06 August 2019

In anticipation of this month's Singapore Mediation Convention...

Who would believe the turkey that voted for Christmas? 

Who will believe a disputes lawyer advocating the greater use of commercial mediation?  I would like to say not many - but that is only because it would mean the costs-saving value of mediation is already recognised by clients as something which some lawyers may not wish to promote.  However, regrettably, at least in Japan, there is still a low level of familiarity and trust in a process which in any other universe would by now have been championed by every GC in a Japanese corporate that engages in cross-border business.  Mediation is ideally suited to solving difficult, potentially expensive and time consuming problems and very often preserving relationships.  It should be one of the first formal dispute resolution options considered anywhere and especially in Japan.  Here are some reasons why: 

  • Success rates reported by international commercial mediation centres in Singapore and London (for the last 10 years): 80-90% 
  • Average duration (not including preparation): one day.  The costs & time savings which this entails are significant – they cannot be understated. 
  • Control over the process – unlike a judge or arbitral tribunal, the mediator is only there to facilitate the discussions and encourage the parties to reach an agreement.  Nothing can happen without the consent of all parties. 
  • Confidentiality – nothing that is said or that occurs during the mediation may be reported or used in any other proceedings: what happens in mediation, stays in mediation. 
  • There is scope for more creative commercial solutions to seemingly intractable legal disputes. Whereas a court or tribunal is limited to determining appropriate legal remedies based on an assessment of the facts and respective legal merits, a mediator may be able to facilitate agreement of a wholly commercial solution.  For example, the sale of a disputed interest, the agreement of future business or the licensing of a brand or patent under agreed/revised terms. The focus then becomes the future relationship or business possibilities not the past dispute. 
  • Maintaining relationships – while it is often said that a good mediation is one where all parties leave feeling a little dissatisfied (i.e. the nature of any good comprise), mediation is not an adversarial process and with the possibility of a much larger range of solutions, it is quite possible that existing relationships can be protected and in some cases even strengthened through constructive dialogue. 
  • Enforcement - with the advent this month of the Singapore Convention on Enforcement of Mediated Settlement Agreements and initial indications of support from up to 50 countries, including Japan, India, China and the US, enforcement of mediated settlement agreements should prove just as straightforward as with foreign arbitration awards under the 1958 New York Convention.  (This is despite the fact that in practice, it is actually quite unusual that a party will not honour a mediated settlement agreement.) 

In contrast, if you end-up in arbitration or court, parties may look forward to years of acrimonious proceedings, costing hundreds of thousands (if not millions) of dollars spent trying to achieve an outcome that is invariably difficult to predict: there is rarely any guarantee of success and rarely any hope of saving the parties’ relationship.  There is seldom a ‘winner’. 

Given that Japan is known for being a discrete society that values relationships and loyalty, that is traditionally litigation averse and prefers instead to maintain harmony through collaborative problem solving, international commercial mediation would appear tailor-made for solving disputes that arise between Japanese corporates and their international counterparts.  Moreover, what is there to lose?  In the overall scheme of things, virtually nothing.  Mediation may not be appropriate in all cases but there is rarely much to lose by finding out – and lots to gain if it succeeds (which it does far more often than not). 

What does it take to succeed?  Here are 3 key elements: 

  1. It is important to choose the right mediator – somebody that is respected by all parties, with a good mix of legal, technical and interpersonal skills.  They must also be commercially minded, potentially creative when it comes to exploring possible solutions and proactive – it is important that the mediator is somebody who can listen ‘actively’ but also at times knows when to push. 
  2. There must be genuine engagement by all parties concerned, and the involvement of representatives with decision making power – or at least ready access to them during the course of the mediation. 
  3. Preparation – this should extend to not just the facts and legal merits but also an awareness of what each side has to lose or gain both commercially in terms of any relationship as well as in terms of costs, reputation, management time etc.  Whether the parties employ some form of game theory analysis or BATNA/ZOPA calculations, if a mediation is to succeed, it is important that all concerned are alive to the realities of their positions and not simply proceeding on an assumption that they are right, justice will prevail and they will win.  There should be an understanding that the mediator is not going to determine the rights and wrongs of the situation – there is not going to be any award or judgment; the parties’ only objective is to achieve a commercially acceptable deal. 

What is potentially a fourth key element is the agreement to mediate itself.  In many instances, neither side proposes mediation out of a concern that to do so may indicate weakness.  By incorporating a mediation provision in the dispute resolution clause of your contracts as a standard option, the amateur psychology is largely removed from the equation.  Mediation then becomes just one of the options that the parties should consider at some point during the course of their dispute. It then becomes less about why mediation has been proposed and more about why it has not been proposed. 

And if there is no settlement, it may still have been a success – the parties may have been able to narrow down what is important and potentially clear-up any misunderstandings that may have become embedded through the adversarial nature of most international dispute proceedings.  This could well pave the way to a settlement being reached shortly afterwards.  This is not unusual; in London about 22% of those cases which settle as a result of mediation do so shortly after the mediation day itself.  It represents a modest amount of money well spent in the vast majority of cases. 

The only question left is to ask how many turkeys will now be opting for mediation at Christmas and perhaps advocating the use of a vegan substitute at dinner?

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