Guide to Mediation20 January, 2015
This note provides general guidance with regard to mediation and identifies those matters that ought to be considered in advance as part of a strategy for achieving a successful outcome.
The following issues are looked at:
- What is mediation?
- Why mediate?
- The mediator
- The mediation process
- The aim of the mediation
- What happens if settlement is achieved?
- What happens if settlement is not achieved?
- Costs of the mediation
- Pre-mediation action points
What is mediation?
Mediation is a process in which a neutral third party leads a structured negotiation with the aim of assisting parties in a dispute to achieve a negotiated settlement.
The neutral third party is called the mediator.
Mediation is conducted on a ‘without prejudice’ basis. This means that the matters discussed in the mediation, or documents produced, cannot be shown to the court or otherwise employed in any litigation between the parties.
Unlike in litigation the parties and their advisers remain in complete control and ultimately decide whether and how a case will be settled. Any party to mediation can bring the mediation to a halt at any point, should they choose to do so.
Mediation can be a very effective method of resolving disputes faster and at considerably less cost than pursuing court proceedings.
It enables the parties to retain control of the process as the outcome is entirely within their hands.
An unreasonable failure to consider or pursue mediation (or other forms of alternative dispute resolution) can result in the court imposing costs penalties on the party in default. This could mean, for example, that a “winning” party is denied an award of their legal costs in whole or in part on the basis that if they had agreed to mediate then the matter could have been resolved more cost-effectively.
The role of the mediator is to listen to the parties and try to identify common ground that may form the basis of a settlement. Rather than being judgmental the approach of the mediator will be to endeavour to facilitate constructive and productive negotiations. The mediator will not make a decision on any issue.
Traditional mediators take a purely facilitative approach and will not offer an opinion on any issue. However, some mediators prefer a more evaluative approach and they may express their personal opinions on issues. This can sometimes be helpful as it can be useful to have a third party’s view on the merits of an issue.
The mediation process
The mediation will take place at a venue to be agreed between the parties. A neutral venue is best but often the offices of one of the parties or their lawyers is used for convenience or to save to the cost of hiring a venue.
The mediation will commence on a time to be agreed and continue until either a settlement is reached or it becomes clear that no settlement will be possible. It should be noted that mediations can often continue quite late into the evening and attendees need to be prepared for a long day.
Each party to the mediation will normally have a separate room at the venue and there will also be a room set aside for joint meetings (which also often functions as the mediator’s room).
The mediator will normally be supplied in advance with mediation statements prepared on behalf of each party and with a bundle of the key documents. Mediation statements summarise the position of each party for the mediator and are exchanged between the parties before the mediation.
The mediation will usually begin with a joint meeting of the parties and an opening statement by the mediator explaining their role to the parties. The mediator will also set out how it is envisaged that the mediation will progress. The parties will sign a mediation agreement setting out the terms on which the mediator is instructed and also confirming the confidential nature of the mediation.
Normally the mediator will then ask each party to give an opening statement. The purpose of such statements is to provide the mediator and the other parties with a short description of the issues as that party sees them. These are not necessarily just the legal issues although these are often the primary ones. It is also traditional for the opening statement to confirm the fact that the party is there in good faith and has a willingness to negotiate.
Mediators often prefer that the opening statement is made by the party rather than by their lawyer. The parties’ mediation statements will already set out their formal positions in some detail and there is therefore no need to repeat these in the opening statements, although they are often referred to.
Following the conclusion of opening statements the mediator will usually meet with the parties individually, known as ‘caucusing’. The discussions at these meetings are confidential and details will not be released to any of the other parties (unless the mediator is given specific permission to do so).
Following these initial caucus meetings the mediator may then call a further joint meeting if he feels that this could be an appropriate way to advance discussions. Otherwise, he may shuttle between the various parties determining whether the parameters for an overall settlement are likely to be in place.
During this process the mediator may ’reality test’ the positions of the parties. What this means is that the mediator will seek to identify whether each party has fully considered the strengths and weaknesses of their claim and is fully aware of the risks of proceeding if a settlement is not achieved.
At a certain point the mediator may encourage the parties to table offers that can be put to the other parties in caucus. As part of this process the mediator may also wish to get a feel for the highest / lowest figures a party will accept (although this information will remain confidential and not disclosed to the other parties).
This process will enable the mediator to assess whether the parameters within which the various parties are willing to settle overlap. If they do not then it is the job of the mediator to see whether any of the parties are willing to change their position. If no party is willing to change their position then the mediation will fail.
The mediator will not seek to force the parties into an agreement but will try and encourage the parties to see the benefits of a settlement.
The aim of mediation
The aim of mediation is to achieve a negotiated settlement of the dispute.
Accordingly, the parties and their lawyers should try not to see themselves purely as advocates of their cause. The key to a successful mediation is flexibility in considering the position of the other parties by reference to a risk analysis of a party’s own position.
A negotiated settlement is invariably a compromise. It depends upon the parties putting forward terms of settlement that realistically balance what they believe they might achieve in litigation against the risks of losing.
Whether a settlement is ultimately reached will depend upon whether the terms that are offered are considered to be a satisfactory outcome having regard to the risk analysis that has been carried out by each party. If the terms on offer are not as good as the risk analysis suggests would be appropriate then either a commercial decision can be made to accept them in any event or it can be accepted that the mediation has failed.
It is an essential requirement for a successful mediation that the parties’ representatives who are attending are authorised to settle the dispute should the opportunity arise.
What happens if settlement is achieved?
If a settlement is reached at the mediation this should be immediately recorded in writing. The mediator will assist in this regard to ensure that the settlement agreement truly reflects the agreement of the parties.
Ideally the written agreement should be legally binding so as to be enforceable if the terms are not complied with. However, sometimes the complexity of the settlement means that a non-binding agreement is reached which is intended to form the basis of a more formal agreement in due course.
What happens if settlement is not achieved?
If no agreement is reached then little has been lost other than the time and money incurred in attending the mediation. What has been gained is a better understanding by all parties of the position of their opponents. This may well assist reaching a negotiated settlement at some point in the future.
Only a minority of mediations fail to achieve a settlement on the day, and of those that do fail, many settle shortly afterwards.
Costs of the Mediation
If settlement is achieved then the costs of the mediation itself and the parties’ legal costs leading up to the mediation are normally dealt with as part of the settlement agreement.
If settlement is not achieved then it will depend upon the terms of the mediation agreement. Often it is agreed that the costs incurred by the parties in relation to the mediation will be borne by them in any event. In other words, these specific costs are not taken into account when costs are awarded at the end of litigation. If it is desired that the costs might ultimately be picked up by the “loser” in the litigation then it may be necessary to agree an amendment to the mediation agreement.
Before any mediation you should do the following:
- Undertake a risk analysis of the case.
- Prepare a mediation statement.
- Decide who will give the oral opening statement.
- Agree the format of the opening statement.
- Decide on your opening position.
- Come to a view on the parameters within which settlement is possible.
- Ensure that whoever attends the mediation has authority to reach a settlement.