The decision of whether to mediate or proceed straight to arbitration before each party knows what the other will say, or before they have seen the supporting evidence (or defence), may be thought of as an insoluble problem. So too might the question of how disputes can be resolved proportionately where there are multiple parties under chain contracts, which may or may not be subjected to the added complications of differing law and jurisdiction clauses. So how best to address it?
As I have argued before, “Early Resolution” provides answers to these and other problems. It enables parties to resolve their disputes at the earliest possible stage, leaving the participants free to go about their business. Whereas I have stressed its benefits in the context of mediation in the past, it is equally, if not more pertinent in the arbitration sphere.
Background
Unquestionably, business disputes are a drain on resources. They divert senior management time and risk destroying important business relationships which may have taken considerable time and energy to establish.
Traditionally, options for dispute resolution have focused on the choice between litigation and arbitration. The costs, delays and damage to business relationships, which can result from hard fought court proceedings, are well known. Similarly, recent data and survey responses have suggested that costs and delays remain significant issues in arbitration. As a result, mediation stepped into the fray.
Mediation is a force for good and is strongly encouraged by the English courts. I also believe that arbitrators should have the same powers as judges to stay proceedings and impose costs sanctions where one party unreasonably declines to mediate, as I stressed in a previous blog post. So, it may be thought, there are the meat, fish and vegetarian options: what more is needed?
The mediation conundrum
Reliable data suggests that approaching 90% of mediations are successful and result in a settlement. This very clearly indicates that mediation is a highly effective method of resolving disputes. However, mediations often take place late in the day, by which point, considerable costs and delays have already occurred.
Why is this? Well, disputes put parties on opposite sides of the table. In our adversarial system, the locking of horns is to be expected. Disputes also tend to breed mutual distrust. It may come as no surprise that parties focus on their stated positions, rather than adopting a collaborative approach to find shared interests. Quite simply, each party will focus on building their claim or defence; the setting of a court or arbitration tribunal can make it very difficult for parties to communicate with each other.
On the other hand, the reverse of the mediation coin is that, if it is attempted too early, before each party has a sufficient understanding of its own and its opponent’s case, then it may well fail.
How is it that the Early Resolution Neutral can enable mediation to happen earlier and yet retain its high success rate?
The offering of “Early Resolution”
The Early Resolution Neutral (ERN), working together with the parties appointed legal representatives can enable costly paralysis to be overcome. As alluded to above, in the adversarial setting of court or arbitration proceedings, a proposal from one side is often viewed with distrust by the other. However, ERN can explore with each party, in strict confidence, possibilities to move matters forward in the best interests of all parties to the dispute. These possibilities can include direct negotiation, mediation and indeed for our purposes, arbitration.
Importantly, the ERN will not disclose what he or she learns from one party without their express authorisation. This creates a safe setting in which the ERN can explore any overlapping and unifying interests so as to enable the parties to collaborate to resolve the dispute.
When is the neutral resolver to be appointed? As soon as dialogue has dried up and the parties feel locked into the treadmill of formal proceedings. “How” are they to be appointed? By agreement of the parties or by one party with an initial mandate to seek “buy-in” from the other party or parties. The latter can be especially useful in a multi-party or chain contract scenario where there may be “limping” jurisdiction or proper law clauses (for example, each contract in the chain provides that arbitration or litigation should be conducted in different countries, or should be governed by different laws). That being said, the possibility to have an ERN as a broker in the process could be invaluable, even where there are only two parties to the dispute.
So what will the ERN do? Their role is twofold:
- Firstly, they will explore with each party their respective cases and help to determine what necessary further information or documentation may need to be collected to enable constructive discussions to occur (bearing in mind, of course, that in this context, business people are often more content to hold serious discussions with far less documentation than most lawyers would want for a court or arbitration hearing).
- Secondly, work out a mutually agreed shopping list, or a clear road map, which would enable the parties to identify their options for resolving or contesting any remaining issues (those options will of course include direct negotiation, mediation and also arbitration).
To conclude, the ERN’s intervention may well lead to a mediation or arbitration hearing. However, because of their involvement, and because of these preliminary steps, it is much more likely that a mediation or arbitration hearing will take place much earlier in the life cycle of the dispute than would otherwise be the case. The potential, in particular for time and costs savings, is of course clear.
