Rethinking mediation in uncertain times

INTRODUCTION

The COVID-19 pandemic has taught businesses and individuals alike, that our concept of ‘normal’ can change overnight and despite our best laid plans, there is only so much we can control. Unfulfilled contracts and an inability to meet debt obligations are just some of the difficulties that businesses face. Traditionally, the common channel for solving these commercial disputes would be through a court action or arbitration. Unfortunately, these resolution mechanisms take time and costs which are no longer an option for companies trying to survive.

In a nutshell, mediation (which can be conducted in person or virtually) is a confidential party-determined dispute resolution process wherein, parties come together to resolve their disputes in a mutually beneficial manner. Whilst in litigation, the process and rules are imposed by the courts with little or no deviation allowed; in mediation, there are no judges and no formal procedural rules. Instead, parties freely determine their own process with the mediator as a neutral third-party, present to facilitate the discussions between parties. This is unlike in litigation or arbitration.

These features are especially significant amidst the present COVID-19 climate, as the need to quickly and efficiently settle disputes whilst still maintaining business relationships can mean the difference between commercial success on the one hand, and financial ruin on the other.

PARTY AUTONOMY

The significant advantage of mediation is that parties have the utmost control over the entire process. Parties are at liberty to select their mediators, the date, location and duration of the mediation hearing; unlike traditional hearings, where the institution controls the process depriving parties the ability to determine the process which will be best suited to resolve the problems they are facing.

Critically, parties also have full control during the mediation hearing. They may choose options to be explored, interests to be discussed, and need not engage in any discussion they do not wish to. A skilled mediator, although not able to impose solutions or settlements onto the parties, will only facilitate discussions narrowing the disputes which were influenced by emotions rather than practical necessity.

THE IMPACT OF THE PANDEMIC

In the current pandemic, time and money is at a premium for businesses. Spending years on litigation is not a viable option. It is therefore no surprise that so many businesses have been drawn in by the speed and efficiency of the mediation process. Most mediations take one or no more than a couple of days – a far cry from the year or so (or longer) it may take for litigation proceedings to conclude.

In fact, the Singapore International Mediation Centre’s (“SIMC”) statistics reveal that most of their mediation cases are settled within a day or two, and have an overall settlement rate of 80 per cent. On the flipside, a matter which goes to trial may take about 1-2 years to be resolved from the date the suit is filed. Trial may then span several days, and it may be months later before the court pronounces a judgment declaring one side of the winning party. But it does not end there. There is also the additional burden of commencing enforcement proceedings to realise the judgment debt. This requires additional time and money and by then, the liable party could very well have become insolvent.

Contrast this with the mediation process, where as soon as the parties reach an agreement, their  lawyers can begin drafting a settlement agreement that can be signed almost immediately. This quick start and end to the process allows for commercial parties to focus on the important aspects of running their businesses instead of being bogged down, month after month, by the highs and lows of litigation or arbitration.

COSTS

With mediation taking up a considerably shorter time, the costs of mediation are significantly lower when compared to other dispute resolution processes. In litigation, parties may incur substantial costs in just the preparatory stages before trial even begins. Additionally, parties will have to pay for months or years of out-of-pocket expenses in a litigation matter compared to the several days of such expenses that a mediation will incur. The time and money saved resolving these disputes are invaluable to businesses.

PRESERVATION OF BUSINESS RELATIONSHIPS

Another significant advantage that the mediation process offers is the ability to preserve business relationships. Whether it is bringing in new potential clients or maintaining the existing relationships of long-standing clients, one of the most important elements of running a successful business is the preservation of business relationships. Now more than ever, during this difficult time, maintaining relationships can make or break a business.

To this end, mediation provides something that is almost impossible to replicate through the adversarial process. In mediation, parties can come out of disputes with their relationships intact and, in some cases, improved. The very nature of mediation encourages parties to communicate with each other truthfully, and help each other get a better understanding of their respective interests and challenges.

Compared to the usual adversarial nature of litigation, which is strongly premised on the notion of a having a winner and a loser in a zero-sum game, mediation provides the opportunity for both parties to exit the process content with their settlement. Additionally, as parties share their interests and issues during the mediation process, this allows them to better understand each other and may even strengthen business relationships as they are able to build a new level of trust and understanding with each other.

NOT ONLY FOR THE WEAK

While traditionally the prevailing and outdated mindset has been that: proposing mediation is a sign of weakness in a party’s position. The efficiency and utility that mediation affords is slowly shifting the mindset of many businesses. The focus of businesses should not necessarily be to win a case but to quickly resolve a dispute in order to avoid a legal quagmire. Moreover, businesses are also learning that there is utility to mediate from a position of strength as this too saves time and cost. Businesses must adapt in order to survive in this pandemic and therefore, the traditional mindset regarding mediation must be quickly discarded.

CONCLUSION

In the increasingly uncertain times we face, it is imperative that businesses regain control over their affairs to avoid being victims to long-drawn legal battles which may unwittingly see them end up in insolvency. Mediation provides businesses that certainty and should therefore be any businesses’ first port of call.