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12 Oct 2017

Mediation – Advantages and Disadvantages

by Mark Woodward-Smith, Group Managing Director - UK, Europe and Americas -

History
Mediation is a form of ‘Alternative Dispute Resolution’ (ADR), which is a very ancient practice that has been developed for modern usage.  ADR can offer a compelling alternative to litigation which is often costly and damaging to business relationships whilst offering limited creative problem-solving opportunities.

Mediation has been used as a method of resolving disputes since time began, however it was not until the 1990s that it become an accepted part of the legal process.


Introduction

The construction industry is unfortunately prone to dispute for which the traditional route to resolution was litigation; often a costly and long-winded affair. Now however there are various methods of ADR which are available:

  • Mediation
  • Adjudication
  • Arbitration
  • Expert determination
  • Court proceedings

The use of ADR has become more recognised and the Pre-Action Protocol for Construction and Engineering Disputes requires parties “to make appropriate attempts to resolve the matter without starting proceedings and, in particular, to consider the use of an appropriate form of ADR in order to do so”.

Mediation is now the most commonly used ADR method in the construction industry and although more expensive than a simple negotiation, it allows the parties to retain control, and be intrinsically involved, in the resolution process.

Advantages

  • Mediation can be carried out relatively quickly compared to litigation, taking on average between 1 to 2 days;
  • If both parties agree to mediation this clearly demonstrates a willingness to achieve a negotiated solution;
  • The appointed mediator will be independent, they will not advise or provide judgement;
  • The mediator is there to facilitate and guide the discussions between the parties, with the primary objective of resolving the dispute;
  • It is the parties involved in the mediation process that arrive at a final solution and not the mediator;
  • It is a flexible process that provides parties access to a wide range of outcomes that are not available in litigation. For example, courts will usually order one party to pay money to the other party, whereas in mediation the parties come to their own agreement and other things can be taken into account;
  • If a solution cannot be achieved then other options are still available;
  • The process will attempt to preserve the relationship between the parties;
  • Mediation can allow each party to hear the opposing view in a non-confrontational environment;
  • Both parties must sign an agreement of the final recommendation in order for it to be binding;
  • The parties via the mediator can bring other matters outside of the contract itself into the mediation in order to assist a commercial settlement;
  • It is a confidential process and anything discussed at mediation is considered ‘without prejudice’ and therefore cannot be used as evidence in any subsequent tribunal.

 

Disadvantages

  • Not compulsory;
  • Concerns exist around the enforceability of a mediation agreement;
  • All parties must agree to a resolution as the result is not guaranteed;
  • Can be difficult if either party are withholding information;
  • Mediation may not be appropriate if one of the parties required public disclosure;
  • Utilising the services of an unskilled mediator can contribute to an unproductive resolution;
  • An unwillingness of one or both of the parties to cooperate can make the whole process a waste of time, effort and money;
  • If the dispute cannot be resolved in mediation the cost of mediation will have been wasted;
  • During the mediation process either party can withdraw from proceeding at any time;
  • There is the possibility that information may be given away to the other party during the mediation process that could benefit the other party.

Conclusion

It is important for both parties to recognise the requirements of the Pre-Action Protocol for Construction and Engineering Disputes and that the consequences of failing to mediate, or attempt another method of ADR, could possibly result in an adverse cost order.

Any party refusing to mediate needs to ensure that their stance for refusal is reasonable, as the courts will consider any refusal to mediate seriously when making orders as to the costs of the subsequent litigation.

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