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To Mediate Or Litigate? That Is The Question

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In any commercial dispute, one of the first things a client asks is “How much will we recover?” shortly followed by “how much will it cost?”  Whenever we are instructed by a client, no matter what the basis of the dispute, a cost benefit analysis must be carried out prior to commencing legal proceedings.

To pursue any claim, a substantial amount of money must be paid upfront by the client during the process, including Court fees, expert’s fees, Counsel’s fees and solicitor’s costs. Given that cases generally take 12 – 18 months from issue to trial and with successful litigants only recovering approximately 2/3 of their costs from the other side, the undisputable fact is the“Court Costs.”  But if there is a genuine claim, is there an alternative?  The answer could be mediation.

 

What Is Mediation?

Mediation is a method of resolving disputes without going to Court. If both parties agree, then a trained mediator will be instructed to attempt to assist the parties to settle the claim. Mediations are often held at a neutral venue. All parties have the chance to speak openly to the mediator putting forward their honest views to him/her in private meetings. The mediator will attempt to look objectively at the relationship between the parties, discover what went wrong and will then examine the ways in which the parties could reach a settlement. All discussions are completely confidential and what is told to the mediator cannot be disclosed to the other party, unless the mediator is given express permission to do so. The mediator will spend time with each party and will put forward one party’s case to the other, highlighting the pros and cons of each argument, so that each party can fully understand their own and each other’s positions. Hopefully, this prompts a settlement agreement. 

 

Mediation is not about finding fault with one party “winning” and the other “losing.”  Instead, it is about attempting to find a middle ground so that the claim can be settled in a cost effective and practical manner. It also gives the parties a chance to vent their frustrations and put their side of the story. This does not often happen in litigation as evidence is quite limited and a judge will not consider wider issues.

 

Mediation itself is not binding and anything which has been discussed is confidential as mediations are held on a “without prejudice” basis.  However, if a settlement agreement is reached through mediation, the terms of that settlement become binding in the same way as any other contract and can be enforced through a Court if necessary. However, it is unusual for an agreement reached through mediation not to be honoured, as it is something which has been agreed between all the parties and not imposed by the Court.

 

How Much Will It Cost?

It does cost money to mediate; experienced mediators do not come cheap, solicitors need to prepare properly and neutral venues such as hotel conference rooms need to be paid for. However, it is usually significantly cheaper than litigation. Unlike litigation, where the claimant is usually responsible for the bulk of any upfront costs, the cost of mediation is often split equally between the parties. If an agreement is reached on the day of mediation, then many thousands of pounds of legal costs spent fighting a claim through to trial could be saved.

Mediation could also help the parties save in other ways. All mediation proceedings are confidential (unless specifically agreed otherwise) and therefore they avoid the potential negative publicity of Court proceedings. This could save a business’s reputation and prevent competitors becoming aware of the dispute.

Settlement can also be reached on the day of the mediation or relatively soon after. This is a big incentive for commercial clients, as they need the matter resolving as soon as possible so that normal business can be resumed. It also brings an end to the matter after what may be many months of stress. Even strictly adhering to every court deadline, litigation can take months, even years and be a constant headache to a business. Integral personnel need to take time off work to attend court hearings which can be lengthy and numerous. Mediation can take place any time, anywhere, and will hopefully be a one off event.

 

Mediation could also help salvage the business relationship. As the outcome of mediation is controlled by the parties, there is no winner and loser.  Each party becomes aware of the other parties’ true position. Some commercial disputes can be as a result of misunderstandings which are blown out of all proportion, but once litigation commences and battle lines are drawn, it is very difficult to see the other side’s point of view. Once court proceedings are issued it can be very difficult for parties to contemplate working together again, despite the fact that the business relationship may have worked very well for a number of years. Mediation allows each party to vent their frustrations and then move on. Each party can see how reasonable the other one is in attempting to settle and the fact that you now know a party will not rush off to court means that the business relationship could be resumed.

 

Mediate Or Litigate?

Mediation is not for everyone. Both parties must consent and should genuinely want to reach a settlement. Forcing one party to attend and for them to just go through the motions, does not benefit anyone.  However in recent years, mediation has very much come to the forefront. With the court now playing a very active part in costs management of cases and trying to keep legal costs under control, mediation has become even more important to litigating parties. Even though mediation is still technically a “voluntary” process with both parties having to want to resolve the dispute, the court is now going so far as to even penalise successful parties by not allowing them to recover all of their legal costs from their opponents because of their refusal to mediate during the process, even if that party believes (sometimes correctly) that it has a very strong case.

The court has frequently stressed the positive effect that mediation can have in resolving disputes and it may be difficult for a party to be able to justify rejecting an offer of mediation without putting themselves at risk of not recovering all or some of their legal costs. Therefore it seems that it is no longer a question of if a party should mediate but rather when it should take place.  

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