Mediation – a real alternative to resolving your business dispute

Disputes have become common place for most business owners.  How you resolve disputes, small or large, can make a huge difference to the success and future of your business, not to mention your bank balance.  Unfortunately, most business owners will at some stage find themselves involved in a dispute: whether over an unpaid invoice, a party’s failure to comply with the terms of a contract, shareholder disputes or other business-related dispute.  Whilst it is always open to you to take the other party to Court, and ‘litigate’ to seek a resolution, there are several other avenues, commonly referred to as alternative dispute resolution (ADR).  Mediation is one of the most recognised and commonly used forms of ADR.

What is mediation?

Mediation involves an independent third party (referred to as the ‘Mediator’) who attempts to assist both parties in reaching an agreement to resolve their dispute. Naturally, the meditation process does have a degree of formality, but it is significantly less formal that Court proceedings.  In summary the mediation process will operate as follows:-

• Each party will provide a summary of their case and the issues in dispute. A copy of this document is provided to the Mediator and the other party prior to the mediation.

• The parties will then go into separate rooms and the Mediator will speak to each party in turn, going back and forth between the parties. They will try to narrow the issues in dispute and identify those areas in which the parties are able to reach agreement.

• If the parties can reach agreement at the end of the session, then the Mediator will assist in recording the agreement reached between the parties.

Mediations usually take place over a set period, either a few hours, half a day or the whole day.  The time taken will depend on the complexity of the dispute.

Why mediate a dispute?

There is, at the moment, no formal requirement to mediate a dispute and parties cannot be compelled to do so.  However, the Courts are increasing encouraging parties to seek mediation before litigating the dispute.  More recently the Courts have indicated the intention to make ADR compulsory.

The key advantages of seeking to resolve a dispute by mediation rather than litigation are commonly viewed as follows:-

• Speed – mediation is a significantly quicker process than litigation.

• Costs – with the average costs of a full day’s mediation between £2,000 – £5,000, it is significantly cheaper than litigation. The costs of the mediation are usually split equally between the parties, which further reduces the costs.

• Nature of the process – mediation reflects a collaborative approach to settling disputes, whereas litigation is confrontational.

• Confidentiality – mediation is conducted in a private forum, whereas litigation will be heard in public.

• Procedure – litigation is governed by strict Court rules. Whilst mediation is governed by some rules, the procedure is largely decided upon by the parties and therefore flexible.

• Outcomes – the Courts are bound to follow legal principles when reaching a settlement. For example, the payment of damages / injunctions.  Mediation allows a greater scope for a holistic approach to settlement and can include matters which the Courts cannot provide (i.e. an apology).

• Preservation of relationship between the parties – the collaborative rather than confrontational nature of mediation increases the likelihood of the party’s relationship continuing.

Common criticisms of the litigation process as a means resolving disputes is both the slow speed and costs of that process.  With the time between issuing a claim and trial often taking 12-18 months, as compared to mediation, which takes place in a matter of a few months, mediation represents a significant advantage.  Legal fees and the risk of being liable for the other sides’ fees can be significant.  The costs of litigating a dispute can often be prohibitive to a party pursuing a claim.  For these reasons alone, mediation represents a costs effective way of seeking to resolve a dispute.

It is right to add that not all disputes can be resolved through mediation.  Typically, disputes which are of a technical legal nature, where a remedy such as an injunction is required, or a legally enforceable outcome is necessary, are not suitable for mediation.  It must also be borne in mind that a successful mediation requires both parties to voluntarily participate in the process.  As such there may be cases where one party simply refuses to engage in mediation.

How to start a mediation

Unless you are using a form of Court mediation, the mediation process should be started by:-

• one party contacts the other party to the dispute and invites them to participate in a mediation.

• The parties should agree on the identity of the mediator.

• Each party should prepare a summary of their case and provide supporting documents.

• Practical arrangements will need to be made by the parties for a mediation (e.g. time, date and venue for the mediation).

There is no requirement for a party to be legally represented at a mediation.  However, instructing a solicitor to assist you in the preparation of a summary of the case and presentation of the relevant arguments to the mediator at the mediation is usually a worthwhile investment, and can benefit both parties to achieve a successful outcome of the process.

Remote access mediation

Unsurprisingly the Covid pandemic had a profound effect on how mediations were conducted.  Whereas mediation was traditionally conducted face-to-face, the restrictions arising from the pandemic have seen a significant increase in online and telephone mediations, commonly

referred to as remote access mediation.  The use of such mediums has further reduced the costs of mediation.

A clear example of such developments in the use of technology for mediation is shown in the new mediation platform recently launched by the Quality Franchise Association.  This platform provides a cost-effective mediation service for franchise disputes.  Details of this service can be found here.

Concluding remarks

Mediation is becoming a common and successful means of resolving a dispute, that can be far quicker and more cost effective for your business than becoming embroiled in long and costly litigation.  For any franchise business who finds themselves in any form of dispute, large or small, we would be happy to discuss options with you.