The Dos and Don'ts of Mediation in Commercial Disputes

Mediation of a commercial dispute can be an effective alternative to litigation, whether it is in the form of a pre-action meeting, as part of a contractual process or court-ordered.

In this article, Nicole Mead outlines six of our top tips for businesses attending a mediation for a commercial dispute.

For a private mediation, consideration should be given to who the mediator will be. Aside from the obvious practical considerations like cost and availability, there can be a lot of benefit in choosing a mediator who is well suited to the particular dispute. This includes in relation to the industry, type of dispute and characteristics of the parties. For example, if the mediation relates to a sensitive matter or the other party may need some encouragement to engage and feel safe in the process, electing for a mediator who has a softer approach may be beneficial.

We are all familiar with the idea of taking action based on “the principle of it”. Whilst this forms an important part of our society in dealing with moral issues, a commercial dispute is often not an appropriate place to take a stance based purely on “the principle of it”.

As a business, a commercial perspective and approach needs to be taken to all disputes, including a mediation. The business should carefully assess the risks and benefits of the mediation, how the dispute fits into the businesses general goals and strategies, and fully understand what consequences could flow from a failure to reach a settlement. These considerations should factor into determining what compromises the business might be willing to accept in order to achieve a resolution.

Preparation is key to an effective mediation. All parties to the mediation should be properly prepared by fully understanding their own position and that of the other parties, including what is driving them and the outcomes they are looking for. It is also useful to have considered in detail what a resolution might look like, what areas you are not willing to compromise, and in what areas you may be open to adjusting your position if necessary.

Depending on the dispute, it may be wise to have a pre-mediation meeting to agree on what preparation needs to be done before an effective mediation can be held, or otherwise agree on some steps each party will take.

Mediation can be a long and tiring process. Depending on the type of dispute, there can be weeks or months of preparation leading up to a mediation. On the day, it may feel like no or very little progress is being made, or, a settlement may not be reached on the first attempt.

Human nature can sometimes mean that a resolution is more likely to be reached in the last hour of the time set aside for mediation than somewhere in the middle. The possibility of leaving the mediation without a resolution is sometimes enough to encourage the parties to find a resolution.

Although reaching a settlement is the primary goal, mediation can still be a useful process by clarifying or narrowing the scope of the dispute. This can be particularly helpful in keeping costs down if the dispute does proceed to a trial.

A formal written settlement deed that sets out the terms of what has been agreed, and provides releases from liability in relation to the subject of the dispute is an important step in providing protection to the parties and ensuring that the settlement resolves the dispute.

A settlement deed should be drafted by a lawyer to ensure that it protects your business and doesn’t create ambiguity that could lead to further dispute.

After a long day of mediation, you might be tempted to leave the drafting of the settlement deed and negotiation about the specific wording to be worked out in the coming days. Although this might seem like a good idea, it is often best to ensure the settlement deed is signed on the day as once the parties leave the mediation environment and have the night to reflect on the settlement, they may change their mind about the agreement altogether.

This article provides general commentary only. It is not legal advice. Before acting on the basis of any material contained in this article, seek professional advice.

Disputes can be stressful, expensive, and time-consuming. They often pose significant (even existential) risks to businesses. You’re looking for decisive legal advice from lawyers who understand how to achieve a commercially sensible result, and who proactively manage a difficult, often unfamiliar, process. We are your destination firm.

Our dispute resolution team is widely recognised as a leader in resolving disputes, having worked across the full spectrum of commercial disputes in all Australian jurisdictions. We represent and are trusted advisers to many major South Australian businesses who count on us to achieve the best possible outcomes in actual and potential dispute scenarios. Many of our clients are of long standing, because relationships and repeat performance count.

Find out more about how our expert dispute lawyers can assist your business here.