Commercial Mediation

What is Commercial Mediation?

Commercial Mediation is an informal but structured process facilitated by a commercial mediator. Parties to a commercial dispute (oftentimes contractual in nature), would typically set aside a full day for the purpose of holding discussions aimed at reaching a written out-of-court settlement agreement.

How does it work?

The day typically kicks off with a joint meeting between the parties, their lawyers or other representatives, and the mediator. The mediator would give each party an opportunity simply to state its position (for roughly 15 minutes). This is merely in an effort to clarify the nature of the dispute, and the parties are strongly encouraged not to comment or interrupt. If the matter is complex, the mediator may also have requested written representations by the parties in advance of the mediation, which at this juncture may be referred to.

Once the parties have stated their positions, the mediation breaks off into separate side meetings. During these meetings, the mediator explores with each party, on an entirely confidential basis, the exact nature of the dispute and the reasons therefor. Also during these side meetings, the mediator assists the parties in analysing their “best alternative to a negotiated agreement”. In other words, conducting an exercise in understanding exactly how long, costly and unpredictable the litigation road ahead will be if they don’t reach settlement.

Why does it work?

The process is informal, confidential and without prejudice to any party’s rights going forward if the mediation should be unsuccessful. In other words, nothing that is disclosed by any party during a mediation may be used against it in court by any other party. Moreover, without the express mandate to do so, the mediator may not disclose to any party anything disclosed to him or her by any of the other parties during the mediation.

Combined with these factors it is the informal and exploratory nature of side meetings that typically unearths settlement alternatives in a manner which parties could never do in a confrontational environment. It is in fact customary in mediations for parties to the dispute not to be in the same room at all after the first joint opening meeting referred to above – the parties take up separate rooms and it is the mediator who moves from room to room, first working with one party and then the other. This non-confrontational and creative dynamic is much more productive than typical adversarial settlement negotiations across a boardroom table.

How is it different from litigation and arbitration?

It is vastly different for a number of reasons, but first and foremost is this: the only outcome that binds any party is written settlement. In other words, short of agreeing the exact manner in which the dispute is to be settled, each party is entirely free to walk away and pursue its rights in court.

When should it be considered?

The sooner the better. That said, the time most parties consider mediation is typically when a dispute threatens to head to litigation, i.e. when letters of demand are being exchanged. It is however never too late, and well worth the effort even long after litigation has commenced. The process is not limited to dispute resolution, and can be effectively applied also to facilitate the conclusion of sensitive contractual negotiations, e.g. when the parties have difficulty in reaching agreement.