Arbitration and Mediation Articles
The Role of Mediation in Dispute Resolution
BDO Dunwoody LLP
May 2004, Okanagan Business Journal
Are you faced with an inability to resolve a significant financial dispute with a business associate? Are you reluctant to commence legal proceedings because the associate is a valued supplier or customer, and you believe costs may be too high? Are you concerned about the negative publicity of a trial and the likelihood of having to disclose confidential business matters?
Those are valid concerns. Choosing a venue other than the courtroom may enable you to achieve your financial goals at minimal cost, while preserving both confidentiality and valued business connections.
Mediation may not be appropriate in all situations, but it can be effective when two or more parties recognize that they are developing entrenched positions that may destroy an otherwise mutually profitable association. This is the point at which it could be beneficial for them to call upon a disinterested individual to facilitate attempts at resolving the differences – and both parties just might salvage something from the unfortunate circumstances.
It may seem difficult to conceive of a situation where a dispute can be settled with more than one winner. Consider, however, the example from Mediation 101: two children squabbling over an orange are observed by a wise parent who patiently questions each and discovers that one child wants the fruit to eat, while the other wants only its skin for cooking. It was unnecessary for the parent to impose her will in that situation and, ideally, the techniques used by that parent could be employed by a real-world mediator to facilitate and structure a meeting of all parties in such a way as to encourage discussion, disclosure and a spirit of compromise.
To understand the benefits of mediation, it would be helpful to understand that process and how it contrasts with other approaches to dispute resolution.
NEGOTIATION is a process in which the parties meet together with or without representation for the purpose of finding common ground. The parties can go into as much detail as they want and, presumably, they will agree to respect each other’s confidentiality. The key is that the parties are in control and can set their own rules as to how to proceed. It is often during this process that disputing parties recognize the need for an independent and disinterested third party – a mediator.
MEDIATION is the next step up the complexity ladder of dispute resolution. The negotiating parties will mutually appoint a disinterested third party, the mediator, who will then facilitate their attempts at resolution. Mediation is generally non-binding and it can be private or court connected, a more formal version of mediation which we shall not comment upon in this article.
The mediator and the parties are in control of the mediation process. They will set guidelines and rules for the process. A skilled mediator will ensure the participants agree, before proceedings commence, on such issues as confidentiality; mediator’s fees and who will pay them; attendance by the parties at meetings with the mediator (will each party meet separately with the mediator or will they always meet together?); will the parties be able to attend with their own specialists, such as accountants and valuators; can each party have legal counsel present; can the parties call “time-outs” to caucus during the process; and whatever else the parties mutually agree might assist them in the process.
One task of the mediator is to encourage the parties to commit to writing all points of agreement. A mediation hearing may produce interim success in the form of a written memorandum of understanding that signifies partial agreement and intent to resume meeting and talking until resolution. Ultimately, a summary of points of agreement could be used in discussions by the parties, each with their own legal counsel, prior to signing any final agreement. The mediator does not impose a settlement or render a decision; instead, the mediator facilitates discussion and encourages the parties to explore all possible avenues to success.
ARBITRATION is a more formal version of dispute resolution than is mediation. In arbitration the disputing parties look to the arbitrator for a decision and, accordingly, will lose some degree of ownership in the solution. There will be some loss of control by the parties in developing a common agenda because arbitration hearings are conducted with some procedural safeguards already prescribed. Arbitration, unlike mediation, is generally binding upon all parties.
ADMINISTRATIVE TRIBUNALS and LITIGATION perch atop the complexity ladder and are the most formal, costly, time-consuming, public and intimidating of options; and each almost guarantees destruction of the relationship.
In summary, mediation can be a reasonable and preferred approach to resolving financial disputes where confidentiality, cost, control over process, preserving business relationships and having some degree of ownership in the outcome are important considerations.
