Mediation: Some Do's and Don'ts

Author: Rosemary Jackson QC, Keating Chambers, Great Britain   Date:  July 1, 2005

As a barrister specialising in construction and engineering disputes I am in no doubt about the beneficial effect of lengthy arbitration or litigation upon the finances of lawyers.    All too often a small (or not so small) fortune in legal fees is spent in obtaining an award or judgment that nobody is really satisfied with. 

After years of begging clients not to waste their money on my next holiday if there was any possibility of negotiating a settlement instead, I discovered mediation.  Fast becoming a standard approach for parties wishing to explore whether there is a better way than adversarial proceedings, mediation offers the chance of getting parties together to see whether settlement is possible, as a normal part of case management.  Fear of showing a sign of weakness often prevents a party from opening negotiations and may mean that an opportunity to settle is lost if the other side adopt the same attitude.  Suggesting mediation is not a sign of weakness but of common sense,  particularly given the recent willingness of the courts (and perhaps in the future, arbitrators?) to penalise parties who refuse to mediate by denying them their legal costs even though successful in the litigation (see Dunnett v Railtrack (2002) and later decisions).

Fear of an adverse costs order will cause some parties to agree to mediate with the intention of going through the motions but with no real desire to settle.  They can tell the Court that they tried mediation, safe in the knowledge that the reasons for failure must remain confidential to the parties.  The Court will not discover that they actually had no intention of settling but the costs risk has been avoided.  Experience shows, however that parties who feel coerced into mediation, or indeed who are ordered by the Courts to mediate, do nonetheless engage in the process and often achieve a settlement.  “I’m only here so that you can’t accuse me later of refusing to mediate” often precedes a settlement.

Some parties are put off mediation by fear that the other side may be on a fishing trip.  This has not been my experience.  On the contrary, the process leads to a better understanding on both sides of the differences between them and of the real issues.  Both as a CedrSolve trained mediator and as a barrister accompanying parties to mediations, my experience has been that in virtually every case, the parties benefited from undergoing the process even if they did not settle their dispute.  At least the parties know where they stand and what the options are for settlement.

Mediation is not limited to particular types of disputes.  The Government has made a commitment that its Departments will consider Alternative Dispute Resolution in all suitable cases.  Insurers support mediation even though the mere fact of their attendance at some mediations might (wrongly) be construed as an admission of liability.  Mediation is used in many construction disputes.  In 2004 6% of disputes mediated by CedrSolve were construction cases (i.e. building and engineering).  75% of CedrSolve’s commercial cases settle on the day of the mediation or shortly thereafter.  I have been told by lawyers in engineering companies that they are achieving even better settlement rates than those quoted by CedrSolve.

The increasing popularity of mediation in engineering disputes is underlined by the fact that the I.C.E.’s Disputes Administration Services now manages an accredited list of construction mediators and appoints professionals to act as neutrals in construction and engineering disputes.

Within mediation there is a role for every professional engaged in the engineering field.  Typically, a team of advisers and other professionals will attend the mediation in order to support and assist the parties and it is not uncommon for the mediator to pair off the engineers or the surveyors in a room to explore what common ground there is between them and to narrow the issues.  For those contemplating starting, attending or advising upon mediation, the following tips may be helpful.

DO understand the process.  Mediation is a flexible process conducted confidentially in which a neutral person actively assists parties in working towards a negotiated agreement of a dispute or difference, with the parties in ultimate control of the decision to settle and the terms of resolution.  All too often parties expect the mediator to decide who is right or to persuade the other side that they are in the wrong.  A mediator will test and probe but is not there to decide the dispute.  It can be very helpful if those attending have given some thought to how they think the mediator can help achieve a settlement.  There is no set procedure but usually there will be an introductory meeting at which each party has an opportunity to address the others, having already exchanged Position Statements.  At some point the parties are likely to move into private rooms for confidential discussions with the mediator but this is completely flexible and up to the mediator.  The parties may spend the majority of the day together, or apart.  They may be brought back together at certain points.  The purpose of the exercise is to encourage exploration what really lies between the parties, realistic self-assessment of the merits, and eventually negotiation and settlement.

DON’T assume that agreeing to mediation is a sign of weakness.  Mediation can often be an opportunity to make your opponent understand for the first time the weakness of his case and the strength of yours.  This can be particularly helpful if all correspondence seems to have been fielded by people relatively low down the hierarchy trying to settle the dispute themselves, or (worse) who are protecting their own backs – if the top man with authority to settle comes along to a mediation he may hear from you the things his own team have been withholding.  Mediation is a chance to expose bad advice and bad performance and to explain, face-to-face, why you are right.

DO think carefully about the timing of the mediation.  The earlier the mediation, the less clear the facts and arguments will be.  On the other hand, the later the mediation, the more likely it becomes that substantial legal and other professional fees will have been incurred, thus broadening the gap between the parties.  Some disputes can be settled by taking a broad brush approach, whereas others depend on the parties knowing the facts and arguments in detail.  If the details are going to matter, make sure that each side knows what the other is going to say well in advance.  Ambushing the other side on the day of the mediation is likely to lead to mistrust.  It is also likely that the party receiving new facts, claims and arguments on the day will be unable to verify or refute them on the day and will withdraw from the process.  They may come back to the negotiating table in a few weeks or months, or the momentum to settle may be lost.

DON’T be a cheerleader.  If you are part of a negotiating team you can either tell your principal what he would like to hear or you can give him your honest assessments.  Arguing the case and putting it at its highest is all very well in front of the opposition, but within your own team, and with the mediator, it is really important that the strengths and weaknesses of the case are realistically addressed, along with the risks of failing to settle.  If the parties can gauge the risks and rewards at stake they will be in a position to decide whether to settle on a deal which both sides can live with, or whether they believe the possible rewards to be gained at trial or arbitration so outweigh the risks of losing that the settlement on offer can be rejected.   If defensiveness or fear of appearing not to support the team prevents honest advice being given, the risks cannot be assessed.
DO come prepared to do some lateral thinking.  Settlement does not always involve a simple transfer of money.  The beauty of mediation (as opposed to litigation or arbitration) is that there is the opportunity to structure a deal to everyone’s benefit.  There are no limits to the ways a deal can be structured, but often a non-monetary component makes all the difference:  payment by instalments may enable the payer to agree to a higher total price; an agreement to settle the present dispute may be easier if it goes hand in hand with an agreement not to terminate another contract; facilities or training are sometimes be offered as sweeteners.
DON’T threaten to walk out.  It is one thing to conclude that the dispute cannot be resolved and to propose ending the mediation (although the mediator is likely to try to talk you out of it if he thinks there is still hope) but it is entirely another matter to threaten or stage a walk out as a negotiating tactic.  I have never known this tactic do anything other than bring the walker-outer into ridicule.  Once the threat is made you have only 3 options:  walk out if your bluff is called, and lose the chance to settle your dispute; hang around the reception area with hats and coats on giving the other party a last chance to beg you to stay (how likely is that?); or lose credibility by staying and making/inviting offers.

DO ensure that you are prepared for a long day.  Human nature is such that mediations often last well into the evening.  If key team members have to leave at 5.30pm or if important consultees will not be available in the evening, the momentum can easily be lost.  A good supply of newspapers, energy bars and energy drinks (non-alcoholic) will pay dividends.

DON’T be dismayed when you reach the low point in the day.  Usually this comes when the first offer is put forward and the parties realise the magnitude of the chasm between them.  Everyone’s instinct is to give up and go home.  The reality is that someone has to make the first move, and just making that first offer may have been very difficult.  It is seldom any indication of where they expect or hope to end up. 

DO trust your mediator.  The confidentiality of the process means that you can share your hopes and fears with the mediator so that he can help you to get to the settlement you need. 

DON’T underestimate the importance of saving face.   In order to get the deal you need, it may be necessary to persuade the opposition that their case is weaker than they have been advised.  At some point their lawyer, engineer, surveyor or contracts manager may have to admit that his advice may have been wrong or over-optimistic, or that his actions may have led to some liability.  This is not easy.  You may be in the same position.  Be aware of the hurdles that people have to overcome in order to be able to make the deal that they know makes sense.   Structuring a settlement so as to avoid ritual humiliation can make the difference between settling and not settling.

DO consider mediation next time you have a dispute to resolve!