ABOUT TDM
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Mediation - time to discuss the non-legal elements
I have read your Spotlight article, 'Mediation/Alternative Dispute Resolution in Oil, Gas and Energy Transactions: commercially superior to formal litigation & arbitration?'. I agree with most of what you say, and admire your courage in saying it. I believe that many people share your thoughts but perhaps have not been willing to vocalise them.
I think you make the important clarification regarding the role and nature of arbitration. To many people, 'arbitration' is still regarded as a form of alternative dispute resolution (ie alternative to litigation). Your characterisation of it as 'arbitral litigation' I think brings the point home: arbitration is closer to litigation than to any other form of dispute resolution. (In another of your notes, however, you draw a distinction between 'legal' and 'commercial' mediation, which I think at this stage of the evolution of the mediation process is perhaps a distinction too far. To many people, mediation is, almost by definition, not 'legal'.)
Your paper addresses the most important issue head on: the need for management and the failure of it, particularly in an area which is not regarded as 'commercial' or as being directly relevant to the 'bottom line'. Yet it is here that money, and value, is lost: through poor management of a dispute - before, during and after it turns into full-blown litigation. Your implicit criticism of litigation lawyers is a timely reminder as to the role of a lawyer and, in particular, a lawyer involved in the administration of justice. You are perhaps right when you say that many litigators would feel that they were cutting off their 'economic life-line' if they were to advocate mediation. An enlightened adviser - particularly one who is mindful of the social and economic impact of his advice - is perhaps an increasingly rare breed but one who is not, I believe, close to extinction.
You say that the legal profession owns disputes much as the investment banking community owns large-scale corporate transactions. There is much less money to be made out of settling a dispute rather than playing it out to the fullest extent. Again, this begs the question as to what is the role of the lawyer in preserving or upholding 'justice'. In addition, I would add that in some cases, it is perhaps appropriate to pursue a case through the courts - there might be genuine and compelling legal and economic reasons for a party to do so. I can think of a situation where I had a case which could have been resolved through quick and cost effective mediation - it would have freed up management time and would have saved my company some money. However, in the particular circumstances of the case, our management decided that it was important to be seen to be upholding a clear point of law (on which we were correct). Had we settled through mediation (or any other form of ADR), the other party might have perceived that we were 'soft' and willing to negotiate in circumstances where the counterparties' claim was unmeritorious. Therefore, our conduct set a standard and a stronger foundation for future business relationships with that company - possibly in a more transparent way than a 'fudged' settlement through mediation might have done. Of course, this is just one example based on its own facts, but I hope you see my point.
You also identified the important misconception that mediation is simply 'splitting the difference' - and I agree with you that this is perhaps thanks to less than competent mediators. It might also be because the advisers to the litigating parties are not properly familiar with the process of mediation, and indeed that senior executives within companies do not have a clear understanding of what mediation can do. Another element of the point you make, later in your article, about people's environmental conditioning is this: the word or concept of 'mediation' can mean very different things to people from different cultures. I am reminded of the example given in Fisher and Ury's book, Getting to Yes: the positive sounding statement, 'I have come here to mediate a compromise' was interpreted as 'you have come here to interfere and obtain a concession'. The cultural context in which mediation is attempted is, obviously, an important factor in its acceptance and its chances of success.
I agree with you that a mediator needs to have very strong process management skills, which I think can be found in many transaction and projects-orientated lawyers - perhaps even more so than in litigation lawyers. But to be fair to some litigation lawyers, I have seen them display excellent process management skills.
In your conclusion, you recognise that mediation is not appropriate for every case and also suggest that the downside risk of attempting litigation is 'very limited'. I would agree with this. I think it draws out another point of misconception regarding the purpose and function of mediation. Many litigation lawyers - and indeed businessmen - are 'success'-orientated and will focus, quite understandably, on an identifiable, quantifiable result.
However, the process can be just as important as the result. I have seen situations where the simple process of preparing for mediation and going through with it has been useful, even though the mediation itself did not result in immediate resolution of the dispute. The exercise of identifying the core, true arguments (rather than the artificially constructed ones), the process of testing the reality and strength of each side's case, and the simple dynamic of putting parties together (or at least closer together than they were before) - all were helpful in contributing towards a situation which could allow the dispute to be resolved more amicably and more efficiently at a later stage.
I, personally, am also keen to see mediation techniques being used as dispute management tools in large scale multi-party or multi-issue disputes. In those situations, mediation would not be an end in itself but a means of packaging or disposing of elements of the dispute and in managing the much larger dispute resolution process. In that context, mediation would be complementary, not alternative.
I have to say I am not so convinced about your suggestions for 'success fees'. I have heard many people complain about mediators 'bullying' them into settlement, and concentrating solely on the money aspects of the dispute. My fear is that the encouragement of a success fee might make this type of behaviour (perhaps in those less than competent mediators you referred to in your article) even more aggressive in their approach. In addition, many actual or potential users of mediation are attracted by its perceived low costs. They might, therefore, be less attracted to it if the remuneration structure more closely resembled that of a commercial transaction or of a piece of litigation. Building on your 'consultancy' analogy, why should not a mediator be paid the equivalent of a reasonable consultant's fee? I do, however, see some scope for a mediator suggesting that some element of his fee is related to the success of the mediation, though on the basis of the parties' own satisfaction with the process - ie a discretionary element to be left in the hands of the parties who retain him.
Your comments about 'due process' and 'natural justice' bring me back to the thought that, as you recognised in your own article, mediation is not necessarily the appropriate solution in all cases. For many parties, it is the sense that there is a 'push to settle' that is one of the main complaints about the way some mediators perform their tasks. Sometimes, parties will simply feel cheated if they have not been properly 'heard'. This element of 'being heard' or 'getting the matter off one's chest' can, of course, be handled well by an experienced mediator and it can be incorporated into the mediation process. However, some parties might simply feel that a more formalised procedure is what they want - that they really do want to 'have their day in court' (even if it is not what they actually need).
This is a subject that deserves further analysis, which I hope your well-reasoned article will stimulate.
