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International Mediation - The Art of Business Diplomacy
Eileen Carroll and Karl Mackie.
Kluwer Law International, Published 1999, Reprinted 2000. 191 Pages
ISBN 90 411 1290. Price: US$53.00, €42.00
Summary
This book is timely, with growing emphasis on the use of mediation in commercial disputes. Mediation is one method of Alternative Dispute Resolution or ADR technique, which has become an alternative to arbitration or litigation in resolving commercial disputes.
The book is focused on international mediation and how the techniques of mediation and can be brought to bear on international disputes affecting companies. The text deals with the why, what, who, where and how of mediation. The authors' motivation was to share experience of international mediation practice with those involved in international disputes, and also to demonstrate how and why mediation works. They outline the characteristics of mediation, show how it has a place in disputes, and demonstrate very effectively the preliminary steps, processes and techniques for going through a mediation process. The appendices provide reference to mediation organisations, and provide model mediation clauses to be adapted to contracts, case history summaries and costs.
At the end of the first chapter, which introduces the potential for mediation, the authors list the most persistent questions asked of international mediation: How does mediation work? How can it work if it is non-binding? How does it differ from arbitration? What is the practical experience of mediation? What skill set is needed? What is the role of the lawyer and commercial manager? How long does it take and how much does it cost? And finally what is the likelihood of success? The book manages to answer most of these questions and suggest answers to the last two.
Introduction
The term mediation is used to describe a broad and flexible method of settling disputes as an alternative to the structured approach adopted in litigation and arbitration. In mediation there is no fixed procedure and parties can adapt the procedure to their needs. It has the attributes of confidentiality, so competitive details remain private and the participants' public image is not compromised; it does not require a technical or legal decision to reach a conclusion; it can be confined or expanded to whatever is deemed relevant - legal, technical economic and managerial issues can all be raised, any can predominate and there is a search to apply a business solution to a dispute rather than a narrow legal settlement. Its emphasis is on co-operation rather than confrontation, and maintenance rather than rupturing of business relations. The nature of mediation is to confine the dispute to its commercial and business basis grounds, rather than allowing it to become decided by legal remedies, and in this way it can be used to maintain business relations rather than damage them. Its major advantage over legal remedies are held to be its speed and cost effectiveness, while it avoids creating a diversion from the main business interest of the parties.
The authors bring impressive credentials and experience to the subject of the book. Both work for the CEDR Centre of Dispute Resolution in London, formed in 1980 to undertake mediation and training. Eileen Mackie is a solicitor and has some 25 years of varied litigation and mediation, working at the CEDR since 1996, she has lectured and written extensively on international negotiation and settlement techniques. Professor Karl Mackie is a barrister and psychologist, and works as a negotiating and business strategy specialist. He has been chief executive of the CEDR since 1990. He is honorary professor of ADR at University of Birmingham Faculty of Law and for some 15 years has been director of the Negotiating and Management Programme of the Commerce and Industry Programme of the Law Society of England and Wales. He has authored several texts on ADR and has trained over 1000 mediators in the UK and internationally.
The book is, in the main, both concise and precise, with selected cases used for illustration, and clearly the authors' experience has been sifted for process and procedures, action checklists and lists of cases. It forms a landmark guide to practitioners in international mediation and is likely to form a reference guide to mediation procedures.
The continuous nature of the subject of mediation with each subtopic having elements of all, makes it difficult to break down into strict chapter divisions, but the authors have generated 9 chapters of subject subsets, sometimes overlapping, to deal with this complex and involved topic.
Chapter 1, The Potential for International Mediation, introduces and makes a strong case for mediation, demonstrating how its holistic nature can greatly improve the chances of a settlement compared to solely legal remedies. The big advantages claimed for mediation are its speed and cost, its ability to find a way through in the most intractable disputes, and its non-negative effect on business relations compared to litigation, which can leave a business relation scarred.
Recent experience of high level political mediation in the Middle East and Northern Ireland, the growth of experienced practitioners and the tendency of courts to promote alternatives to litigation have led to a rapid growth of ADR processes. The growth of international trade and the consequent difficulties experienced in either local litigation or arbitration have opened the way to ADR.
Chapter 2 The Power of Mediation mentions, rather briefly, the underlying human element, the psychology of disputes. Psychology may hold the key to the surprising persistence of litigation in the face of the many advantages of mediation, but is clearly was seen to be outside the scope of this practitioner's guide.
The many and profound benefits of mediation are discussed in this chapter. These are its ability to maintain business relations, how it dovetails with business procedures rather than upsets them, its clear cost and time advantage over arbitration and litigation, and how its holistic approach can review all aspects of the dispute to find its root cause rather than concentrate on the narrow legal remedy.
The success of mediation is attributed to several aspects; its focus, concentrating effort at one time and place, and the neutrality and detachment of the mediator from the problem. It also draws on the nature of the mediator, the ideal candidate being selected for his energy, patience and persistence.
The project management approach of ADR may assist by treating each dispute as a project. In this way a consistent process is applied to the dispute and techniques from project management and all germane disciplines skill are brought to bear on the problem.
Chapter 3. The Decision to Mediate - Case and Mediator Selection in Practice gives some guidelines are given for the cases appropriate for mediation and also what attributes make a suitable mediator.
Cases worthy of consideration for mediation include those close to impasse, or if a negotiated settlement looks likely, or if ongoing relationships are at risk. Surprisingly the most suitable cases may be the most difficult or complex, the very complexity makes them lengthy and expensive, in turn makes the outcome more uncertain and allows more scope for bargaining.
The authors detail opportunities, which allow cases to be mediated. These are
- Court Referred under ADR Practice Directions - increasingly in the overcrowded London Commercial courts in particular.
- Court Locked - when an impasse is reached in court proceedings following lengthy proceeding, particularly if the judge is unwilling to hear the action.
- Imminent hearing, when mediation is used to test negotiating limits prior to beginning court proceedings.
- Where mediation is likely to be directed, the parties may appoint a mediator and request a formal order for mediation - so that it becomes part of procedure for cost award purposes.
- As a last resort, to avoid the publicity or expense of legal proceedings
- Obligatory process dictated by commercial contract provisions
- When parties are attempting to avoid harming business relations through litigation.
- Where a broker promotes ADR in an attempt to bring parties to the start of a dispute process.
- When a dispute fails to make progress and ADR is attempted to give a fresh start to proceedings.
The authors offer some guidelines for selection of suitable cases for mediation, and when and how it is best to introduce mediation. These guideline criteria are information held on the case, progress being made, cost versus outcomes of litigation, benefits from preliminary forum, loss through refusal of mediation offer and the loss potential within organisation. The cost-benefit gets only a brief mention here, but is clearly worthy of more discussion. Organisations spend hugely on litigation, and a much deeper examination needs to be made of the spectrum of gains, losses, costs and probabilities of each outcome for a correct corporate view.
An important issue raised here is the selection of the mediator, what skills, personality and status he/she must have. General ideas are presented for finding and selecting mediators, what attributes to look for and how to evaluate candidates.
The authors consider the difficult issues of case selection and proceeding to first steps from a confrontational disagreement will become less critical in the future. This is because they predict that it will become more common to proceed to mediation through court orders or via contract provision. Although this is probably desirable, there is no evidence presented other than the authors' belief that this will be so.
Chapter 4 The Mediation Framework - Form and Flexibility deals with the framework of mediation - the set of operating parameters. Very appropriate is in a quote from Howard Bellman on Mediation "…..It is Jazz, there are a few orthodoxies and a lot of ad-hoc ensemble invention" . This certainly describes the process, and makes a book such as this very difficult to write. Just as improvised Jazz composition is difficult to document, so is the task of describing the intuitive, complex human process of mediation.
The intellectual framework of mediation consists of the governing conditions of mediation, called here the "form" of the mediation. These include the applicable law, the mediation procedure to be followed, the participants and the legal setting of confidentiality without prejudice, the authority to settle and what conditions will bring the mediation to conclusion. The physical framework of mediation is the venue, what records are to be kept, how long the mediation will take, who are the participants and what is the necessary documentation, and the subsequent reporting format and nature.
The structure of the mediation is described within 3 main phases of discussion, with wide operating latitude at the discretion of the mediator. Phase 1 will consider the issues of mediation framework and form, Phase 2 will consist of information exchange, setting out each parties view of the case and setting the part's starting point for negotiations. Phase 3 is the heart of the mediation, the negotiating phase, when during a series of meeting, the mediator searches for a solution to the dispute and bargains with each team.
The economics of mediation receives relatively brief treatment, even though cost is one of the principal benefits of mediation over arbitration. Likely mediation costs are indicated, with the economic parameters being the amount in dispute, the probability of a solution, the comparative cost of arbitration or court solution, and management and other opportunity costs involved,. While this is all true, the costs and benefits can be much wider. The authors set out an example of a comparison between arbitration and mediation, showing that for the case presented, mediation is much more favourable because of its speed and lower costs, even though the range of settlement in mediation is narrower than in the high gain/high loss case presented for arbitration. It is indeed true that arbitration awards are analogous to an "act of god" and there is much greater control over the outcome in mediation. However it is far from good science to show an argument in favour of mediation with one imaginary example of arbitration compared to an actual mediation case results. This topic requires an analysis of all the cost and benefit data for a range of disputes, with monetary and non-monetary benefits analysed, with far more detailed information and rigorous analysis than that presented.
Chapter 5 Preparation for Mediation describes the steps taken by companies leading up to mediation. Chapters 5 and 6 are the best chapters of the book and form the heart of the authors imparted experience. As with much of the book several topics, such as listing the benefits of mediation, could readily be placed under another subject heading but with such an intertwining of subject material in mediation such a separation is difficult.
The benefits of mediations are attributed to its broad perspective, detailed analysis of all attributes and causes of project failures, moving from past history to the present, understanding the human dynamics of the dispute, and provision of a neutral channel of communication.
The preparatory steps leading up to mediation are listed, and how one might approach the issues, best suggested is a project management approach to the dispute, building the process through management of each element of the dispute resolution process. Frankly I cannot see how else the process might be managed except as a project.
The selection of mediators and how they fit into the process is discussed once again, and at some length. The preparation of submissions, team preparation, documents for consideration and their form are all explored lucidly and indications for success presented.
Chapter 6 The Mediation Process, describes the "Dance" of mediation. It draws again on the authors' experience to describe in detail the steps of a mediation process, how they proceed, how they may be advanced and the role of the mediator in each stage. The steps described are exchange of information with presentation of facts of the cases, proceeding to the exploration phase, when discussion and options are open. The next phase described is aptly named the negotiating dance and despair phase of mediation. During this phase, particular to mediation, the initial positions have been accepted and parties are exploring possible solutions. It is during this dance that the process often halts without getting to a solution and must be continued by the mediator, using his skill to explore solutions with the parties, and assist in negotiation of a settlement.
Chapter 7 Achieving and Implementing Mediation Settlements discusses how the mediator can assist in ensuring that an endurable and workable mediation agreement results at the end of a mediation process. It also explains the apparent paradox of non-binding nature of the process and the binding nature of the agreement. At the end of this chapter, some statistics for the previous 2 years of cases for he CEDR are shown indicating a high degree of success and cost effectiveness.
The chapter mentions that comparison of costs should be made, this is a very brief reference for one of the main justifications for mediation over litigation/arbitration and deserves a fuller treatment. Costs of litigation, in time money and effort are only one side of the story, the company may either be collectively rationally in pursuing more expensive dispute techniques and find it worth the extra expense in terms of financial or moral gains to proceed to litigation. This theme is certainly worthy of development.
Chapter 8 The Limits to Mediation discusses why mediation, with its power and flexibility, is not a cure-all for all disputes. The novelty of the approach may lead to different expectations and different results for different parties. Lack of urgency, lack of settlement authority of the participants and lack of proper preparation for mediation are mentioned as limitations to a successful process.
Many cases are noted to be clearly unsuitable for mediation, such as rights protection; legal precedent setting or legal proceedings called because of imposed time limits in an agreement. Mediation may be premature in the dispute, more time may be needed to apply sanctions, no effective authority may exist because of upheaval, and one party may have insufficient information to go to mediation.
The authors contend there may be psychological barriers to mediation, with distrust of novelty, protection of autonomy of managers, a company cultural preference for the adversarial procedure of litigation, and insurance coverage limitations may restrain the dialogue. The lack of control of a litigation or arbitration judgement can at times be politically expedient, when the participants seek to divert blame or responsibility to a third party, in this case often the arbitration tribunal.
The book mentions the irrational basis of the legal process, and how it can be hidden by the complexity of litigation and the lack of process accounting. This brief mention does not do justice to a very important topic of the simple question, of why litigation or adversarial arbitration takes place in many cases when there is allegedly a far simpler, cheaper, more effective and better principled process of mediation available. This simple question has a very complex answer, rooted in irrationality of human behaviour, especially in the corporate context, overlain with poor control of the human tendency for conflict. These questions are peripheral to the actual process of mediation but a greater understanding is necessary to realise why mediation is not always the first choice for disputes.
Alternatives mentioned to mediation are litigation and arbitration. Litigation is often avoided for international disputes unless the forum is clear. A local country court setting is generally not favoured because the procedure is set and already formalised, courts may be perceived to favour local litigants and one or more parties may not feel comfortable if there is a change from civil to common law legal procedures. The enforcement of foreign court judgements is not axiomatic, as judgement reciprocity requires there be a bilateral or multilateral agreement to do so. Arbitration is a very popular alternative to litigation, it has the advantages of allowing control of the methodology and setting of the jurisdiction. The most important is to correctly draft an appropriate arbitration clause in the operating company contracts.
The authors discuss the hybrid form of Med-Arb, whereby contracts provide for a blended process. In this mediation proceeds to arbitration once a time limit has passed, and the mediator then hands down a binding judgement on the case. The advantages are its flexibility, especially as it can take many intermediate forms, while its disadvantages are the many conflicts faced in moving between the two settlement modes.
Chapter 9 Global Business Diplomacy
The final chapter discussed the potential future for international mediation, within the spirit of nurturing business partnerships and formation of corporate policy to promote mediation, leading to a virtuous circle of conflict resolution, mutually satisfactory outcomes and process improvement.
Overall Comments
As very aptly commented in Chapter 3, mediation is close in sense to Jazz, part improvisation, part genius, part knowledge and experience. Just as one cannot write a textbook of how to compose Jazz, so the authors face a difficult task in formulating the work of mediation into a process manual.
The book is at times very ordered with comprehensive lists of procedures and processes, but at other times uses blocks of plain text, or often repetitive lists of attributes which may lead to lack of clarity. While this may be a way of imparting the authors' extensive experience on a subject, it would repay more careful editing to organise and reduce this. Additionally many of the diagrams add little in meaning to the text.
The wider context of dispute cause rather than resolution has not been discussed, or the question of how recourse has traditionally been to litigation rather than the so much simpler, less costly and mutually advantageous methods of mediation as presented in this text. For centuries the public, and legal scholars such as Jeremy Bentham have railed against the monstrosities of the legal process but litigation still endures as the prominent method of settling disputes. A greater understanding of how apparently flawed and limited adversarial dispute resolution techniques have prevailed would assist in understanding how mediation might find application.
The question as to how companies get into bottomless disputes in the first place is probably due to corporate behaviour; corporate bodies are far more Scott Adams than Tom Peters. (Dilbert, as Freud would agree, is amusing only because it is so close to the unspoken truth). Within the corporate web perhaps litigation is convenient in its selective approach to the truth. Mediation may require too much acknowledgement of and squaring up to the facts to be normally possible in company environment.
Of course it takes two to tango, and on the side of the legal profession the enormous incentive bias - to earn fees from disputes which are the professions daily bread - and the tendency to see each dispute in narrow legal terms, cannot but favour litigation over mediation. While incentive bias, or rational self interest as Adam Smith claimed, has got humankind to where it is, he also commented on the tendency of professions to concert practice. This subject is certainly worthy of comment if not discussion.
Although litigation and arbitration are often much more expensive than mediation, this reflects only the cost side of the balance. Companies, aside from the management attitudes mentioned in the text, and the human factor, may have good reasons for opting for litigation rather than meditation. The authors quote cases where a legal principle is at stake, however there may be other cases where the prize is worth the risk, and where companies are relatively rational about the risk/cost - reward ratio. This may again be outside the scope of this text but it should not necessarily be assumed cheaper is better.
This book is excellent manual of mediation practice, rather than a treatise on mediation or business diplomacy. It is for those who have got to the stage of considering mediation and will prove invaluable to practitioners and those associated in any way with a mediation process.
