Mediation can save parties the stress, expense and time of litigation. Whilst lawyers tend to enjoy standing up for their clients and taking on the other side, there are very few clients for whom the experience of going to trial is a positive one. In litigation one side comes away with nothing, and the outcome is always uncertain.
Having now qualified as a mediator, I am instead relishing the opportunity to help parties reach a mutually acceptable resolution outside the traditional court process. Although mediation is a consensual process, clients can still benefit enormously from the assistance of a well-prepared legal team. In this article, I draw on observations during the course of my career in terms of what has worked well, and also what could have gone better on the day.
1. Choose your mediator with care
The starting position is to check whether you have a dispute resolution clause which requires a particular body to appoint a mediator (for example CEDR). There are other organisations with very well-regarded mediators (for example In Place of Strife) and colleagues can be a great source of recommendations. I always think that whilst familiarity with the subject matter of the dispute (for example, if you have a public procurement dispute, it is useful for the mediator to understand that context), the mediator’s approach counts for far more. Will the mediator create the right rapport with your clients; taking the time to really listen to them to understand their concerns; and will the mediator work hard enough with both parties to bring them to a deal?
2. Work out your settlement strategy in advance
Well ahead of the day (so that your client can consider internally and reach any required approvals) you will want to work out with your client what offers (assuming offers will be made) your client will make and when, and what its bottom line is. You may reach the view with your client that you are going to use the mediation day as an opportunity to test the water, rather than reach settlement at any cost on the day. Either way, you should expect that the mediator will expect you and your client to have worked out what alternatives to settlement look like. These are often referred to as your “Best Alternative to a Negotiated Agreement” (“BATNA”) and your “Worst Alternative to a Negotiated Agreement” (“WATNA”). For example, if your client seeks damages of £1,000,000 what are the realistic prospects of succeeding at trial if you do not settle? And what level of irrecoverable costs would your client face? Those calculations provide a realistic BATNA, but equally what is the outcome if your client loses at trial? What legal fees and/or counterclaim would it be liable for?
3. Authority to settle
The mediator will expect both parties to sign a mediation agreement in advance which confirms that they attend with “full authority to settle”. Clients can sometimes be nervous about this as they think it means unlimited authority to settle. In reality, clients should have discussed internally and got approval from within their organisation to negotiate up to a certain amount. That is fine, and that still constitutes authority to settle. No one expects a client to come with a blank cheque. It is however important that both sides understand whether there are any other hoops or formalities to go through before a settlement can be signed. If it looks as though a deal can be reached on the day, it can be incredibly disruptive if one side announces that any “in principle” agreement will require separate approval. This is sometimes unavoidable (for examples in disputes with public bodies, Treasury approval may be required) but ensure that the other side is not surprised by this on the day.
4. Ensure your client knows what to expect on the day
One of the benefits of mediation is that the parties can have a say in how the day unfolds. There are however typical formats that most mediations follow, and the mediator will expect you to have gone through this with your client so that they know what to expect. Most mediations follow something along the lines below:
The day starts with a short private meeting with the mediator, you and your client. The mediator should explain the confidentiality of the whole process, and will treat any information your client shares with the mediator as confidential unless your client gives the mediator express authority to share the information with the other side. The mediator will want to check whether your client is happy to attend an opening meeting with the other side, and if so whether your client wants to make an opening statement during that meeting.
The joint opening meeting is an opportunity for your client to get its message across to the other side in a constructive way. Some clients don’t want to say anything, and want the lawyers to speak instead. I would always encourage the lawyers to keep any legal points brief, and stick to the best points. You will lose the ear of the other side if you start rehearsing your legal arguments. Much ground can be gained by being reasonable in opening, and actually acknowledging that there is risk on both sides.
After the joint opening meeting the respective parties will retire to their private rooms with their lawyers, and the mediator will start a process of speaking to each side. The first couple of meetings may be about finding out if there are any factual areas or questions which need resolving before offers can be made. It is not uncommon for it to be lunchtime before an offer is made, with it being early evening if an acceptable deal is reached. It can then take time to get any settlement down in writing so be prepared for a late night!
5. Work towards a negotiated outcome, not towards scoring points
As litigators, what comes naturally may be a combination of defensive line up: not allowing any remarks to hit home or damage our client’s case, and spotting any opportunity to snipe or score an attack which advances our client’s case. This can lead to a tendency to bristle at any points made by the other side with which we disagree, and a temptation to remind the other side of any weaknesses in their case. As party representatives on the day, think about how this is going to be viewed by the other side, and whether it is really going to be conducive to settlement. It is not a battle of wits between the lawyers on each side; the day is an opportunity for the clients to move away from positional bargaining where they instinctively devalue any offer coming from the other side, and instead to look at the situation from the perspective of reaching a mutually beneficial outcome. What principles does your client really need to stick to in order to reach an outcome which it can accept – those principles can guide it forwards to a negotiated outcome far better than being fixated with its legal position. Ultimately, being courteous and respectful is a sign of strength, not weakness, and whilst it is understandable if emotions are running high on the day, try and stay focussed on the benefits to each side of reaching a negotiated outcome.
6. Be prepared to settle!
Strange though it sounds, some mediations fail at the last hurdle because the parties have not thought through what the consequences of settling are. Common pitfalls include:
The tax consequences of any payment from one party to the other. Will the receipt of any settlement sum trigger corporation tax, VAT payments or personal tax liabilities? A late realisation that tax will need to be accounted for can derail the settlement if parties have reached the end of their negotiating room.
Confidentiality: Mediations carry a triple-lock confidentiality, meaning that what happens on the day is confidential, what is said to the mediator is confidential unless the mediator has express authority to share it, and the whole event is without prejudice to either side’s legal position. That said, some parties need to make a statement after a successful mediation in order to be able to communicate the outcome, or put something on its website. Most mediation agreements will require there to be absolute confidentiality on the outcome save if required for legal/auditing purposes, so some thought will need to be given to this in advance and a suitable joint neutral statement agreed on.
The settlement agreement: The parties are responsible for drawing this up if agreement is reached. The mediator will circulate a mediation agreement ahead of the mediation which governs confidentiality and the process on the day, but that is not the actual settlement agreement. Given that it can be very late in the day before agreement is reached, coming prepared with a draft agreement can help speed matters up and make sure people get home before midnight!
7. Pitching your offers
It is common for the defendant to make the first offer (although not set in stone). The tendency can be to attempt to manage the other side’s expectations with very low opening offers, but be wary of this. It risks alienating the claimant if it is perceived as an insult. The best opening offers are credible, and accompanied by a rationale. Most mediators will want to know why you are proposing the figure you are putting forward, so be prepared to explain it. Some mediators will tell you if they think your approach is going to risk triggering a hostile reaction, and may work with you to re-frame the offer. If your opening offer is too low, are you also risking looking untethered if later in the day you are prepared to make significant increases?
8. Lean into the emotion
I used to think that mediations were all about the money, and that they could be settled more quickly if both sides turned up on the day ready to talk numbers more quickly. Was it not all about an acceptable price after all? Why not just cut to the chase and start swapping numbers on bits of papers at 9.30 am over a coffee? The reality is that even in commercial disputes, emotion and feelings are involved. The people who have been dealing with the dispute on a day-to-day basis are human. Even corporate entities or large public bodies can build up a feeling of grievance harboured by the people who often work very hard to further that body’s interests. Clients (and their lawyers) are sometimes programmed to avoid accepting any fault, to avoid any recognition that harm might have been done, and that parties may have suffered as a result. Addressing those events and respecting those positions can be very helpful in enabling parties to move away from reactive devaluation and positional negotiation, and to start to look to what a more principled outcome might look like.
The parties may agree to hold the mediation at the offices of one of the legal representatives. If this is the case, you will need to arrange at least 3 rooms in total: a break out room for each party and for the mediator. It is ok for one of the breakout rooms to be the main joint meeting room but obviously this must be big enough to accommodate everyone. Assume that the mediation will last all day and possibly very late into the evening, so think about how everyone will be fed and watered comfortably. Will there be an access to a printer later on so the parties can sign a hard copy if a deal is reached?
10. Use your mediator wisely
Make sure your client understands that the mediator is not there to take sides, nor to give a view on merits, nor to impose a settlement. In my view it’s inevitable that the mediator will have reached a view on merits (hence the usefulness of using a mediator who has some knowledge of that area of law) but any nudging the mediator does should be very subtle. I wouldn’t expect the mediator to weigh in early in the day by telling one side they’re at risk of losing, or wrong on a particular point. That said, I would expect a good mediator to apply some pressure to parties later in the day if their position fails to recognise an appropriate degree of legal risk.
Emily Heard is a CEDR Accredited Mediator, registered with the Civil Mediation Council and a member of the Association of South West Mediators’ panel. Emily has extensive dispute resolution experience encompassing a broad range of civil and commercial disputes.