The Background
Commercial mediation is used for resolving every kind of dispute, from small issues involving minor amounts of money to large disputes involving many billions of dollars. It is a way of resolving disputes by negotiation, facilitated by the mediator who acts as an independent and neutral third party to ensure negotiations stay on track and assist the parties in finding a way to resolve the dispute. Because mediation is a confidential process, it is particularly useful to corporations for resolving disputes away from media attention and the cost in time and money of court proceedings. The settlement agreement is an enforceable contract and can be made a Consent Order of the Court, giving it added legal status and enforceability.
The Process
Mediation is a voluntary process and the aim is a mutually acceptable resolution. This is called a “win-win solution”. In practice it is often a compromise that the parties can accept and move on, often continuing their previously cordial business relationship.
Preserving relationships is an important element of mediation. The process enables all sides to a dispute to vent or get off their chests whatever it is that bothers them about the others, in the assurance that they will be heard without interruption and the confidence that what is said remains confidential.
A mediator doesn’t have the authority of a judge, and can’t hand down orders or punish anyone. Whether mediation leads to a resolution of a dispute or not is up to the parties. But the mediator can assist the parties to find and reach a settlement and, if it seems that a full settlement cannot be reached, the mediator may be able to help the parties identify areas they can resolve. This narrows down the elements that need to be referred to a court for judgment. The parties can bring their lawyers with them as advisers.
Sometimes elements of a dispute, especially a commercial or technical one, may require a judicial finding of fact and a judgment. Mediation relies on the fall-back alternative of the rule of law and the courts, and this enables it to function successfully because the parties know that if they don’t resolve their disputes by mediation, they can resolve them in court.
Even a small commercial dispute typically takes over a year to litigate and larger disputes can take many years. It is rare in litigation for all sides to feel they succeeded. Usually in court proceedings, there is a “winner” and a “loser”. The loser feels aggrieved and may appeal the decision, prolonging the investment in time and money, and the winner may also find they are out of pocket – it is a rare case that awards the winner costs that fully compensate their expenses in terms of time, money and resources devoted to the case.
Then there is the risk of media coverage which can harm the reputations of the parties. A party may win a case but lose the media campaign, which can harm their reputation and sales. Mediation can be completed far more quickly than litigation, usually at less cost, and without the publicity risk, and result in a situation where each party comes out of the process with something.
The Business Benefits
Let us take an imaginary intellectual property dispute. Company A makes the popular product “ZXZ”, Company B copies the product and sells it in a jurisdiction in which A has no hope of stopping B’s activities. A can take B to court and seek an order ordering B to stop copying A’s product and ordering B to pay compensation. But even if A succeeds in court, there’s the question of enforceability – it may win in court, but cannot enforce the judgment against B, which continues to make and sell the product, ignoring the judgment.
In mediation, another outcome is possible. A might consider B’s product and sales penetration to be of such merit that B could be a potential licensee of A’s product. This is not an outcome which is likely from a court, but it is an outcome that is possible through mediation. This is an outcome with benefits for all sides: A regularises its position in B’s jurisdiction, B becomes legitimate by licensing ZXZ from A, and A receives royalties or licence fees they would not otherwise get. The incentive to B to agree is the risk of prosecution and execution of judgment. The incentive for A is the creation of a business partner in a new territory. Together they can grow their business.
To paraphrase Abraham Lincoln, “the best way to resolve your disputes is to make your opponents your friends”. Mediation can provide that solution.
Julian Stargardt is chairman of the Commercial Mediation Interest Group of the Hong Kong International Arbitration Centre’s Hong Kong Mediation Council.
The information contained in this article should not be relied on as legal advice and should not be regarded as a substitute for detailed advice in individual cases. If advice concerning individual problems or other expert assistance is required, the service of a competent professional adviser should be sought.
