Hill & Associates
6 chemin du Port-Noir, CH-1207 Geneva, Switzerland
Tel.: + 41 22 840 1021, Fax: +41 22 840 1025
E-Mail:
info@hill-a.ch     http://www.hill-a.ch
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Mediation

Finding win-win solutions that benefit both parties in a conflict

"That war is an evil is something that we all know, and it would be pointless to go on cataloguing all the disadvantages involved in it.  No one is forced into war by ignorance, nor, if he thinks he will gain from it, is kept out of it by fear.  The fact is that one side thinks that the profits to be won outweigh the risks to be incurred, and the other side is ready to face danger rather than accept an immediate loss."  Thucydides, circa 400 B.C.

What is Mediation?

Mediation and conciliation are voluntary, non-binding processes using a neutral third party to guide the parties towards a mutually beneficial resolution of their dispute.  Unlike an arbitrator, who can impose a decision, the mediator helps the parties to decide for themselves whether to settle and on what terms.  The key feature of mediation is the belief that settlements should be brought forth from within by the parties themselves, not imposed on them from the outside.  This is akin to Michaelangelo's approach to sculpting: he claimed to do nothing more than to free the figure that he saw imprisoned in the block of marble, although the situation is more dynamic in mediation and the agreement that finally emerges may be surprisingly different from the one the parties and the mediator first imagined.

Why use Mediation?

Thucydides' words apply equally well to business disputes that degenerate into fiercely contested, expensive, and prolonged lawsuits.  All parties know that such legal proceedings have disadvantages, but are willing to engage in them because they believe that the ultimate outcome will outweigh all the disadvantages.  In many cases, the parties are correct to pursue disputes to their ultimate conclusions in court; in other cases, however, alternative dispute resolution mechanisms, in particular mediation, may be better alternatives.

In many situations, disputing parties can find negotiated solutions that benefit each party more than the best possible outcome of litigation.  Real business situations are rarely zero-sum games like chess or territorial wars: by cooperating, business partners can expand their markets and reap mutual benefits.  Imagine how many goals a football team could score if it could persuade the other team to cooperate!

It is sometimes implied that mediation can only be used before the beginning of court or arbitration proceedings, as a last-ditch phase of negotiations.  This is not correct.  While mediation can, at times, help to resolve disputes before they are litigated, mediation is often used to resolve them during the course of litigation, before the final award is rendered.  Indeed, mediation can also be used at the early stages of arbitration to help negotiate Terms of Reference, to resolve disputes regarding procedures, and to narrow differences between party-appointed expert witnesses.

Parties may often feel that court proceedings are the only solution when the dispute arises in a zero-sum situation: there is a fixed-size "cake" to divide up, and each party would rather have a bigger slice than a smaller slice.  Such situations arise, for example, in case of bankruptcy or in case of cancellation of a licensing agreement.  However, it must not be forgotten that the legal fees associated with court proceedings reduce the size of "the cake", in some cases very significantly.  So, even in a zero-sum situation, it might be better to rely on a dispute-resolution mechanism that is less expensive than litigation or arbitration.  Mediation proceedings typically last only a few days and costs are very small compared to the costs of litigation or arbitration.

Mediation is eminently sensible in the following cases:

        When the parties can benefit by continuing to do business together after the dispute is resolved.

        When one of the parties wishes to maintain or to enhance its public reputation as a good business partner.

        When the cost of litigation or arbitration will be high.

        When the dispute centers around complex factual issues.  Factual issues can often be better appreciated by business people familiar with the industry than by lawyers or judges.

        When neither party requires a determination of legal issues.  If a determination is required, arbitration or conventional court proceedings are appropriate.  However, in some cases, lawyers do not agree on the correct legal analysis (just as their clients often do not agree on the factual issues) but are willing to allow a mediator to help them find a compromise position that is mutually acceptable.

Mediation is based on the idea that, by probing for underlying business interests and listening carefully to what the parties have to say, the mediator can help the parties to discover creative solutions to the dispute, often allowing all parties to find benefits unavailable through litigation or arbitration.  Parties work together to "make the pie bigger".

What are the Characteristics of Effective Mediations?

Mediation involves people, and the interactions between people.  Like most fields that involve people, there is no single "best" way to do things or to get results.  Just as there are many different effective management styles, so there are many different effective mediation styles.  However, no mediation can be effective without the following:

        The presence of party representatives with the authority to negotiate a settlement.  Contrast this to so-called mediation procedures where parties are represented exclusively by external counsel.

        The willingness of the parties to find a solution outside the courtroom.  Sometimes, only one party is keen on mediation at the outset, and must "sell" to the other party the benefits of mediation.  In many cases, a neutral mediation institution is in the best position to convince the parties that mediation is worth trying.

Mediation Works!

In countries with extensive experience of mediation, the settlement rate is about 90%, with a vast majority of settlements obtained within thirty elapsed days, after one to three days of mediation.  In the words of one Swiss mediation center: "the mediation process is a resounding success from the user's point of view: disputes are resolved rapidly and at low cost."