexible and commercial solutions. Parties are encouraged to make concessions and propose options for settling the dispute. With luck a solution will be reached which will suit both sides and very often be something which a court could not order in any event. Of particular note is the fact that in a negotiated settlement an existing commercial relationship is preserved, to the benefit of all.

A quick process

Mediation is designed to be quick. Once the parties have agreed to mediate then matters can move forward as fast as the parties are able to move themselves into action. This contrasts very favourably with legal proceedings which can take literally years to come to court.

Non adversarial

The process is based on the parties seeking solutions, not blame, although it should be added that sometimes what a party actually wants is an apology! As a result a mediator will try to establish what will allow matters to move towards a settlement rather than focus on “who was wrong and why”.

Much less expensive

It follows that a process which is designed to be relatively informal and quick will inevitably be very much cheaper than litigation which is itself bound by protocols and procedures. The benefit of this is that time and money can be used for the benefit of the parties’ businesses instead of fighting an action. The costs of mediation are normally borne by the parties in equal shares unless otherwise agreed, the parties each bearing their own costs. In jurisdictions where commercial mediation is more established, it has been estimated that 85% of mediations are successful and cost is around 20% of litigation.

How does a mediation work?

One popular way of explaining the mediation process is by dividing it into five phases.Phase 1 – preparationThis phase involves getting the process started. The parties will firstly conclude that a mediation is right for them and agree to mediate. A mediator will then be selected. Once the mediator is in position, he will take charge and carry out the following actions:1  Agree the terms of the mediation agreement which will be a three part agreement, more if there are more than two parties to the dispute. This agreement, apart from imposing the duties of the without prejudice nature and confidentiality discussed previously, will set out the basic format of the process. Matters such as fees and costs will be covered at the same time. Most mediators will have a standard set of terms and conditions which can be adapted to every individual case.2  Arrange a time and place for the mediation suitable and agreeable to all parties.3  Agree what documentation is to be provided by the parties to the mediator in advance of the mediation to enable the mediator to acquaint himself with the details of the dispute.4  Agree with the parties precisely who will be in attendance at the mediation for each party. In addition he will verify that the proposed attendees for each party are acceptable to the other party.5  Have initial discussions with the parties individually to clarify any issues which may need to be clarified before bringing everyone together.

Phase 2 – opening  

The process will normally commence with a joint or plenary session at which all parties will be present with the mediator taking the chair. The purpose of this is for the mediator to ensure that everyone present is left in no doubt as to how the process works and will be managed, including particularly the duties of confidentiality. The parties will then normally be invited to set out their positions relatively briefly.

Phase 3 – exploration  

Once the opening plenary session has been held, the parties will adjourn to separate rooms and the mediator will discuss the details of the dispute with each party separately, and confidentially. The purpose of these sessions is to ensure that the mediator understands exactly what the real aims and objectives are for each side. It is effectively a form of “shuttle diplomacy”. For example, a mediator will often have to deal with personal aspects of matters such as a desire for revenge or vindication of a party’s position. This challenge will be met by exploring the parties’ true motivation. During these sessions the mediator will seek to build up trust. In effect this is a preparation for settlement negotiations by establishing the positions, interests and needs of the parties.

Phase 4 – negotiation  

A mediator will tackle the issue of negotiations by exploring the strengths and weaknesses of the parties’ respective positions. More particularly he will assist the parties to recognise these aspects for themselves. The mediator must then use his skills to present and help settlement options. If the parties are legally represented often the legal advisers are invited to meet separately to discuss issues if there is deadlock.

Phase 5 – concluding

Once an agreement is reached it must be committed to paper and signed. The mediator must ensure that the parties understand and intend the consequences of the settlement agreement since once completed, it will be legally binding. It needs to be viable and sustainable and, above all, must be designed to avoid any new dispute. Of course if lawyers are present, the mediator can allow the lawyers to explain the ramifications of the agreement to their clients.

What if the mediation does not settle?

Needless to say there is no such thing as a guarantee of success. The parties are free to leave at any time and in those circumstances legal action can continue unhindered. However very often the discussions which take place at a mediation can facilitate a subsequent settlement and if litigation is inevitable, at least the parties will now know what the real issues are and be able to concentrate on those.

Are there occasions when mediation is not advisable?

Generally speaking mediation can be used in most disputes. It may be necessary sometime for legal proceedings to be issued if some form of statutory relief is required. Mediation is of no help in cases where a party wishes to establish a precedent as this can only be done through court and if an injunction is required, the same applies even though mediation might be adopted subsequently.

Is mediation a fixed and immutable process?

The principles set out in this paper are those which are generally recognised. However sometimes parties do decide to deviate if they feel it to be appropriate. For example, they could ask a mediator in an otherwise failed mediation to make a determination or may be just recommendations as to a path to settlement. Because it is a flexible and commercial process the parties can in essence decide how the process shall proceed.

Copyright © Adrian Leopard and Company 2009

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