International commercial mediation by Gavin Lightman
INTERNATIONAL Commercial Mediation
The topic of my talk is International Commercial Mediation from a UK perspective. Any consideration of this topic requires as an introduction some understanding of the history and the development of mediation in the UK, the guiding legal principles and the practice of mediation generally. Only in the context of that framework can the position in respect of international commercial mediation be fully. understood ,for the principles and practice are substantially the same though there are certain considerations which have particular significance in the case of international mediation,.
The use of mediation as a form of alternative dispute resolution first developed in the UK in the 1970s in matrimonial and employment dispute cases. There was no regard for mediation in other cases, and in particular in commercial cases. The prevalent view of the court and the legal profession was that justice and public policy (and the financial well-being of the legal profession ) required that commercial cases should be tried in public before and decided by a judge .An exception was gradually and grudgingly accepted that the parties could enter into a binding agreement to proceed to arbitration, but such an agreement would not be given effect to if the court took the view that the issue at stake for any of a variety of reasons called for a judicial decision Since the 1960s this provincial approach in respect of the use of arbitration however could not be maintained in the face of international insistence on the need for the availability of arbitration and respect for the parties choice of arbitration as the medium for resolution of disputes. As a result there progressively developed the present stance of the courts of the UK which is to give effect to arbitration clauses in practically all cases if at all possible. A similar historical process was required in the 1990s to change the attitude of the court to mediation. Previously mediation was a process which the court recognised it was open to the parties to adopt, but the court would not endorse or encourage it. Indeed the court often showed the most extreme reluctance to accede to the request of the parties to adjourn trials to give the parties the opportunity to mediate or negotiate. Indeed the English Court of Appeal went so far as to hold that a provision in a commercial agreement that the parties in case of a dispute should try to settle a dispute, whether by mediation or otherwise, before instituting legal proceedings was without any legal effect -purporting to apply -the technical rule of the English law of contract that -a contract to try to agree the terms of a further contract cannot be enforced.
There were however impelling reasons for the UK courts changing their approach ..First and foremost the parties to commercial disputes and their advisers were insistent that in cases of commercial disputes mediation should be an available option.. This was primarily for three reasons. The first was that litigation in commercial cases was becoming increasingly lengthy and expensive-- in a word in many cases no longer commercial. The second was the recognition that sensible business men placed a premium on preserving business relations and gave priority to a process which aimed at securing between the parties harmony in place of strife and the prospect of fruitful relations in the future. The third was the establishment of a number of organisations of the highest standing to train mediators and as a consequence the existence of a steady stream of trained mediators ( mainly, but not exclusively, lawyers) available to conduct mediations. Reflecting this change in the climate, the practice of the courts and the rules of procedure fundamentally changed and in place of the previous hostility to mediation the courts adopted a robust approach recognising and enforcing a duty on parties to disputes, in practically all cases where there was a real prospect of a mediation succeeding ,to give mediation a chance .This is so whether or not there is a provision in the commercial contract between the parties for mediation and whether or not such a provision is legally enforceable as a matter of contract law, though the existence of such a provision no doubt increases the courts resolve to insist on mediation. This is now the established law and practice of the UK courts in all commercial cases, whether international or not ,in harmony with like developments else where and in particular in Europe and Australia..
The courts as well as practitioners recognise that there is one serious limitation on the courts jurisdiction to require mediation. The court can compel a party to proceed to mediation and compel him to attend a mediation meeting; if a party refuses to attend, the court can impose on him sanctions most particularly as to costs –which (in particular in commercial cases) in the United Kingdom is a very real sanction because legal costs are very high. But the court cannot monitor the conduct of the parties in the mediation itself, for to safeguard the mediation process itself the mediation proceedings are confidential and cannot be disclosed to any outsider and that includes the court without the consent of all parties. This rule of law precludes the court from imposing any sanctions in respect of abuse of the process Accordingly a party may for any of a number of reasons, good or bad, agree to go to mediation, but there is no legal means to prevent a party to a mediation from adopting a stance in the mediation which totally frustrates the whole mediation process, e.g. quite deliberately insisting on terms which are extravagant or totally unrealistic. I have had the experience of this happening in one case in which I was involved. But I am pleased to say that in that case the party in question lost at the subsequent trial and was ordered to pay all the costs. But such conduct on the part of a party is very rare, for as research and experience confirm once the mediation process is brought into play under the guidance of an experienced mediator there can be generated a degree of mutual understanding and a willingness to achieve a satisfactory resolution of a dispute, though absent on the part of one or indeed both parties when the process began..
I now turn to say a few words on a succession of stages in an international mediation.
(1) Agreement to Mediate.
The first stage in many cases is to persuade the parties to proceed to mediation. This first stage may be needed where the underlying commercial agreement makes no provision for mediation. The need may arise because the parties and indeed their lawyers may be unfamiliar with mediation or hostile to the adoption of generally or in their particular case or they may be concerned that for them to offer or to agree to mediation is or will be perceived to be a sign of weakness Not all lawyers today and still less not all clients can clearly distinguish between mediation and arbitration and they may require a clear account of what mediation involves and can reasonably be expected to provide This is not an unfamiliar experience in international disputes where parties may come from jurisdictions with different legal cultures In such situations advocacy may be required to persuade a party to agree to the process. Careful thought may be required how this exercise should be approached. A direct approach by one party to the other may give rise to the risk of an adverse response. Experience shows that it may be more productive to enlist the support of an independent third party to make the approach or to seek the help for this purpose of a neutral and perceived neutral mediation organisation
(2) Choice of Mediator
The second hurdle is to agree the identity or the process for identifying the mediator. Different legal systems and different legal traditions have different approaches to the selection of mediators. There are systems (and in particular some civil law systems) which provide for the appointment of judges as mediators. This is popular amongst some judges, for they may be paid for this service by the parties as an increment to their annual salaries and they do not have to compete in respect of expertise or quantum of remuneration for appointment, for they appoint themselves. There are systems where ( as e.g. in Turkey) the law requires that mediation is a monopoly of qualified lawyers. There are systems that require that mediators be appointed by the court .There are others (such as the UK) which give the parties a free choice of mediators, and that includes a choice whether the mediator should possess any qualification or have received any training In the choice of a mediator in case of an international mediation, these considerations may have to be taken into account. The cultural susceptibilities of the parties may also require thought. .For example there may be distrust by a party of one nationality of a mediator of the nationality of another party. The acceptable candidate for appointment as mediator may require a variety of abilities to satisfy the parties, reflecting expertise in different fields and different cultural loyalties and experiences. In some cultures a sense of humour on the part of a mediator would be be an asset, but in others it may prove a liability. These hurdles may be overcome by an offer of (say) two joint mediators each coming from different backgrounds or by inviting a choice of mediator from a panel of mediators put forward. by a party or proffered by an established international mediation centre.. In practice parties are generally willing to accept a mediator recommended by a leading mediation body. The hoped for response of a party may require that he fully understands that the mediator cannot force him to do anything, let alone force him to enter into any settlement.
(3) Mediation Agreement.
Practically every mediation requires a written mediation agreement. There are terms that must be agreed ,even if the necessary agreement may be to the greatest degree informal Thus it must be agreed : (a) how far the mediation proceedings and documents shall remain confidential; (b) ,whether the mediator shall be paid and (if so) by whom .It is not uncommon for a party to require as the price for going to mediation that the opposing party pay the whole or a substantial part of the costs of the mediation and this course may have particular force where one of the parties is in a significantly weaker financial position than the other;(c) the form that any settlement reached shall take It is common to provide that no binding agreement can be reached unless and until a written agreement is signed by the parties) ;(d) whether the mediator can be sued by a party in respect of his conduct of the mediation and whether he is a competent and compellable witness in any proceedings arising out of or after the mediation A clause to this effect is a vital safeguard for the mediator I should add in this context that a mediator invites trouble if he assumes any role in drafting any settlement agreement. There is a real risk that the agreement may have unforeseen (e.g. revenue ) consequences for a party..The mediator is unwise to take on a task which is the responsibility for a partys lawyer:(e) the extent of the obligation of the parties to ensure the attendance at the mediation of all necessary decision-makers to enable a settlement to be reached or at least (as a second best) their availability on telephone. of email or fax throughout the mediation process so that decisions can be made at any stage ; (f) (as in the case of all international commercial agreements), it is essential to agree the proper law of the mediation agreement Very often it follows the proper law of the underlying commercial contract between the parties, but very often there is good reason to depart from that practice.. Very often the choice is of English law. though the mediation takes place outside the UK. The choice of the proper law of the mediation agreement is a matter of great importance. Thus for example the proper law may regulate (to a greater or lesser extent) what should be included in the mediation agreement , whether and how its terms can be enforced and the grounds on which the validity of a settlement in the mediation can be challenged.
(4) Language of Mediation.
Careful thought is required beforehand by the parties and their advisers ,as well as the mediators, mediators as to the language of the mediation .All those attending must feel comfortable with the proceedings . as they progress and not feel left out. Interpreters who are fluent and reliable in the language or languages of the parties may be needed
(5)Culture of Parties.
The mediators should prior to the mediation immerse themselves in the culture of the parties The cultural backdrop to an international dispute and mediation frequently provides the key to its solution and a failure to give attention to that backdrop can doom to failure any mediation efforts. There are cultures where the highest premium is placed on face-saving and a proposed settlement which secures such face saving alone can have any real prospect of acceptance. This may require the mediator to avoid any action which may occasion a loss of face and accordingly (e.g.) any suggestion of a possible finding of fault or anything resembling cross-examination and any settlement involving a payment of compensation by one party to the other may need dressing up e.g. as a promotional payment for a new enterprise or product. There is a well known saying of the French philosopher Blaise Pascal: "People are usually more convinced by reasons they discovered themselves "This is particularly true in case of international mediation. and is a valuable guide to the mediators role in appearing to follow rather than lead any negotiations and discussions.
(6) Non –Binding Recommendations.
It is not unusual .in an international mediations ( in case the mediation fails to result in a settlement) to invite the mediator to make a non-binding recommendation as to any matter which may require resolution. His recommendation may afford a way ahead. Care should be taken before the mediator accede to a request to follow this course, for by expressing a view the mediator may as regards one party or other forfeit the perception of neutrality and accordingly the necessary confidence of both parties if the parties subsequently resolve to resume the mediation process.
CONCLUSION>
With increasing international travel and trade, the occasion for international disputes and the need for International conflict management and resolution is increasing day by day. At the same time there is ever greater recognition that mediation is a very effective tool to resolve business conflict –in a word mediation should be the recourse of first choice, and that litigation and arbitration should be the recourse of last resort. This is reflected in the increasing frequency with which provisions requiring mediation of commercial disputes are inserted as a matter of common form in commercial contracts and a book entitled " International Mediation-The Art of Business Diplomacy" by two leading UK mediators is now in its second edition. International mediation is still in its infancy – the potential for growth is immense. Mediation may have short-comings, but if you compare those shortcomings with the shortcomings of the alternatives -litigation and arbitration – and in particular costs and speed they are scarcely significant.
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