Mediating complex disputes

Resolving disputes through litigation and arbitration comes at a high cost. Written submissions and preparations, sometimes over several years, lengthy hearings, expert witnesses and arbitrators’ fees, are just a few examples of the many contributors increasing the final bill. And in the end, many complex disputes will end up without any party being awarded costs – if the relevant jurisdiction has limited scope to make such an order. There is however an alternative with increasing popularity; mediation. How do you get the most out of mediation in a complex dispute?

Mediation is a form of assisted negotiation. A neutral and impartial third party is asked to mediate between ­parties in dispute and aid the parties into ­reaching a settlement. The mediation may be structured in a number of ways, but whichever the approach, reaching a settlement through mediation involves far fewer costs than litigation and ­arbitration, particularly in complex disputes.

All the major arbitration institutions, such as the London Court of International Arbitration (LCIA), London Maritime Arbitrators Association (LMAA), International Chamber of Commerce (ICC), Stockholm Chamber of Commerce (SCC) and the Oslo Chamber of Commerce (OCC) provide mediation services. There is also a general trend that mediation clauses are included in both standard form contracts and individually negotiated ­contracts. Moreover, ad-hoc mediations are not uncommon. 

More complex disputes

Today, we see more complex disputes, often stretching over weeks and months, and with substantial amounts of documents. Files reaching 10,000 pages and more in disputes of some magnitude are not uncommon. When technical restraints on the number of documents and pages gradually disappear, through better printing facilities and not least the use of digitalisation, cases can swell up if the amount in dispute is high enough. Furthermore, new search facilities make it far easier to find new and further documents all the time.

Choosing the right mediator is very important

In a dispute following a project perhaps having gone over years, a large number of people on all sides need to be questioned and testify in arbitration and court hearings. The number of issues or points in dispute may be overwhelming.

The above makes such disputes demanding to handle. And as stated: Costly. The question then is whether arbitration or litigation is the appropriate venue for resolving such disputes. The answer is yes, but rather as a last resort. The alternative, mediation, should be considered with all its possibilities. As sometimes expressed; arbitrators/judges determine a dispute, the mediator resolves it.

Who should mediate?

Choosing the right mediator is very important. In a complex shipping and offshore dispute, it will be a great advantage – sometimes a necessity – to involve a mediator having both legal background and real project experience. Such experience combined with the necessary authority will enable the mediator to grasp the main points in dispute easier and to point out strengths and weaknesses in the arguments in order to bring the parties together. Also, the person appointed needs to have the skills and patience necessary to mediate properly; in particular to listen, argue and not give up even when it could appear as though a settlement is not feasible.

Pleadings

For mediation in a complex dispute to be successful, it needs to be properly prepared. If it isn’t, there won’t be any sustainable argumentation, merely a negotiation based on – usually – an amount of money. In such situations, several advantages of mediation are lost.

How do you get the most out of mediation in a complex dispute?

If arbitration or litigation has already been initiated, documents such as statement of claims (writs) and statements of defence (defence replies) will often form a suitable basis for mediation. In short, the more detailed written preparations, the better. The balance needs to be struck with regards to timing and costs; at what time during the preparation for the hearing should mediation be instigated and such written preparations involve more legal fees.

If an arbitration or court case has not been initiated, specific pleadings for the mediation can be produced. This will both allow the mediator to learn the case (which is utterly important), and give the parties a further notion of how the other party assesses the matter. If no settlement is reached through mediation, such pleadings will certainly be of value as a basis in a later arbitration or litigation. 

Presentations during mediation

There are probably as many ways of mediating as there are mediators. Many mediations will start by giving each party the opportunity to express its views on a high level. This part can be expanded upon in a complex mediation. Oral presentations, to some extent similar to what is seen in court and arbitration hearings can be constructive means of getting the parties to understand the opponents’ view, and also give the mediator a better understanding of the dispute. However, care needs to be taken so that such presentations do not increase the distance between the parties. A further possibility through mediation is to hear just a limited number of experts and witnesses, and indeed perform on-site inspections.

It may take time!

Mediating a complex dispute can take time, sometimes days and weeks. The number of days should be agreed upon at the outset. It is important not to allocate too little time, and often the parties will benefit from mediating at a more neutral location to all parties. It can also be necessary to have breaks in the mediation, for instance, if the mediator asks the parties to assess certain questions of facts or law on each side. In our experience, it is also recommendable that the parties’ representatives during the mediation have the necessary authority to enter into a settlement, thus using the momentum from the mediator’s proposal.

The success rate

Most cases referred to mediation are resolved. If they are not, the otherwise unsuccessful mediation in some cases serves as an important basis for the parties to reach a subsequent settlement, without resorting to litigation or arbitration. It is the mediator’s task to help the parties find a settlement. The mediator’s role may develop throughout the mediation; from being a facilitator followed by an advisory role, and ending up decisive, that is, by giving his opinion as to how an arbitrator or judge would decide the case. This will often be a difficult task, and in the end, the parties may not even particularly appreciate the settlement they end up with. But having reached a settlement, the parties will have removed all risks inherent to litigation and arbitration, and reduced costs substantially. There is no loser, while it is worth noting that the settlement may have re-established a new basis for further commercial co-operation between the parties.

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