Sometimes, litigation can be a necessary evil, but it is far from the only way to resolve a dispute. In this issue of The Field, barrister Ravi Aswani (St Philips Stone Chambers), lawyer Stefanie Johnston (Keoghs LLP) and Pamela Milgrim and Lewis McDonald of Skuld compare and contrast mediation in the US and the UK.
Dispute resolution - Litigation, arbitration or mediation
Alternative forms of dispute resolution (are becoming far more commonly pursued, with many commercial contracts now favouring arbitration in one of its various forms over court proceedings ). Mediation is another alternative dispute resolution method and the least formal and most flexible of the three main dispute resolution procedures, with the parties to the dispute very much in control of the timing and the process. It is also typically the quickest and least expensive way to resolve disputes, which clearly contributes to its increasing prevalence.
While the process of mediation is similar in all jurisdictions, there will be differences from country to country. In this article, we look at the general features of mediation in two common offshore dispute forums, the US and the UK.
The US has a long history of informal dispute resolution, dating back to the colonial period when community groups resolved disputes through negotiation and mediation. More recently, mediation became commonly used in family and labour law issues, with the burgeoning popularity in those forums leading to it being tested and thereafter adopted in other arenas. Today, mediation in its various forms is widely and successfully used to resolve disputes of all natures, and particularly in shipping and offshore related matters.
Currently, less than 5% of cases raised in courts across the US result in a full trial taking place. A substantial factor in that statistic is the successful use of mediation, which is estimated to result in a positive resolution of roughly 80% of cases. Combining this with significant time and cost savings, the attraction of mediation becomes clear. Cost savings are even more significant in the US, as the costs of litigation are not generally recoverable even by the successful party, as they can be in the UK.
Mediation is an extremely flexible tool, with the time at which it takes place, the form in which it is carried out and the process that is followed generally within the control of the parties to the dispute. Pre-suit mediation is not unusual, allowing parties to resolve the dispute extremely quickly and potentially without the burden of costly discovery and depositions processes. However, litigation being commenced does not preclude it from taking place, with parties free to mediate (and increasingly choosing to do so) throughout the duration of the claim. In addition, parties can be ordered by the courts to mediate and, while that may seem to be somewhat contrary to the concept of mediation, it is frequently also successful.
The US has a significant and well-established mediation practice, with mediation agencies and both full-time and part-time mediators offering their services either in dedicated mediation facilities designed to both put parties at ease and allow them to remain engaged in the process for the long-haul, or in a variety of different offices. Private mediators are primarily former lawyers and judges, but some mediators manage to maintain parallel legal and mediation practices. Court appointed mediators can however be drawn from current judiciary. Depending on the dispute at hand and the parties involved, the mediator identified can have a significant impact, with the skills and attributes of each mediator not always being of universal application.
Although there are various approaches that can be taken to how the mediation proceeds, typically parties will be based in separate rooms, which allows the mediator to speak openly with each side on an alternating basis as they try to close the gap between parties. The mediation will commence with an opening session in which both parties get an opportunity to participate, either by themselves or, more commonly, via their lawyer. This opening session is typically an extremely important part of the process, allowing each side an opportunity for an unfiltered assessment of the other party's position, immediately before the mediation process commences. It also allows an opportunity for the decision makers to meet each other before being whisked off to separate rooms for the remainder of the day.
While negotiation and mediation strategies vary from party to party and case to case, one significant difference between the way negotiations are carried out in the UK and the US is the routine use of 'bracketing'. While typically in the UK offer and counter-offer are made as parties move closer together, brackets are used frequently in the US with the objective of bringing parties onto the same negotiating ballpark. Although 'bracket theory' is a separate subject in itself, it is, in simple terms, one party saying "if I was prepared to lower my demand to X, would you be prepared to increase your offer to Y?", thus allowing parameters to be narrowed quickly. While the bracket is not a formal offer (and that is important), it is an effective way of potentially bringing parties into the realms of settlement.
In the UK, mediation has been used to resolve commercial and other disputes for many years. The development of mediation as a specific form of dispute resolution for shipping has however been somewhat slower to develop. In cases where parties still agree to submit their disputes to a court, the practice in some jurisdictions, including UK, is that the courts are proactive in encouraging parties to mediate, usually after the first case management conference. Mediation does not have to take place at this stage; indeed it could happen later or earlier, even before legal proceedings have been instituted.
In shipping, the increasing dominance of arbitration as the chosen method of dispute resolution has had the effect, not necessarily intended, that mediation has not developed in the same way as shipping litigation in court. Mediators and others involved in the industry would say that this is a wasted opportunity, and that mediation in the context of an arbitration clause can take place just as effectively as mediation in the context of a court jurisdiction clause.
The principal commercial advantages of mediation over other forms of dispute resolution are as follows:
Mediation is often significantly quicker and cheaper than other forms of dispute resolution. It is generally accepted that cost savings of even 80% compared to a full blown litigation or arbitration can be achieved by a relatively early use of mediation.
Whilst a judge or arbitrator has to find facts and apply the law to them in the context of the issues raised before him, the mediator has a much wider range of tools available. The mediator is not issuing any binding decision but is facilitating a process by which the parties can reach a commercial solution to their dispute. Very often, that commercial solution is not necessarily one which a judge or arbitrator simply could have imposed upon the parties. What happens in the mediation is entirely without prejudice (even as to costs). The parties are able to take a different approach which can lead to collaboration and inventive problem solving.
The success rates for mediation are high – generally in the region of 80% settle on the day of the mediation and a further 10%+ settlement shortly after the day of the mediation. Different mediators may have different styles – some more evaluative of the parties' cases; some more facilitative – as well as having different experiences to bring to the mediation. Proponents of mediation cite the flexibility of being able to tailor the process to a mediator with a very specific skill set and experience in specific fields of commerce or industry as a massive advantage.
Where the parties wish to maintain or develop an ongoing business relationship, the adversarial nature of the litigation or arbitration process and the inevitable binary "win/lose" end product can provide difficulties. Mediation allows a move away from pleaded cases to actual commercial interests, which encompasses more than the narrow features of the particular dispute.
Parties are usually permitted, indeed invited, to make written and then oral opening statements. The oral opening statement can be a particularly powerful tool, setting an environment in which the other party cannot help but empathise to at least some degree with the other side's position. Again, this is not easy to achieve in an adversarial context such as litigation or arbitration, and there is considerable writing on the psychology of mediation (in particular relating to the powerful scene setting effect of a good opening statement).
Clearly, with the practice of mediation having been developed in the US, this has had an effect on practice in the UK. Interestingly though, in the converse to the way that the US legal system was influenced by the UK courts but became a little less formal (or more accessible to lay persons), mediation in the UK has been influenced by US practice, but has made the relaxed process slightly more formal.
Ultimately, though, the outcome is similar. The fact is that, regardless of jurisdictional quirks, the mediation process bears similar hallmarks on both sides of the Atlantic Ocean.
The clearest similarity, however, is the efficacy of the procedure and its ability, in the vast majority of cases, to quickly and economically provide results that both parties feel comfortable with.
Mediation is very much embraced by Skuld Offshore. Every year, roughly 50% of the contentious claims in which we are involved are resolved through formal mediation, with a significant number of those resolutions being in the US. Our approach is always to take a very active role in proceedings, with someone from the Offshore team attending or, where that is not possible, to be involved by phone. This allows us to bring our considerable experience to bear and contribute to a successful resolution.
Over the years, it has become apparent that our attendance at and participation in the mediation can be very important to resolving matters on the day. Not only does it allow us to hear the other side's position in an unfiltered fashion, which can be lost amidst correspondence between lawyers, but it also allows the other side to see that the matter is being taken seriously and treated with respect, the perceived lack of which can be a stumbling block. It is also far easier then to take an additional step that may be required to finalise matters than it would be if attending remotely.
As is made clear elsewhere in this article, the idea of mediation is that parties should reach a compromise solution and that there are no winners or losers. With that approach, a situation where both parties leave feeling satisfied but not delighted with the outcome probably means that a fair result has been achieved. However, what can definitely be said is that the savings in terms of legal costs and working hours that are generated by an early mediated resolution have to be viewed as a win for both sides.