If mediation is suitable for most cases, when should I not mediate?
There is no hard rule to determine which disputes should not be mediated. A party's decision to mediate (or not) depends on whether settlement is the objective and whether engaging a mediator is perceived to increase the chances of reaching that objective. We have seen reasonable reluctance to mediate, for example, in circumstances where:
- the claim was for a simple debt and the claimant did not see the benefit in bargaining on the amount due;
- the parties required the clarification of an IP right for third-party proceedings;
- the parties had gone through substantial bilateral negotiations (with expert advice and the intention to settle) without being able to reach agreement; and
- there was no trust that the counterparty would observe the settlement even if agreement was reached.
Early mediation is desirable from a cost and time-saving perspective. It also mitigates the risk of parties getting too entrenched in their positions, which is prone to hamper settlement efforts.
Is now a good time to mediate?
However, consider whether both parties have sufficient information about the strengths and weaknesses of their respective cases. Often, an understanding of parties' positions on the issues – whether through pre-action correspondence or initial pleadings – will help identify the scope for settlement options.
Tip: Consider what others think about the timing of mediation in arbitration.
The Herbert Smith Freehills arbitration team has partnered with the London Chamber of Arbitration and Mediation to conduct a snapshot survey of more than 50 mediators, exploring their experience of mediation in arbitration. The majority of mediators with experience of mediation in arbitration reported that they had mediated these disputes at the pre-document production stage.
Tip: Agree to have a "mediation window" in the arbitration proceedings with the other party.
The HSF arbitration team has partnered with the London Chamber of Arbitration and Mediation to conduct a snapshot survey of more than 50 mediators, exploring their experience of mediation in arbitration. The majority of mediators with experience of mediation in arbitration reported that they had mediated these disputes at the pre-document production stage.
Med-arb: mediation and arbitration before the same neutral
One way of combining arbitration and mediation is through 'Med-Arb'. In Med-Arb, a single neutral serves both as a mediator and an arbitrator. If the mediation does not result in settlement, the neutral will issue a binding decision in their capacity as arbitrator.
The adoption of Med-Arb varies between legal cultures: while it is more prevalent in jurisdictions such as China (as reflected in the CIETAC Arbitration Rules) and certain European civil law jurisdictions (as reflected in the Prague Rules), Med-Arb is less frequently used in common law jurisdictions and occasionally viewed with a degree of scepticism.
A key benefit of Med-Arb is the potential to streamline the two processes by having the same neutral briefed as arbitrator and mediator on the matter, which should result in cost and time savings. A potential drawback is that parties might be less open in the mediation phase, fearing that any concessions made could negatively impact their position when the neutral assumes the role of arbitrator. So, is Med-Arb the right approach for your dispute? As a wise lawyer once said: it depends.
My counterparty has agreed to mediate. What next?
DOs
DON'Ts
1
Prepare for the process and for settlement. Identify your preferred outcomes, a settlement range, your best alternative to a negotiated agreement, and any non-negotiables. Consider using a Decision Analysis model to quantify your risk and the zone of possible agreement with the counterparty. Come equipped with signing authority, so formalities do not stall the process on the day.
1
Consider a mediation that does not result in a settlement as a waste of time. Even if settlement discussions ultimately stall, the information gained from such conversations is invaluable to the conduct of the arbitration. If it proves impossible to settle the entire claim, do not overlook the possibility to settle specific issues only.
2
Choose the right spokesperson. The person who makes the opening statement can set the tone for the rest of the mediation. Consider from whom the statement would have most impact: an external lawyer, in-house lawyer, or someone from the commercial team. Use personal connections to your advantage if conducive to the discussion (eg, to explain why something was perceived as (not) fair) but be careful with team members who may be too emotionally involved to engage in rational problem-solving with the other side.
2
Overstate your legal case to the commercial team. Always provide an honest assessment of the legal strength of a case to your commercial colleagues. Overstating or understating the case can lead to unrealistic expectations and may hinder the settlement process.
3
Understand your strength and consider creative solutions that could be beneficial to all parties involved. Mediation is a lawyer-driven process but it is unlikely that legal argument will sway the outcome on the day. You may have commercial leverage even if your legal case is not strong.
3
Underestimate your opponent. The level of preparation and the strength of the evidence you bring to the table can significantly influence the power dynamics in a negotiation or mediation.
4
Pick the right mediator. Think about whose opinion would be valued by you and your counterparty. Consider whether the mediator requires any specific technical expertise or sector experience to understand the issues or give meaningful guidance.
Leave the entire conduct of the mediation to your external lawyers by default. In certain situations, it may be beneficial to cut out the lawyers as the go-between and – with the benefit of the lawyers' advice and guidance – have one-on-one discussions with your in-house or commercial counterpart.