Commercial mediation
What is mediation?
Commercial mediation is a method of dispute resolution whereby the parties to a dispute arising out of a commercial transaction attempt to resolve it through a negotiation process facilitated or directed by a neutral third party, who has no decision-making power over the dispute and the parties.
What are the defining features of mediation?
There are three features that distinguish mediation from any other method of resolving commercial disputes (negotiation, arbitration, litigation, etc.).
Voluntary
Mediation is an eminently consensual procedure. The consent of both parties must be present at all stages of the process:
- At its inception, the parties must agree to start it, specify its details – language, place, duration, etc. – and appoint a mediator.
- During its conduct, both parties must attend the sessions in good faith and be willing to negotiate with the help of the mediator.
- At its conclusion, if the negotiation is successful, the parties must sign a settlement agreement that puts an end to their dispute.
Numerous laws and regulations reflect this principle of voluntariness by expressly providing that one or both parties may terminate the mediation at any time. See, e.g., Art. 8.1.b) of the ICC Mediation Rules or Art. 1.1 of Law 5/2012 of 6 July 2012 on Mediation in Civil and Commercial Matters.
Self-determination of the parties
Self-determination means that the parties are free to shape almost every aspect of their mediation at will.
Unlike in arbitration, where arbitrators largely govern the process and settle the dispute, in mediation it is the parties who determine by mutual agreement every detail of the procedure and the substance of their negotiations. The mediator is generally limited to proposing, structuring and facilitating the exchange of information and settlement offers.
This principle is now explicitly laid down in numerous mediation rules and regulations. See, e.g., Art. 7.1 of the ICDR International Mediation Rules or Art. 10.1 of Law 5/2012 of 6 July on Mediation in Civil and Commercial Matters.
Intervention of a neutral facilitator
Mediation is basically a negotiation guided by an impartial and independent third party, chosen by the parties to help them put an end to their dispute. This third party has no decision-making power over the dispute or the parties. His or her intervention serves as a channel for the parties to continue negotiating, since by the time the mediator intervenes, the parties are generally no longer able to communicate effectively.
In fact, as a third party outside the dispute, and with no personal or direct interest in its resolution, the mediator is in a position to detect and filter out those obstacles that prevent fluid and fruitful communication between the parties. See, e.g., Art. 7.3 of the ICC Mediation Rules or Arts. 7 and 8 of Law 5/2012, of 6 July, on Mediation in Civil and Commercial Matters.
These characteristics give mediation its unique value, allowing the parties to focus on their commercial and economic interests in order to find an effective solution.
What are the advantages of mediation?
As a method of resolving commercial disputes, the main advantages of mediation over other mechanisms are as follows:
- In terms of duration, mediation does not usually extend beyond a few days or weeks and can normally be organised at short notice. Arbitration and litigation, on the other hand, usually take months or years and require thorough preparation.
- The cost of mediation is much lower than arbitration or litigation.
- The entire content of mediation is confidential and cannot be used as evidence in subsequent arbitration or court proceedings. By contrast, litigation is almost always a public process and arbitration offers limited guarantees of confidentiality.
- Mediation tends to be much less damaging to the commercial relationship of the parties, whose willingness to find a negotiated solution can sometimes even preserve it. In contrast, both arbitration and litigation often mean the end of any relationship between the companies involved.
- Mediation makes it possible to find creative and effective solutions to the problem at hand, as they can design an agreement that suits their common interests. In contrast, judges and arbitrators can rarely do anything other than accept or reject the parties’ requests.
- The difficulty of mediation does not vary according to the country or jurisdiction in which it takes place, as is the case with court and arbitration proceedings.
All that has been said in favour of mediation should not be understood to be to the detriment of arbitration. If the parties cannot settle their differences through mediation, arbitration allows the parties to obtain a remedy without having to fight their case before courts in countries where the administration of justice is sometimes seriously flawed or seriously inconvenient.
In short, both mechanisms occupy their own unique place in the panoply of the most modern methods of dispute resolution.
