Wednesday, May 27, 2015

Mediation in International Commercial Disputes


A unique mechanism available for parties to amicably resolve disputes is often underutilized in international commercial disputes.

There are several advantages that mediation offers over other forms of dispute resolution (such as court proceedings/arbitration) which we will explore below.

Benefits of mediation in resolving international commercial disputes

  1. Oftentimes, disputes stem from a breakdown in communication between parties, or misunderstandings between parties due to language or cultural differences. Assigning a third-party neutral person in these situations may help to dispel false perceptions that have been created due to poor communication, which may facilitate a swift and simple resolution. In these circumstances, a constructive conversation may bring about the appropriate remedy, and this can often be brought out by mediation. Adversarial dispute resolution does not lend itself to this kind of dialogue – a clear disadvantage to parties who seek to preserve their commercial relationship moving forward.

  2. A second advantage of mediation in the international commercial context is the opportunity for the parties to develop creative and customized outcomes. Unlike an arbitrator or a judge, the mediator does not levy a decision or offer her opinion on what the appropriate outcome should be. Rather, the mediator helps facilitate a constructive and honest conversation between the parties, and allows them to develop a remedy on their own. As a result, the disputing parties are given full control on the outcome of their own dispute, which in turn gives them the flexibility to come to a creative resolution that can be tailored in a distinctive way that works for them.

  3. A third advantage of mediation is that mediation can be quicker and less expensive for the parties. Since mediation is an informal proceeding, the parties have the flexibility to control the time-span of a mediation session. Further, if parties feel the need for more than one session, the parties have the flexibility to schedule as many mediation sessions as they so desire.

  4. Perhaps the greatest advantage of mediation is the “win-win” feel that a successful mediation produces. Unlike adversarial dispute resolution, mediation does not have a defined “winner” and “loser”. Rather, the very essence of mediation is founded upon core principles of negotiation, collaboration, and finding constructive solutions whereby both parties’ interests may be accommodated. Furthermore, this “win-win” energy further encourages the parties to find creative solutions in constructing a workable outcome.

The General Structure of International Commercial Mediations

Mediations always begin with an introduction by the mediator. During the introduction, the mediator will likely summarize the goals of the mediation, describe the structure of the process, explain the confidentiality component, and outline the role that the mediator will play throughout the session. The introduction is especially important, since many first-time participants are very unfamiliar with the process and may not know what to expect.

Ensuring confidentiality is very important to both parties, as this assures the parties that whatever information that is revealed during the session cannot be used against them, which facilitates an open and forthright discussion between the parties. This is of real concern throughout the Middle East, as “without prejudice” discussions, such as those envisaged in mediation, are often not protected, and may be referred to in subsequent arbitration or court proceedings. Ensuring effective confidentiality is one of the most important issues in drafting a good mediation agreement.

After the mediator gives the introduction, the focus of the discussion then shifts to the parties in dispute. Each party is asked to set out their respective positions, to outline the key facts/issues, and to convey their desired outcome. The mediator will then repeat a summarized version of the essential points raised by each party. This assures the parties that their viewpoints are correctly understood and helps elicit and define the scope of the mediation.. Furthermore, summarizing the parties’ positions helps the mediator grasp the true nature of the dispute, and perhaps to unveil any underlying issues that may have been previously concealed by the parties. Ultimately, a summary will help the mediator craft a defined and clear-cut agenda for the remainder of the mediation session.

After the parties agree to the proposed agenda and scope of the issues, the mediator initiates the negotiation process with an open discussion. During the negotiation phase, the mediator’s primary role is to keep the parties’ discussion consistent with the agreed-upon agenda. If the mediator senses that the discussions become unproductive, or if tensions rise and emotions intensify, the mediator will intervene and steer the discussion back to the agenda. If and when the mediator senses that negotiations have come to a deadlock, the mediator will likely then adjourn the negotiations and hold private individual meetings with each party.

During the private sessions, there is also the possibility of an added level of confidentiality for each of the disputing parties. Any information that is revealed during the private sessions will not be disclosed to the opposing party unless the party so consents.

This additional layer of confidentiality can enable the mediator to unlock critical facts and concerns that the respective party may not feel comfortable revealing during the joint session. Also, the private sessions grant the mediator an opportunity to unearth any possible concessions in which a party is willing to make for the sake of resolving the dispute. Although it is likely that the parties would prefer to not disclose many critical facts to the opposing side, the mediator’s knowledge of such findings is crucial for the mediator to appropriately reshape the agenda after the parties reconvene. Thus, the individual private sessions are not only critical in helping mediators guide the parties to a successful resolution, but in many instances, the private sessions are the turning point in the negotiation process.

The ultimate goal of the mediator is to guide the parties towards an agreed-upon solution by the end of the mediation. If the parties fail to do so, the mediator may schedule a second mediation session if it appears there is hope that the parties can reach an agreement, and of course, if the parties agree to a second session. At worst, if the parties ultimately fail to reach an agreement, the mediation may still prove to be beneficial, since the mediation process helped the parties identify key issues of the dispute, and helped each party appreciate its counterpart’s viewpoint.

Mediation is an underutilized tool in dispute resolution in the Middle East. As eluded to above, one of the main reasons for this is because of the difficulty in protecting “without prejudice” negotiations in this jurisdiction. If the parties, by way of a carefully drafted confidentiality clause, can get around this difficulty, then parties should keep mediation in mind as an alternative and often cost effective method of dispute resolution.