Survival skills

ADR is a much bandied term. Some regard it as a must particularly in the light of the CPR requirement to consider settlement. Others are more sceptical and regard an offer of ADR or settlement as a sign of weakness. Lord Woolf encouraged it; more recently Lord Justice Jackson has endorsed it. So, what is the truth about mediation? Does it work? And, if so, how?

The short answer is yes '“ if used properly and effectively at the right time in the life of a dispute. It is certainly something which should be considered; not only at the outset of the dispute or when asked in the allocation questionnaire but throughout the dispute. Mediation is unlikely to succeed if entered into just because the court asks you to consider ADR. The attitude, timing and mediator must combine to create an optimal environment for settlement.

Those within companies responsible for dealing with legal issues face continuing scrutiny and accountability for legal spend. Attempts at early resolution of disputes should be worthy of serious consideration. While many hanker after their 'day in court', mediation can provide an opportunity to put your case at a more affordable price.

An expensive settlement meeting?

Clients need to be persuaded of the merits of mediation; it can reduce costs and copious amounts of management time and remove the uncertainty of trial. However, a client insistent that he/she does not want to attend should not as they are unlikely to settle.

A reluctant or sceptical client is, however, different: 'Why do we need to pay a mediator when we can sit around a table ourselves; we are never going to settle anyway' '“ a common mantra of many clients. Mediation goes beyond a formal all parties meeting by introducing an independent party. The impartiality of a good mediator ensures an additional and very important dimension to settlement discussions. Generally, at the outset of the day, most mediators ask the parties to meet together and to present to each other a summary of the key legal and commercial issues.

A good mediator will listen to the parties and will identify the areas where the parties are in agreement. This is in complete contrast to the usual approach in litigation where lawyers are encouraged to find the (often subtle) differences in facts, legal argument and to find clever ways of distinguishing case law to support the case he/she is being asked to advocate. Mediation is sometimes the first time that parties to litigation ever recognise that there are points upon which they agree. This can be a positive experience and can have an impact on the ability to find common ground.

An effective mediator will also identify the parties' objectives both short term '“ i.e. on the day itself '“ and longer term '“ i.e. wider issues surrounding the business which is engaged in the dispute. It is often these wider issues which provide a catalyst for settlement of the dispute. The mediator will attempt wherever possible to take the parties away from the minutiae of the legal issues and to get them to focus on the commercial objectives that they may share.

The parties' respective advisers also contribute to a successful mediation. All parties must attend the mediation with the right attitude '“ i.e. trying to find common ground and a way through the issues '“ and so litigators have to suppress their natural tendency to argue.

Being well prepared is essential. Demonstrating that both the strengths and weaknesses of the respective legal issues have been thought through is essential. A good mediator will test the legal case hard; the mediation is not the place for the lawyer to doubt his/her own advice. The client needs to receive no surprises. The mediator can re-enforce some of the difficulties with a case from a legal perspective which can encourage a client to reconsider those issues more realistically.

Finally, clients must be prepared and of the correct mind set. The clients must have the information ready to answer questions which the mediator and the other side may have. This information may extend to wider business issues. Equally important is to ensure that the right people from the client are in attendance. Unsurprisingly, when the CEO or MD is in attendance at mediation, they will look at a dispute very commercially. The mediation may be the first time that they have focused in any detail on the dispute and can often generate interesting proposals.

Successful mediations produce a real feel-good factor. Clients have commented on the fact that they felt they had their day in court; the feelings of euphoria the following day when they realised the litigation was behind them; the positive experience of looking at a dispute from all angles which has empowered them in negotiations on other issues.

The reluctant client

In almost all cases, there is some reluctance on the part of the clients to be open with the other side. Often they will have been in dispute for a long period prior to the mediation. We acted for owners of a care home business. The husband and wife team had run the care home for a number of years; they were in dispute with the purchasers of the business who had taken over the care home; they employed one of the former owners and then dismissed her. There were a number of legal issues but the key driver of the dispute was the hurt and anger which our clients were experiencing following their treatment by the new owners.

Mediation was an obvious solution from our perspective given the multitude of issues; some of the 'moral' points which our clients were determined to have resolved (which a court could never have adjudicated on) and the costs consequences for them as individuals if they had to take the dispute all the way to trial. The thought of entering a room with the new owners and facing them with the issues they had was daunting for the clients, however, and mediation was therefore unattractive and rejected.

As the costs began to make an impact, we revisited the question of mediation and the clients agreed. The process was emotionally daunting for them but equally liberating. They presented their own case in front of the individuals who they really believed had wronged them and it was a great release of anger and emotion. Having got the emotion out of them, we moved very quickly to a successful and commercial settlement.

The mediator who listened

Listening is key to a successful mediation. We acted in relation to a complex contractual case where there was fundamental disagreement between the parties as to whether or not there had been wrongful termination of a supply agreement. The parties entered into mediation with almost certainty that this was not something which would work for them.

As expected, there was debate around the legal issues which took the parties no further forward. The mediator had picked up in the opening session, however, that one party wished to sell its business and the open-ended litigation was causing difficulties. The mediator opened up this issue and the discussion focused on a potential purchase of the business by the party alleged to have breached the agreement. A purchase price (incorporating a sum to compensate for the alleged breach) was agreed and the litigation was settled. Neither party had envisaged this compromise and both were incredibly satisfied with the outcome.

What can go wrong?

Running out of time

Timing is often an issue which gives rise to difficulties in mediations. The general rule is that parties attending mediation should be prepared to stay at the mediation as long as it may take to reach a settlement. It is not uncommon to begin to talk about potential settlement figures quite late in the day and if terms are agreed the detail can take some time to finalise.

We acted for a client with a complex patent dispute. Having agreed to act, the mediator warned us in advance that he had difficulties with staying beyond 6pm. We communicated this to the client and warned the client that this may be far from ideal. The sceptical client did not think he would be there beyond lunchtime and saw this as no problem. Sadly, it was apparent from the outset of the day that we were running to the mediator's timetable and that he was keen to force issues to a conclusion. Both sets of lawyers tried to get together to see if they could move things on but everyone felt the time pressure. The parties became more and more entrenched and no settlement was reached. The clients were philosophical but commented that notwithstanding our team's efforts, the only person who had not come with the right mindset was the mediator.

The temptation to opine

Clients often wish to have lawyers as mediators and this can be incredibly effective. It is very helpful to have a mediator who quickly and easily understands the legal issues and can ask relevant questions to establish how both sides see their respective legal case.

We have had one experience, however, where the mediator lawyer got carried away. During the mediation there was a (not unusual) impasse on the legal issues. The mediator thought he should 'opine' on the issues to move things on. We did not want to alienate the mediator but equally his opinion of the legal merits of the case would have re-polarised the parties. It would also have had an impact upon the conduct of the litigation going forward.

We persuaded the mediator that this would not assist in achieving settlement and outlined to him the commercial issues we could focus on to try to move the discussions from the intractable positions which the parties were taking on the legal issues.

The party who ran away

Last chance; if that isn't accepted we are off; we are leaving in 30 minutes. These are all words that are often said during mediations. Our experience is that they are very rarely acted upon. A good mediator (and the legal teams supporting the parties) will seek to focus on the points where progress has been made, recap on the success so far and provide options to take the parties forward. One mediator has, however, commented that forcing a party to stay when they are determined to leave is pointless.

We acted in a dispute where the parties were millions of pounds apart. The other side became frustrated and we were told that they were going to leave. We had not in fact seen them since the opening plenary session. We asked the mediator to put the two business leaders together to see if progress could be made. That meeting took place; the lawyers were eventually called in with the mediator and a round the table discussion facilitated by the mediator resulted in a settlement which only an hour before had seemed impossible.

A sensible option

Mediation can be costly but compared to the costs of running a dispute to trial it is commercially sensible to keep it open as an option throughout the course of any dispute. Key points to note are:

• Timing '“ ensure you understand each other's case before entering into mediation.
• Costs '“ ensure they do not dominate the day or cloud the issues.
• Choice of mediator '“ research of the mediator is also important: look at CVs, take references and consider the experience which the mediator has not only of mediations but generally in their professional capacity.
• Allow time.
• Prepare yourself and with the clients.
• Be open minded.
• Have clear parameters in mind '“ what is the point at which you will walk away '“ and stick to them.

Mediation is rewarding and can provide a very good result for clients. Surprising results can emerge when least expected.

Copyright & permissions