Mediation in commercial disputes: very wise, not waste

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Each year, many millions of business transactions take place. In the normal course of day-to-day business affairs, disputes are often inevitable. If we solve it smoothly, quickly and amicably, we don’t call it “dispute”. It leads to a higher professionalism and a possibility to avoid similar ones in the future. But parties might disagree as to their individual rights and obligations no matter how carefully a contract is written and concluded. This can lead to delayed shipments, complaints about the quality of merchandise, claims of nonperformance, personal injury claims and similar confrontation of interests. Resolution of such disputes, however, needs not to be costly and acrimonious. Alternative means of commercial disputes’ resolution can save and do save time and money, and help to put the dispute behind you while preserving valuable business relationships. Actually, 80 % of commercial matters and 92 % of personal injury matters end in written settlement agreements.

If a dispute arises out of or relates to commercial law matters, for instance, breach of contract, I prefer to highly encourage the parties first to try in good faith to settle the misunderstanding by mutual compromise and reach win-win solution. I would suggest business people to consider these practical PROS of mediation in commercial disputes:

  • reduction of hostility between the parties and helping them to engage in a meaningful dialogue on the issues at hand;
  • open discussions into areas not previously considered or inadequately developed;
  • communicating positions or proposals in understandable or more palatable terms;
  • probing and uncovering additional facts and the real interests of parties;
  • help each party to better understand the others parties’ views and evaluations of a particular issue, without violating confidences;
  • narrow the issues and each party’s positions, and deflate extreme demands;
  • gauge the receptiveness for a proposal or suggestion;
  • exploring of alternatives and search for solutions – gives parties control over the process and the outcome;
  • identifying what is important and what is expendable;
  • prevention of regression or raising of surprise issues or subrogation;
  • structuring a settlement to resolve current problems and future parties’ needs – parties are directly engaged in the negotiation of the settlement;
  • parties enhance the likelihood of continuing their business relationship;
  • creative solutions or accommodations to special needs of the parties can become a part of the settlement;
  • an amicable settlement can be reached much more quickly than in litigation;
  • businesses generally save money through reduced legal costs, less staff time, preserve their confidentiality, professional reputation and “good social standing” and know-how.

Many commercial disputes are resolved by arbitration, the voluntary submission of a dispute to a professional person (-s) for final and binding determination (mediators do not have the authority to make binding decision or award, though, if free will of parties change or differ or transform to negative intentions). However, mediation has proven to be an effective way to resolve huge, complex international disputes privately, promptly and economically:

  1. A UK company entered into a contract with French supplier to design and provide complex technical equipment. A dispute arose over the late delivery of the equipment and for charges for additional work. After two years of dispute, litigation commenced when a claim was made against the supplier, who responded with a counterclaim for the purchaser’s failure to provide information required under the contract. The total amount in dispute was approx. 20 million Euro. After 3 yearsof litigation the supplier proposed mediation. The claimant was initially reluctant but was eventually convinced by their commercial considerations – very specific products and services, necessary in the future. Despite mutual agreement to mediate, the parties disagreed on “place and judge”. The French supplier insisted the mediation to take place in France with a French speaking mediator with technical expertise, while the UK company wanted the mediation conducted in UK with an English speaking mediator with a high level of general mediation experience rather than sector specific knowledge. Finally they found bi-lingual mediators, possessing both qualities. It was found that the agreement reached over the arrangements for the mediation was an important start in breaking the parties’ deadlock. Over the course of a 2 day mediation the mediators pieced together the legal and cultural differences that had perpetuated the dispute and created the environment for settlement to be reached. Mediation costs were 4 000 Euro per party.
  1. Other dispute arose between Dutch and German companies which entered into a collaboration agreement for the development of a human antibody for the treatment of a major disease. Two years later, a US corporation acquired the Dutch company. Alleging that the US corporation shortly thereafter caused certain payments required under the collaboration agreement to be withheld, the German entity filed an action for breach of contract against the US corporation in a district court in the United States (approx. 5 million $). The US corporation filed counterclaims of rescission and breach of contract against the German company. After more than 2 yearsof court proceedings, the parties accepted the suggestion of the judge to submit their dispute to mediation. After long discussion, the parties finally agreed on an American intellectual property lawyer with considerable mediation experience as a mediator. As a direct consequence of the facilitative role played by the mediator in the course of the case, the parties settled their dispute 1 month after the commencement of the mediation.

It’s apparent that majority was taught and trained law as the study to focus on rights, not interests; on victories over enemies, not continuing relationships. However, the world of international commerce does not operate that way. To “add value” in the modern world lawyers and businesses need to develop an attitude to concentrate on real interests, pragmatic cooperation and proactive amicable solutions.

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About the Author

Ieva Balčiūnaitė

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