Introduction
Mediation is an essential dispute resolution tool. Over the past ten years, more than 430 cases with a combined value of in excess of US$18 billion have been mediated before the Singapore International Mediation Centre (“SIMC”) as the Courts encourage parties to find a negotiated resolution to disputes which may otherwise incur millions in legal fees and weeks in trial.
The SIMC reports that over 70% of SIMC mediations secure a settlement. That is an impressive statistic. So why do 70% of mediations succeed? Or 30% of mediations fail? In this Guide, we offer some tips to maximize the probability of a commercial, if not amicable, settlement.
What is mediation?
Mediation is a supervised settlement meeting. It is confidential and conducted on a “without prejudice” basis, which means that nothing said in the mediation can be used in any ongoing or subsequent court or arbitration proceedings should the mediation not secure a settlement. If the mediation does result in a settlement then that settlement is not binding unless and until an agreement recording the settlement terms is drawn up and executed by the parties.
When should the mediation be convened?
A mediation can be convened at any time, if the parties agree. Hence throughout the life of a dispute, there may be multiple mediations on the same or different issues, such as liability to compensate and/or the amount of compensation payable. That said, in our experience timing the mediation is critical to achieving success. If the mediation is held too early then it may fail because the issues have not crystallized or, if they have, the evidence that goes to those issues has not be ventilated. If the mediation is held too late then it may fail because the parties have incurred so much time and cost in the litigation or arbitration procedure that they prefer the matter to be resolved by the Court or Tribunal, even if that leads to a binary result.
What is the optimum timing?
In our view, the mediation should be held at one of three stages: (i) before the litigation or arbitration action is commenced; and/or (ii) if the action has been commenced, after disclosure and the exchange of factual and expert statements but before trial preparation begins; and/or (iii) if trial preparation has begun, between the conclusion of the trial and the publication of the judgment or the award. Of these three stages, Stage (ii) is the ideal stage at which to convene the mediation because issues and evidence are before the parties and the mediators whilst the costs and risks of trial still hang like the sword of Damocles.
How many mediators?
The traditional view is that there should one mediator only agreed by the parties or, absent agreement, appointed by the mediation center charged with administering the mediation. This can of course lead to a dispute as to the appointment of the mediator. The better approach, in our view, is that each party should appoint one mediator of their choice, or the mediation center should appoint two mediators, with the result that the mediation is mediated by two or in some cases three mediators rather than a single mediator.
Why multiple mediators?
Why is this a better approach when it means an increase in cost and difficulties in finding dates when the mediators and the parties can convene the mediation? Two reasons. First, most disputes cover a range of legal and technical issues. Hence the need to draw mediators from different backgrounds and disciplines to understand the parties’ positions and find a common ground. Second, because by the time the dispute reaches mediation the parties, or legal counsel, may have become so entrenched that it requires the efforts of two or more mediators to move them to a position from which a negotiated settlement can be achieved.
What makes for a good mediator?
Good mediators possess the power of persuasion. But to exercise that power, they must have a detailed understanding of the legal, technical and quantum issues relevant to the dispute to enable them to highlight the strengths and weaknesses of each parties’ position such that they can persuade, bully or cajole each party, and their lawyers, to a position of compromise.
How can the parties, or their counsel, assist the mediator?
Even good mediators cannot secure a negotiated settlement without the help of the parties or their counsel. And that help can be given most effectively in one of three ways.
Express a View
First, the parties should empower the mediators to express a view as to the strengths and weaknesses of the parties’ positions and the possible outcomes in terms of trial risks and adverse cost orders. All too often mediators are empowered only to shuttle offers and counter offers between the parties which adds little or no value to the negotiation process. Mediators must have the authority to challenge the positions that both parties have taken and in so doing, introduce a fear factor that encourages the parties to move towards settlement and away from the binary (win/lose) outcome offered by litigation or arbitration.
Focused Submissions
Second, counsel should provide detailed but digestible written mediation submissions. These submissions should not be a rehash of the pleadings or a summary of the evidence. Instead, they should focus on the key issues that separate the parties, explaining why those issues are key and outlining that party’s position on those issues as well as its response to the position the counter party takes. This will assist the mediator in understanding the merits of each parties’ position, identifying areas of common ground where negotiations may focus and pushing the parties towards that common ground by encouraging them to drop weaker points and temper stronger points given the risks and costs presented by a failure to compromise.
Flexibility
Third, the parties should remain flexible. By agreeing to mediate, the parties are agreeing to come to the mediation to listen and to compromise by way of trading offers not insults. Very rarely does the negotiated settlement of a dispute result in a “win-win” outcome. Rather, it results in a settlement the parties dislike but can tolerate and justify to their stakeholders. In order to get to that outcome, the parties must start from a position of compromise, recognizing that through a process of give and take, a negotiated settlement can be achieved.
Any risks associated with mediation?
There is always the risk that the mediation will not achieve a commercial settlement. And the SIMC statistics would suggest that risk is around 30%. If that risk materializes then wasted time and money has been incurred. The greater risk, however, is the party that comes to the mediation with no real intention of settling but instead to sound out the counter party’s appetite for settlement or trial. This of course is disingenuous as well as frustrating. But it can, and should, backfire if the party that has attended the mediation in good faith refuses further settlement discussions and serves a Calderbank or Part 36 Offer that is significantly lower than any offer that it made during the mediation, indication an intention to fight the dispute without further discussions whilst at the same time protecting its position on costs.
What are the costs of a mediation?
The costs of a mediation fall broadly into there categories: (i) the mediation center’s costs; (ii) the mediator(s)’ costs; and (iii) the costs of counsel. Whilst it may be difficult to generalize given that all disputes vary in complexity, the total costs to any one party should not exceed US$80,000, being US$20,000 for the center and mediator costs and US$60,000 for counsel. In the context of otherwise taking the matter to trial, this can produce substantial savings if the dispute is settled and the costs (and risks) of preparing for and attending trial are avoided.
Way Forward
Our firm is a strong supporter of mediation. We firmly believe that settlement of a commercial dispute that does not involve fundamental matters of law or industry practice, and that may preserve the commercial relationship, is a far better outcome than weeks in trial, even if those weeks produce a favorable result. Hence throughout the litigation or arbitration process, we believe in putting our clients in the best position to settle, as well as the best position to fight.
Should you have any further questions about mediation then please get in touch.