Mediation – has it come of age?

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Mediation – has it come of age?

Mediation is an alternative to expensive and lengthy litigation and court proceedings. It is a form of alternative dispute resolution (ADR) in which an independent third party, the Mediator, assists the parties to negotiate their own solution to a problem. It has a structure and an agenda. In specific types of cases where there is a pre-action protocol, ADR is a requirement. There is not, as yet, a specific debt pre-action protocol, but one is in development.

Why use Mediation?


Firstly, unlike formal legal proceedings, it is a quick and cost effective way to resolve disputes. Second, it has a high success rate and its use is increasingly encouraged by the Courts as the County Court system cannot cope with the current volume of civil cases. Finally, the entire process is private and confidential.


Statistics vary but range from 65% to 85% of mediations being concluded with an agreed outcome. Also, the Court may award costs against a party where it can be shown that it acted unreasonably in refusing to mediate.


What is the role of the Mediator?


Trained Mediators use various techniques to open or improve dialogue between parties with the aim of helping them to reach agreement. A Mediator will not take sides or give advice and he or she will try to focus the parties on the future and how they would like to see things change so that both parties can move on.


In short, the Mediator plays a number of different roles but all those roles are designed to help the parties to overcome deadlock and to find a way of working co-operatively towards a mutually acceptable settlement. Importantly, a Mediator will help the parties to take a realistic view of the dispute and to consider the risks in the light of the alternatives to not reaching settlement. The Mediator will then oversee the drafting of the settlement agreement, checking with parties that all issues are covered and that the settlement is workable.


The Mediator can work with the parties and their advisers to ensure they have done a full appraisal of the implications of time, cost, management input, publicity and all the other factors that will flow from continuing with the dispute. Moreover, the Mediator can help the parties in their analysis of the best and worst alternative to a negotiated settlement and the most likely alternative to a negotiated settlement. By examining each case against these tests, it is possible for the parties to be more realistic about the future course of any litigation.


How does mediation work?


There are five separate phases to the mediation process:

 

  1. The preparation phase - initial contact is made with the Mediator who will listen to the problem and decide whether mediation may help.
  2. The opening phase - all relevant parties confirm their commitment to the principal of trying mediation.
  3. The exploration phase - separate meetings are arranged with each of the parties involved.
  4. The bargaining phase - the Mediator will facilitate and assist the parties in finding a resolution. Sometimes more than one meeting may be necessary. Follow ups are made to determine whether mediation has helped or more work is required.
  5. The settlement phase – having reached agreement the Mediator then works with the parties to reduce the terms agreed by the parties to writing.


Is Mediation suitable for ABL?


Mediation can be applied across a whole variety of disputes including disputes arising in the field of ABL. Those disputes range from arguments arising between a factor and his client to disputes with debtors and guarantors. We believe that mediation has a real place in ABL and its benefits should be considered well before legal proceedings are issued. Factors and discounters should bear in mind that:

 

  • if mediation is rejected as a means of settling a dispute, or a Factor refuses to even consider whether a case is suitable for mediation, he may be at risk of an adverse costs order
  • the Courts strongly support the use of mediation as an alternative to lengthy and expensive legal proceedings which may be disproportionate to the value of the dispute
  • mediation can help restore, preserve or even enhance business relationships
  • confidentiality and privilege give the parties protection so that negative or embarrassing publicity is avoided
  • mediation avoids legal costs, lost opportunity costs and management time
  • the parties can choose the Mediator who is the most suitable for the dispute (unlike court proceedings where the parties cannot choose a judge if it goes to a full trial)
  • mediation can produce outcomes which might not be possible through Court or Arbitration processes
  • the parties have an active role in the mediation process and control the outcome
  • the process is voluntary so a party can withdraw from, or terminate, the mediation at any time
  • the process is quicker taking, generally, no more than a few days or weeks and is “low risk” – there is nothing to lose by attempting a mediation

 

Can Mediation be the forum of choice in an ABL agreement?


Many agreements now contain an alternative dispute resolution clause. Whilst not binding on the parties it may still help the parties to channel their disagreement away from more formal legal proceedings. An example of such a clause is as follows:


If any dispute arises in connection with this agreement, the parties will attempt to settle it by mediation. Unless otherwise agreed between the parties, within 14 days of notice of the dispute, the Mediator will be nominated by [ABFA]. To initiate the mediation a party must give notice in writing (“ADR Notice”) to the other party(ies) to the dispute, requesting mediation. A copy of the request should be sent to [ABFA]. Unless otherwise agreed, the mediation will start not later than [28] days after the date of the ADR Notice.


As the vast majority of cases are settled without court determination we expect to see a continued rise in the use of mediation as a method of ADR. If you would like more information on mediation or other methods of ADR then please contact Nigel Davidson who is a CEDR accredited Mediator, or Noel Ruddy.

The content of this webpage is for information only and is not intended to be construed as legal advice and should not be treated as a substitute for specific advice. PDT Solicitors LLP accepts no responsibility for the content of any third party website to which this webpage refers.

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