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What happens when mediation fails

DTM Legal looks at the options a company faces when they have doubts about compromising during mediation.

Compromise is said to be the art of dividing a cake in such a way that everyone believes he has the biggest piece but can also be seen as a settlement by which neither side gets what they wanted.

Each perspective may be valid but there is no doubt that the difficulties of compromise reside in the talks themselves and are currently highlighted in Greek/Eurozone discussions which have been in our weekly diet of news since the fall out from the financial crash of 2008.

Angela Merkel, Francois Hollande, Alexis Tsipras and co. have been engaged in round after round of talks that focus on the perceived need for Greece and the Eurozone to remain interconnected.  However, continuous compromises only appear to steer Greece away from the brink for a short period of time before the country slides perilously towards the exit once again. Many wonder where and how this will end with critics doubting the talks will end in anything but failure.

In law, mediation is a flexible, voluntary and confidential form of alternative dispute resolution in which a neutral third party “the mediator” assists parties to work towards a negotiated settlement. The parties involved retain control of the decision on whether or not to settle and on what terms. Although some of these aspects are noticeable in the Greek/Eurozone talks, any attempt at confidentiality is almost impossible with all the media glare.

Thankfully, the mediation process relating to legal disputes is confidential. It allows more creativity and flexibility over settlement options than resolving a dispute through the courts. The best time to mediate is generally before proceedings are issued and although not mandatory, engaging in mediation can maximise cost and time savings and helps to achieve the overriding objective of the courts to deal with cases justly and proportionately. A failure to consider mediation can have adverse costs implications for a party at a later date.

However parties are sensibly not ordered to engage in mediation as there is little point in proceeding with mediation if the parties are unwilling or it appears doomed to fail.

Mediation can fail for a number of reasons and at various points, for example at the first signs of non-cooperation or perhaps a lack of trust such as where one party will not help in the selection of a neutral mediator.  In such circumstances litigation or arbitration could be used.

Of course, it may not be that mediation fails early but does so further down the road. Commonly, mediation is used to narrow the issues in dispute and at first both parties may be willing and negotiations may go well. However, over time the mediator may find it difficult to prevent conflict between the parties from spreading and it might not be possible to resolve a specific dispute or disputes.

At this point concluding a ‘failed’ mediation may well enable both parties to understand the case against them, evaluate the strength of the evidence against them and even agree on some aspects of the dispute before taking the more partisan issues to an arbitration or court.

Even if mediation is abandoned initially an arbitrator or a judge may deem it appropriate to continue with mediation in conjunction with litigation or arbitration, using the latter as a spur to co-operation with the former.

In the event of non-settlement the mediator may ask permission to remain in contact with the parties involved, as often settlement can be achieved after a period of reflection in the following weeks or months. If this is not the case the parties are able to pursue their rights either through litigation or arbitration as appropriate and in the knowledge that anything said or done or any documents created for the purpose of the mediation are ‘without prejudice’ and except in very limited circumstances, cannot be relied upon in subsequent litigation or arbitration.

Although the Centre for Effective Dispute Resolution reported that 70% of their cases settled on the day with another 20% settling shortly thereafter, successful mediations require compromise from both sides.

Here are 5 top reasons that should be considered when having doubts about compromising and giving mediation the best chance of not failing:

1. Speed – it takes longer to resolve a dispute through the courts, whereas most mediations last only a day (although preparation is required).

2. A failed mediation may not have failed – there may be no agreement on the day, but airing the issues face to face may mean a settlement is reached soon after, or, at least there may be agreement on some points which leaves fewer points to litigate over and potentially less costs incurred.

3. Higher risk in the courts – proceedings through the courts involve asking a judge to deliver a judgment on the dispute, mediation removes this risk as the parties try to find a solution.

4. Court is confrontational – parties are cross examined. This can be stressful and this can impact detrimentally on your personal and business life.

5. Relationships are less likely to be saved in court proceedings – parties’ positions become entrenched during court proceedings which can mean irreversible damage.  There is less chance of the parties shaking hands and talking again after court proceedings whereas there is a greater possibility of this happening after mediation as the parties will have agreed their own conclusions.

Mediation may not be perfect or even suitable in some circumstances but a failed mediation can have significant implications for the parties involved. For more information, contact our dispute resolution department.

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