But anyone who has any experience of litigation will know that it is rarely the ideal way to resolve such disputes. Court action can be time-consuming, expensive and an unwelcome distraction to the business. The outcome may be inherently uncertain, and may put off potential investors in the business until it is resolved. It can significantly disrupt business operations if key executives are tied up dealing with lawyers. Intrusive and burdensome document collection exercises may be required in the course of disclosure. And litigation can involve an unwelcome degree of public exposure and reputation management. Finally, if there was any chance of salvaging a business relationship before Court proceedings are commenced, you can generally kiss that chance goodbye as soon as legal papers are served.
There are a variety of alternative dispute resolution procedures out there that parties are encouraged to consider by the Courts. Indeed if they do not give due consideration to these options they may be penalised by the award of an unfavourable costs order. The alternatives include arbitration and expert determination, but these both involve putting the outcome of the dispute in the hands of a third party arbitrator or expert to make a decision that will bind both parties. If you want a truly consensual alternative to litigation, then you may want to consider mediation.
So how does it work? The format of the mediation is open to the parties to agree, but usually it takes the following form. The parties will agree on a choice of independent mediator, or in default of agreement will usually agree to use an approved industry body to appoint one. The parties will exchange briefing papers before the mediation, setting out the relevant facts of the dispute and the positions of the parties. The mediation itself will usually begin with an initial round table meeting chaired by the independent mediator, where both parties may make opening statements. The parties will then break out to separate rooms, and the mediator will shuttle between them trying to broker a settlement.
It may take all day (and sometimes all night) but more often than not the mediator is successful. This may be because the very fact that parties have agreed to mediate in the first place means a settlement is more likely. It may be because if you sit senior executives in a room for long enough they will want to do a deal just so they can escape. But whatever the reason, mediation works. Talk to any mediator and they will be justifiably proud of their success rate.
Mediation is cheaper than litigation, more flexible in terms of the range of outcomes open to the parties to agree and it's confidential. What's not to like?
(This blog was also published by The Huffington Post here.)