European Mediation Procedure (1996)
In this informal process, the mediator facilitates negotiation among the parties and their lawyers to help them reach settlement. The mediator can help parties identify interests, develop settlement options and overcome barriers to settlement.
Dans cette procédure informelle, le "Médiateur" assiste les parties et leurs avocats dans leurs négociations, afin d'aboutir à une transaction. Ce Médiateur peut aider les parties à identifier les intérêts en jeu, à mettre des solutions pour une transaction, et à surmonter les obstacles à une transaction.
In diesem nicht förmlichen Verfahren vermittelt ein Mediator bei den Verhandlungen zwischen den Parteien und ihren Anwälten um zu einem Vergleich zu gelangen. Der Mediator kann die Parteien dabei unterstüzen, ihre Interessen zu identifizieren, verschiedene Vergleichsmöglichkeiten zu entwickeln und Hindernisse zu überwinden, die einem Vergleichsabschluß entgegenstehen.
In questa procedura informale, il mediatoro facilita le trattative tra le parti e i loro avvocati al fino di aiutarli a raggiungere un accordo. Il mediatore può assistoro lo parti ad identificare i rispettivi interessi, sviluppare le condizioni di un accordo e superare gli ostacoli alla definizione della vertenza.
En este procedimiento informal, el mediador facilita las negociaciones entre las partes y sus abogados para alcanzar un acuerdo. El mediador puede ayudar a las partes a identificar intereses, desarrollar las soluciones alternativas y superar los obstáculos a una solución del conflicto.
Mediation is a process in which a third party neutral — a mediator — sits down with the disputing parties and actively assists them in reaching a settlement. CPR uses the expression "mediation" to cover both the concepts of mediation and conciliation. The process is designed to assist parties in reaching a commercially attractive settlement, with minimum time and cost.
The CPR European Mediation Procedure is designed to provide a model for the format and procedure of a mediation, although the emphasis is on flexibility and minimizing the imposition of rules on the parties. The commentary explains the model rules and the reasoning behind them. It gives guidance on the conduct of a mediation, particularly on the initiation of the process and selection of a mediator.
- 1. PROPOSING MEDIATION
- 2. SELECTING THE MEDIATOR
- 3. GROUND RULES OF PROCEEDING
- 4. EXCHANGE OF INFORMATION
- 5. PRESENTATION TO THE MEDIATOR
- 6. NEGOTIATION OF TERMS
- 7. SETTLEMENT
- 8. FAILURE TO AGREE
- 9. CONFIDENTIALITY
1. PROPOSING MEDIATION
Mediation can be used in disputes including those where numerous parties are involved. Any party to a business dispute may propose the use of mediation to the other party or parties. If the parties have made a contractual commitment to mediate disputes between them, or if they have subscribed to another commitment to engage in alternative dispute resolutions (ADR), that commitment or policy may be invoked. Sometimes a neutral organization may help persuade a party to engage in mediation. CPR may be requested to play that role.
2. SELECTING THE MEDIATOR
Unless the parties promptly, as part of their agreement to mediate, agree on a mediator, they will notify CPR of their need for assistance in selecting a mediator, informing CPR of any preferences as to matters such as candidates' mediation style, technical and/or legal expertise, competence in certain languages or geographic location. In international disputes, CPR will endeavor to appoint a mediator from a country other than that of either of the parties, unless the parties agree otherwise.
CPR will convene the parties, in person or by telephone, to attempt to select a mediator by agreement. If the parties do not promptly reach agreement, CPR will submit to the parties the names of not less than three candidates, with their resumes and hourly rates. If the parties are unable to agree on a candidate from the list within seven days following receipt of the list, each party will, within 10 days following receipt of the list, send to CPR the list of candidates ranked in descending order of preference. The candidate with the lowest combined score will be appointed as the mediator by CPR. CPR will break any tie.
Before proposing any mediator candidate, CPR will request the candidate to disclose any circumstances known to him or her that would cause reasonable doubt regarding the candidate's impartiality. If a clear conflict is disclosed, the individual will not be proposed and CPR will promptly propose another candidate. Other circumstances a candidate discloses to CPR will be disclosed to the parties. A party may challenge a mediator candidate if it knows of any circumstances giving rise to reasonable doubt regarding the candidate's impartiality.
The mediator's fees will be determined before appointment. Those fees, and any other costs of the process, will be shared equally by the parties unless they otherwise agree. If a party withdraws from a multiparty mediation but the procedure continues, the withdrawing party will not be responsible for any costs incurred after it has notified the mediator and the other parties of its withdrawal. Shared costs will not include costs that each party incurs in preparing its own case, attending meetings and instructing representatives. The parties will bear these costs themselves.
Before appointment, the mediator will assure the parties of his or her availability to conduct the proceeding expeditiously. It is strongly advised that the parties and the mediator enter into a mediation agreement. A model agreement is attached.
3. GROUND RULES OF PROCEEDING
The following ground rules will apply, subject to any changes on which the parties and the mediator agree.
3.1 The process is voluntary and depends on the co-operation of the parties. The mediator does not issue a binding decision.
3.2 Each party may withdraw at any time by written notice to the mediator and the other party or parties.
3.3 The mediator is neutral, independent and impartial.
3.4 The mediator controls the procedural aspects of the mediation. The parties cooperate fully with the mediator.
(a) The mediator is free to meet and communicate separately with each party.
(b) The mediator decides when to hold joint meetings with the parties and when to hold separate meetings. The mediator fixes the time and place of each session and its agenda in consultation with the parties. There is no formal written, audio or video record of any meeting. Formal rules of evidence or procedure do not apply.
(c) Unless otherwise agreed by the parties, the mediator decides, if necessary, the language in which the mediation is to be conducted and whether any documents should be translated.
3.5 Each party is represented at each mediation conference by a business executive authorized to negotiate a resolution of the dispute and to execute a settlement agreement. Each party may be represented by more than one person, e.g. a business executive and a lawyer. The mediator may limit the number of persons representing each party.
3.6 The process is to be conducted expeditiously. Each representative undertakes to make every effort to be available for meetings.
3.7 The mediator does not transmit information received in confidence from any party to any other party or any third party, unless authorized to do so by the party transmitting the information, or unless ordered to do so by a court of competent jurisdiction.
3.8 The mediator and any persons assisting the mediator is disqualified as a witness, consultant or expert in any pending or future investigation, action or proceeding relating to the subject matter of the mediation (including any investigation, action or proceeding which involves persons not party to this mediation).
3.9 If the dispute goes into arbitration, the mediator will not serve as an arbitrator.
3.10 The mediator may obtain assistance and independent expert advice, with the prior agreement of and at the expense of the parties. Any candidate proposed as an independent expert will also be required to disclose any circumstances known to him or her that would cause reasonable doubt regarding the candidate's impartiality.
3.11 Neither CPR nor the mediator is liable for any act or omission in connection with the mediation, except for its/his/her own willful misconduct or gross negligence.
3.12 The mediator may withdraw at any time by written notice to the parties. Either party may seek assistance from CPR in such a situation.
3.13 At the inception of the mediation process, each party and representative agrees in writing to all provisions of this Model Procedure, as modified by agreement of the parties. A model mediation agreement is attached.
3.14 With the approval of the parties, the mediator may sit with a trainee mediator, who may observe the process, but takes no active part in it and charges no fee. The trainee will be bound by the same obligations of confidentiality as the mediator.
4. EXCHANGE OF INFORMATION
Each party shall produce the documents it relies on in the mediation and may, but shall not be obliged to, produce any further documents requested by the mediator or the other party.
At the conclusion of the mediation process, upon the request of a party which provided documents or other material to one or more other parties, the recipients undertake to return them to the originating party without retaining copies thereof. All documents and other information provided to a party, in the course of a mediation, shall be used by that party exclusively for the purposes of the mediation.
5. PRESENTATION TO THE MEDIATOR
Before dealing with the substance of the dispute, the parties and the mediator discuss preliminary matters, such as possible modification of the ground rules, place and time of meetings, and each party's need for documents or other information in the possession of the other.
At least five business days before the first substantive mediation conference, unless otherwise agreed, each party submits to the mediator a written statement summarizing the background and present status of the dispute and such other material and information as it deems helpful to familiarize the mediator with the dispute. The parties may agree to submit jointly certain other materials. The mediator may request any party to provide clarification and additional information. The mediator may limit the length of written statements and supporting material. The mediator may direct the parties to exchange concise written statements and other materials they submit to the mediator to further each party's understanding of the other party's viewpoints.
Except as the parties otherwise agree, the mediator keeps confidential any written materials or information that are submitted to him or her. The parties and their representatives are not entitled to receive or review any materials or information submitted to the mediator by another party or representative without the concurrence of the latter.
At the conclusion of the mediation process, upon request of a party, the mediator without retaining copies returns to that party all written materials and information which that party had provided to the mediator.
6. NEGOTIATION OF TERMS
The mediator may promote settlement in any manner the mediator believes is appropriate. The mediator helps the parties focus on their underlying interests and concerns, explore resolution alternatives and develop settlement options. The mediator decides when to hold joint meetings, and when to confer separately with each party.
The mediator expects the parties to make settlement proposals.
Finally, if the parties fail to develop mutually acceptable settlement terms, before terminating the procedure, and only with the consent of the parties, (a) the mediator may submit to the parties a final settlement proposal which the mediator considers fair and equitable to all parties; and (b) if the mediator believes he/she is qualified to do so, the mediator may give the parties an evaluation (which if the parties choose will be in writing) of the likely outcome of the case if it were tried to final judgment. Thereupon, the mediator may suggest further discussions to explore whether the mediator's evaluation or proposal may lead to a resolution.
Efforts to reach a settlement continue until (a) a written settlement is reached, or (b) the mediator concludes and informs the parties that further efforts would not be useful, or (c) one of the parties or the mediator withdraws from the process. However, if there are more than two parties, the remaining parties may elect to continue following the withdrawal of a party.
If a settlement is reached, the representatives of the parties draft a written settlement document incorporating all settlement terms, which may include mutual general releases from or discharges of all liability relating to the subject matter of the dispute. This draft will be circulated among the parties and the mediator, amended as necessary, and formally executed. Initially, a preliminary memorandum of understanding may be prepared at the mediation and executed by the parties; the memorandum should make it expressly clear whether it is intended to be binding or not.
If litigation is pending, the settlement may provide that the parties will request the court to make an appropriate order disposing of the case promptly upon execution of the settlement agreement. The settlement agreement may also be entered as a consent judgment.
8. FAILURE TO AGREE
If a resolution is not reached, the mediator discusses with the parties the possibility of their agreeing on arbitration or another form of ADR. If the parties agree in principle, the mediator may offer to assist them in structuring a procedure designed to result in a prompt, economical process.
For Austrian, Belgian, Dutch, English, French, German, Italian, Scottish, Spanish, Swedish and Swiss mediations: The parties agree that the mediation process, and all negotiations, statements and documents expressly prepared for the purposes of the mediation shall be "without prejudice". The entire mediation process is confidential. Unless agreed among all the parties or required by law or ordered by the Court, the parties and the mediator may not disclose to any person any information regarding the process (including pre-process exchanges and agreements), contents (including written and oral information), settlement terms or outcome of the proceeding. If litigation is pending, the participants may, however, inform the court of the schedule and overall status of the mediation for purposes of litigation management.
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SUITABILITY FOR MEDIATION
Most bona-fide disputes are amenable to settlement by negotiation. Mediation is a facilitated form of negotiation. Virtually every case in which negotiation is appropriate but difficult is suitable for mediation whether direct negotiations have taken place or litigation is pending. Mediation can be particularly helpful if there is an opportunity to structure a creative business solution. When a dispute involves several or many parties it may not be essential for all to be at the table, but any party crucial to a settlement must be represented. Mediation is often seen as a process to be used at the outset of a dispute, but can be initiated at any time, and can take place whilst litigation is ongoing. Mediation differs from arbitration in that participation is entirely voluntary and the process depends on the co-operation of the parties. The mediator does not issue a binding decision. A successful mediation results in a settlement agreement. The parties have complete control over whether they agree or not and, if they do, over the content of the agreement. Mediation is a much quicker form of dispute resolution than arbitration and is also not constrained in its form by statutes or arbitral rules.
The following is a partial list of the many types of domestic and international business disputes that have been successfully mediated:
- bankruptcy and creditor/debtor issues
- commercial, financial and real estate transactions
- dealerships and franchises
- eminent domain
- insurance coverage
- mineral extraction
- partnerships or joint ventures
- patents, trade secret, technology
- personal injury
- private antitrust
- product liability
- professional malpractice
- regulatory matters
- trademarks and unfair competition
Mediation has become the most popular choice of parties seeking a non-binding form of dispute resolution. However, other forms of non-binding ADR do exist, and there are cases for which non-binding procedures may not be appropriate. CPR will, on request, be happy to provide you with more information about those.
WHY MEDIATION WORKS
A high percentage of mediations of business disputes result in a resolution. Even when agreement does not occur during the proceeding, the greatly enhanced mutual understanding substantially improves the prospects for a later agreement. Satisfaction with the process on the part of users is very high.
What are the reasons for the success of the process? Each case has unique aspects, but the following factors are common:
- Disputes ostensibly between dispassionate corporate entities involve human beings endowed with emotions. The mediator can help the parties deal with emotional issues. Discussions in the presence of a mediator tend to reduce misunderstandings and antagonism frequently subsides. Concerns beyond legal issues are discussed. The process itself presents a joint challenge to all participants to devise solutions. The momentum of mediation leads to accommodation. Settlement represents success for all involved.
- Just as an impending trial often induces litigants to stop posturing and seriously seek a settlement, commitment of the parties to a mediation is likely to motivate them to "bite the bullet" rather than to postpone unpleasant decisions. The mediator will reinforce this motivation.
- The mediator can establish ground rules designed to maximize the chances of success.
- The mediator may first urge discussion of non-controversial subjects or those for which agreement is readily achieved and postpone consideration of difficult issues. These early agreements help build a spirit of co-operation.
- Mediation provides the parties with an opportunity — at little or no risk — to crystallize issues and learn more about the other party's perceptions of the pertinent facts.
- In caucusing with each party, the mediator can diplomatically urge that party to face facts and dispel unrealistic expectations such as over-optimism regarding chances of prevailing in court. The mediator also can point to the costs and burdens of prolonged litigation.
- Once the mediator understands the true interests of each party, he or she can recommend opportunities for common gains. Many business disputes are resolved through innovative business arrangements not previously contemplated.
The factors favoring mediation are likely to be particularly strong when, but for the dispute, the parties would or could be in a continuing business relationship. The settlement then may well take the form of a renegotiated contract or some other business deal including, where appropriate, new provisions for remaining disputes or new disputes which arise in future.
Where the parties are unevenly matched with respect to business sophistication, economic resources, or information concerning the underlying facts, the "stronger" party may be able to impose lopsided settlement terms. However, this imbalance is not necessarily a reason to reject mediation. The imbalance may well be offset by the calibre of the person(s) representing the "weaker" party, and a settlement through mediation may be more desirable for even a "weak" party than the alternatives of direct negotiation or litigation with its "win-lose" outcome, high costs and other burdens. Mediators may be effective in counteracting "power imbalances" to facilitate an equitable solution.
Personal and emotional factors cannot be ignored. Animosity is likely to get in the way of unaided negotiation and to underscore the need for skillful mediation. A key function of a mediator is to defuse hostility and distrust and to encourage cooperation.
Bringing about a settlement may be more difficult if there are numerous parties with dissimilar interests; however, mediations involving many parties have been successfully concluded.
Fact Issues Predominate
Cases involving predominantly fact issues or mixed questions of fact and law tend to be well suited for mediation. In mediation, the parties need not resolve fact issues to agree on a resolution of their dispute.
Even when a party believes that a vital interest rides on the outcome of a case, it may well favor mediation over the uncertain decision of a judge, jury or arbitrator. The parties remain in control of the outcome; if the mediation is unsuccessful, other options remain. If the stakes are moderate, mediation may also be appealing; for one thing, the cost and burdens of litigation may be disproportionate even for the winner of a lawsuit.
Opportunities for Joint Gains
Many business disputes are not solely about whether X owes Y money, and if so, how much. Frequently, there are opportunities for non-cash settlements which a court or arbitrator generally cannot impose. Even if the subject matter is limited to money, there may be differences in the availability and cost of credit to the parties, or in the value of delayed payments, which can be exploited to add to the value of a settlement to each side. Development of such "value-creating" solutions requires cooperation between the parties. This is easier to foster with the help of a mediator.
Costs and Time
The direct and indirect costs and burdens of full-scale litigation are likely to be of a different order of magnitude from those of mediation. Even parties with ample resources are likely to welcome the potential savings in the time and costs of dispute resolution.
Parties to a business dispute frequently are anxious to avoid giving publicity to the details of their transactions. The privacy and confidentiality of mediation is likely to be seen as a significant advantage.
The selection of a highly trained and capable mediator is absolutely vital. A mediator is not vested with the legal authority of a judge or arbitrator, but must rely on his or her own resources. To effectively mediate a complex business dispute, a mediator must possess a combination of qualifications. The ideal mediator:
- is absolutely impartial and fair and so perceived
- has a personal stature that commands respect
- inspires trust and motivates people to confide in him or her
- is able to size up people, understand their motivations and relate easily to them
- sets a tone of civility and consideration in dealings with others
- is a good listener
- is capable of understanding the law and facts of a dispute, including surrounding circumstances
- is able to analyze complex problems and get to the core
- is creative, imaginative and ingenious in developing proposals and knows when to make them
- is a problem solver
- is articulate and persuasive
- possesses a thorough understanding of the negotiation process
- is flexible, patient, persistent, indefatigable, and upbeat in the face of difficulties
- is an energetic leader, a person who can stimulate others and make things happen
- has experience as a mediator
The size and complexity of the case will influence the selection of the mediator. In a major case, the mediator might be a former judge, a leading lawyer, a professor of a law school or business school, a senior executive, or a skilled conflict resolution professional. An evident flair for dispute resolution is as important as long experience.
The styles, personalities and orientations of mediators vary significantly. Some mediators are facilitative and focus predominantly on party interests and insist on party-generated solutions, while evaluative mediators focus centrally on the positions of the parties and the merits of the legal claims. Strict facilitators will not offer opinions about legal claims or court outcomes. Other facilitators will not offer such opinions unless party interests have been fully explored and parties directly request the opinions. Evaluators tend to approach mediation as an opportunity to offer realistic assessments of legal claims and predictions of court outcome. They may bypass interest exploration. Many mediators tend to favor one school of thought, although some will both facilitate and evaluate. A mediator's orientation will affect the mediator's techniques throughout the process.
These differences should be borne in mind in selecting a mediator. However, in advance of a mediation parties and their lawyers may not perceive opportunities for interest exploration that a skilled facilitative mediator can uncover. CPR believes that unless it is certain that such opportunities do not exist, the parties will be best served by a mediator who can play both roles. When CPR is asked to assist in the selection process, the parties' preferences should be discussed.
When legal issues are critical, there may be significant advantages to selecting as the mediator a lawyer or legal academic with expertise in the field (e.g., patent, trademark, construction). Similarly, when the subject matter is technical, it may well be desirable to select a person who has an understanding of the technology. Some experienced mediation practitioners, however, believe that even in legally or technically complex disputes, the key to resolution does not lie in adding yet another expert to the process. Instead, they prefer a mediator who is a skilled deal-maker and who can shift the parties' focus from resolving the legal or technical dispute to reaching a mutually satisfactory business agreement.
In most cases a single mediator will be used; however, in complex cases the mediator may need assistance, and it is helpful for the mediator to be able to discuss issues or possible solutions with another neutral person familiar with the case. Occasionally, using two mediators may have advantages. They can represent different disciplines relevant to the dispute, e.g. science and law. Alternatively, one could possess relevant technical expertise and the other could be a deal-maker. By conferring with each other they may develop additional settlement options. There is a risk that the two mediators may not be in sync, in which case using both can actually be counterproductive.
It is critical that the mediator be totally impartial and be so perceived by all parties. When CPR is asked to nominate candidates, it will not propose any individual who has disclosed a clear conflict. As to candidates CPR proposes, it will disclose to the parties any circumstances made known to CPR that could cause doubt but that the parties probably will not regard as disbarring.
The mediator's fee and other expenses of a mediation are normally shared equally. However, sometimes a party proposing mediation will offer to bear the expense of the early phase of the procedure in order to induce the other party or parties to try the process. There also may be reasons not to allocate expenses on a per capita basis.
The mediator may well need administrative assistance, legal research, or other forms of assistance. It is desirable for the mediator and the parties to discuss early the types of assistance likely to be needed and the mediator's resources for obtaining such assistance.
THE MEDIATION PROCESS
There is a range of approaches to mediation, going from "facilitative mediation" to "evaluative mediation." In the former, the mediator, usually meeting separately with each party, first explores with the parties their underlying interests. Having identified these interests, the mediator and the parties explore opportunities for a creative solution, such as a mutually-advantageous new business arrangement. This approach is likely to be most effective when a business relationship already exists between the parties. In facilitative mediation the mediator ordinarily will not offer opinions on the merits of the case or the positions of the parties.
In evaluative mediation the focus is more on the parties' legal rights and obligations, the strengths and weaknesses of their legal positions, the likely outcome if the case were tried in court, and what represents a fair settlement. This approach is likely to be used if the case does not present opportunities for facilitative mediation or if the facilitative mediation approach has been unsuccessful.
Many cases call for both approaches. The two approaches can be combined or alternated, with the mediator providing an evaluation during the later phase of the mediation on one or more remaining issues after facilitative mediation has been partially successful in moving the parties toward settlement. The mediator should give such an evaluation only with the prior consent of all parties and on an issue on which he or she has strong expertise. Before giving an opinion on a disputed legal issue it may be advisable for the mediator to request the lawyers to submit briefs on the issue. Once having given the evaluation, the mediator's impartiality may be impaired in the view of a party whose position is weakened by the evaluation.
There is no one right way to conduct a mediation. The Model Procedure set forth above represents a process that appears logical and has proven effective in numerous cases. One advantage of the model is that it can be readily modified to fit the circumstances of the case and the wishes of the parties.
INITIAL CONSULTATION WITH MEDIATOR
The initial consultation of the parties with the mediator serves several purposes:
- The parties are given an opportunity to size up the mediator.If one or more parties do not gain a favorable impression, a substitution may be proposed.
- The mediator will discuss the entire mediation process, including the ground rules, with the parties. They may agree on modifications.
- If they have not done so previously, they should develop a retention agreement with the mediator.
- A meeting schedule may be discussed.
- The mediator and the parties will discuss the role(s) the mediator will play.
- The parties will begin to familiarize the mediator with the dispute.
- The mediator can confirm that the parties have a genuine interest in resolving their dispute through the mediation process, and that they have the persistence to stick with the process.
- The parties' representatives will begin to talk to each other in a manner appropriate to their joint goal of reaching an accommodation.
- There will be discussion of who will represent the parties at future sessions, and the extent of their authority. If the stakes are large, it may not be possible for the negotiators to have complete authority to sign a settlement agreement, but each should have authority to negotiate a settlement, and the authority of the negotiators should be comparable.
- The exchange of certain documents may be discussed.
- If litigation is pending between the parties regarding the subject matter of the mediation, the parties and the mediator may discuss the suspension or curtailment of discovery and other pre-trial activities. They also may discuss whether the court should be informed of the mediation, and whether court approval of curtailment of pre-trial activities is required.
In a relatively simple case, a discussion of the preliminary matters listed above may be followed immediately by a joint session as described below.
FAMILIARIZING THE MEDIATOR WITH THE CASE
The mediator must be familiarized with the dispute, and the parties must be given an opportunity to state their case. The mediator usually will ask the parties to submit on an agreed time schedule such written materials as they consider necessary or advisable. A statement summarizing the background and status of the dispute is likely to be the principal document. If litigation is pending, court documents such as pleadings and briefs may be submitted. If an exchange of certain documents between the parties has been agreed upon, that exchange also should occur during this phase of the proceeding.
JOINT SESSIONS AND CAUCUSES
Following submission of these written materials, a joint session is likely to be scheduled (but need not be) at which the parties' representatives will state their views orally in an informal manner and will address the conflicting views of the other party or parties. Each party will present its position in what it considers the most effective manner. Usually there will be opportunities for rebuttal and for discussion and clarification of issues. The formality of the rules of evidence will not hinder the proceedings and the presentations will not be transcribed. The mediator will prescribe the sequence of presentations, may impose time limits and is likely to ask clarifying questions.
Following the joint session, the mediator is likely to caucus with each party. The parties will be encouraged to be more candid in such a private meeting in the knowledge that their confidences will be respected and not disclosed without their specific consent. The mediator may well elicit in confidence information not disclosed at the joint session. The mediator may explore certain aspects of the party's presentation and may request additional materials. The mediator will explore with each business executive his or her company's underlying interests and aims, will identify barriers to settlement and will help the parties address those barriers.
The mediator must understand the case fully from each side's perspective; the mediator should then assure that each side better understands how the case looks from the other side's viewpoint. The mediator should avoid expressing views on legal issues early in the process or without the parties' consent.
The mediator, to be effective, must be kept fully informed of all developments and must be able to control dialogue between the parties. The mediator may conclude at a given stage that it is preferable to keep the parties apart.
Even when there are no issues of credibility, the "facts" relevant to a dispute can be elusive. The party submissions to the mediator or statements made in meetings may well indicate that the parties see the facts differently, or draw different conclusions from them. At times, it will be useful for the mediator to address any such differences and seek to bring about agreement on the most salient facts and the issues of the dispute. At other times, focusing on the facts may be counterproductive if it will encourage the parties to focus on past disputes rather than on reaching an arrangement that will enable them to better deal with each other in the future. An "agreement to disagree" on past facts may still be used productively to reach a forward-looking solution. This is a case-by-case decision for the mediator.
Some controversies hinge on key factual issues which can be resolved by an independent expert operating under ground rules on which the parties have agreed. Does the machine perform in accordance with contractual specifications? Is the former executive using information proprietary to the former employer? Were the soil conditions as represented to the contractor, and if not, how much additional expense was incurred? Once such critical questions have been answered by a neutral expert, the controversy may, as a practical matter, resolve itself. In appropriate cases, the parties and the mediator should consider retaining an independent expert.
NEGOTIATION OF SETTLEMENT TERMS
Negotiation is most productive when the parties focus on their underlying interests and concerns, avoiding fixed positions which often obscure what a party really wants. The mediator can help the parties crystallize their own interests and understand each other's interests, defuse adversarial stances and develop a more cooperative approach. The mediator can narrow or expand the range of issues as appropriate for effective resolution of a particular dispute.
Settlement proposals are likely to be generated through discussion in caucus. The mediator can help each party to generate ideas, to develop options and alternative proposals that will lead to a mutually acceptable solution, and to try out unusual solutions in a relatively safe and confidential setting.
The first settlement proposal, by whomever made, is not likely to be the last. Hopefully, it will provide a basis for negotiation. At this juncture, some experienced mediators will usually engage in "shuttle diplomacy," i.e. meet with the parties individually to try to bridge a gap or develop a more acceptable solution; other mediators are likely to conduct joint sessions to bring the parties together. When conveying one party's position to the other, the mediator must take care to state that position accurately. On some occasions, the mediator may consider it advisable to meet with the principals of the parties, separately or together, outside the presence of lawyers. Any such meetings should occur only if the principals and their lawyers agree to them.
Some mediators prepare the first draft of a settlement agreement, seek the parties' comments, and prepare successive drafts until all parties are in agreement.
Section 6 of the Model Procedure contemplates that if the parties do not develop mutually acceptable settlement terms the mediator, only with the parties' consent, (a) may submit a settlement proposal, and (b) if the mediator feels qualified to do so, may give the parties an evaluation of the likely outcome of the case in court. When submitting a settlement proposal it may be advisable for the mediator to assure the parties that acceptance of the proposal by either party will not be communicated to the other, unless and until the other also accepts.
If agreement is reached on settlement terms, by whatever technique, a settlement agreement is drafted by the mediator or a party representative, circulated, edited as necessary and executed. A memorandum of understanding may be prepared first.
When it is clear that no agreement can be reached through mediation, other alternatives to litigation remain. The mediator may discuss with the parties whether arbitration or another form of ADR may be preferable to a lawsuit. In particular, a "last offer" arbitration would require each side to submit an offer to an arbitrator who would be required to select the offer he or she considers the more reasonable. If the parties agree in principle, the mediator may be able to help them structure appropriate ground rules. It is not desirable to permit a mediator to become an arbitrator once the mediation process has concluded, as that may well inhibit discussions in caucus between each party and the mediator. It is also doubtful whether the mediator can serve as the arbitrator since the parties are likely to have given the mediator significant confidential information that will not be placed in evidence in an arbitration but may influence an arbitrator's decision.
BARRIERS TO SETTLEMENT
The primary aim of mediation is to facilitate faster, less costly and more productive settlements. Common barriers to settlement are outlined below. These barriers should be identified and addressed in a mediation proceeding, and often they can be overcome.
Perceptions can differ about a number of issues relevant to settlement. Do the parties have different views regarding what the facts are? Do they disagree about what proposition the facts prove? Is this disagreement based on each side having access to limited information? Is disagreement primarily the result of each side's partisan assessments of the evidence and its implications? Do the parties have different views as to how the law will be applied or as to the likelihood of success at trial? Do the parties have different views of what is at stake? Do they make different assessments concerning the value of those stakes? It is very common for each party to be unduly optimistic about its chances of success at trial, particularly during the early stages of litigation. A mediation proceeding is likely to lead to a much more realistic appraisal and thereby greatly enhance prospects for settlement.
Extrinsic Pressures, Linkage
Are there pressures working on one or more parties that cut against prompt settlement? Do time constraints operate differently on the parties? Has personal animosity hindered rational decision taking? Is resolution of this dispute linked to other similar disputes, pending or contemplated? Does either side have constituencies that would criticize a settlement? Are there "strategic" considerations to avoid settlement, e.g., to discourage other suits?
Communication problems between the parties or their lawyers are a common barrier. Does the negotiation process afford sufficient opportunities to devise and explore settlement options? Do the lawyers have different incentives than the parties in interest?
Delay Considered Advantageous
A party may believe, rightly or wrongly, that it will benefit from delay. When a dispute arises while a business relationship is ongoing, both parties have an incentive to put the matter behind them, although mediation itself is also open to abuse by a party seeking to delay. Even when there is no continuing relationship, there are likely to be advantages to all parties in having the matter resolved.
Are all of the parties with a stake in the dispute available for negotiation? Should non-disputants with a stake (e.g., insurers) be invited to participate?
Parties may believe that they are not in a position to properly assess their own or the other side's position until, for example, after disclosure of documents, statements of witnesses or reports of experts in a litigation process. This is an argument more for postponement of settlement than for its abandonment.
"SELLING" MEDIATION TO THE OTHER PARTY
The other party may well have to be "sold" on mediation, especially if it lacks prior experience. A suggestion or offer to mediate may not suffice. The advantages of mediation to both sides should be carefully explained. The proposer should emphasize that:
- The procedure is voluntary, non-binding, "without prejudice" and confidential.
- The parties retain control over the outcome.
- This particular dispute is well suited to mediation and mediation has worked in comparable situations.
- There is a likelihood of substantial savings in legal fees and other litigation costs and of a much quicker and more satisfactory outcome.
- The risk for each party is minimal.
- Mediation is much less adversarial and disruptive of business relationships than litigation or arbitration.
- The mediator must be acceptable to both parties.
- The ground rules must be acceptable to both parties.
- Either party may withdraw at any time after the first session.
- The cost of the procedure is likely to be relatively modest.
- Experience shows that the chances of success are high.
- The proposer will negotiate in good faith and trusts the other party will do likewise.
- Even if the procedure should not succeed, something will be gained through better mutual understanding.
- If the parties have a contractual relationship and the contract calls for ADR, the relevant clause should be invoked. If the initiating party has subscribed to a CPR policy on ADR, the policy may be invoked even if the other party is not a subscriber. Special inducements to use ADR sometimes can persuade the adversary into the process, such as:
- Monetary Incentives:Offers to pay for the initial meeting with a mediator to determine if the process can be helpful to the parties, with shared costs beyond the first meeting; offers to pay the entire mediator fee unless the mediation is successful.
- Allowing the Opponent to Select the Neutral so long as significant conflicts of interest are not present. This technique has been used so the opponent feels confident in the neutral and may accept any recommendations more readily.
When the opponent cannot be convinced to use ADR for the entire matter, isolating a key issue or factual dispute, or even the damage portion for submission to ADR, might result in partial ADR use.
Consideration should be given to who should approach whom. Who is most likely to be receptive to early settlement and ADR? Who has had prior ADR experience? Who appears to be the principal decision-maker on the issue? Success will depend in part on the persuasiveness of the proposer.
If the persons to be induced to mediate are not familiar with the process, it may help to provide them with a copy of this paper or with other reading material. Moreover, a neutral organization, such as CPR, may play a useful role in persuading parties of the advantages of mediation.
THE ROLES OF EXECUTIVES AND LAWYERS
In a mediation, the business executive and the lawyer function as a team. Business executives have the best understanding of their company's interests and are the most likely to embrace creative, business-oriented solutions. It is preferable for a company to be represented by an executive who does not feel a need to defend past actions, who can be relatively objective and unemotional, but who has a thorough knowledge of the facts. It will be helpful for the executives representing the parties to relate well to each other and to be experienced negotiators. Each executive should be a decision maker authorized to negotiate a settlement, subject to board of directors approval if need be.
Success in negotiation, as at trial, depends on thorough preparation on the part of each participant. As a rule, the lawyer will prepare the client for the mediation. Normally, the lawyer will make the opening statement, presenting the company's views in joint session. When it comes to discussing business interests and exploring options for settlement, the executive should take the leading role.
The company's lawyer, who may be a senior in-house or outside lawyer, has a critical role to play which requires different skills from courtroom advocacy:
Counseling and Preparation
- Counsel on the advisability of settlement and mediation
- Persuade parties to agree to the process
- Design or adapt the procedure
- Select the mediator
- Educate the executive about the process and the legal issues
- Help the executive think through goals for the process
- Draft statements for submission to the mediator
- Prepare for effective presentations by lawyers and client
- Counsel on management or suspension of litigation
- Assure the confidentiality of the process
Participation in Proceeding
- Advocate in a non-confrontational manner designed to impress the mediator and other side with the reasonableness of your position
- Listen carefully to the other side's statements, so as to understand their interests
- Ask questions
- Answer questions about legal claims, etc.
- Serve as a sounding board for the client, brainstorming and discussing settlement options as the mediation progresses
- Help the client articulate business concerns and formulate proposals
- Avoid compromise of the client's litigation position should the mediation fail
- Be aware of legal ramifications of possible solutions and options
- Draft the settlement agreement and assure its enforceability
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ROLE OF NEUTRAL ORGANIZATION
Mediation services are being offered by an increasing number of international, national, regional and local organizations. Essentially, three types of services may be provided:
- Help bring parties to the table, i.e. secure their agreement to participate in the process.
- Identify candidates well qualified to serve as mediator in the particular dispute, secure the agreement of all parties to the retention of one of the candidates, recruit that person and make remuneration arrangements.
- Administer the proceeding.
Once an adversarial relationship has developed, a party who wishes to engage in mediation may be reluctant to take the lead in "selling" mediation to its adversaries or may have difficulty persuading them to mediate. A neutral organization can play a useful role in explaining the mediation process and its advantages to parties whose agreement to participate is being sought. CPR has successfully played that role in numerous cases involving both small and very large numbers of parties.
Selection of a well qualified mediator in whom all parties have confidence is the most critical step in assuring the success of the mediation. Parties often need the assistance of a neutral organization in the selection process. CPR's Panels of Distinguished Neutrals include persons having the highest qualifications and CPR regularly assists parties in selecting the "right" mediator, including European members of its International Panel of Distinguished Neutrals.
Given the highly informal and voluntary nature of mediation, CPR believes that once the mediator is in place, the parties and the mediator usually do not need a neutral organization as an "administrator" of the process.
ROLE OF INSURERS
In certain cases one or more insurers are direct parties to the dispute, as in a coverage dispute with a policyholder or in an allocation dispute among insurers. Obviously, these insurers must be at the table. In other cases, the immediate parties are not insurers, but one or more insurers are expected to bear all or part of the liability of a party, and any settlement therefore will be subject to their approval. Under these circumstances, it is essential for the policyholder to assure in advance that the insurers do not object to the insured's participation in the mediation. It will be desirable for the insurers to agree informally in advance to the parameters of a settlement, and for the insured to keep the insurers informed as the mediation progresses. Representation of the insurers in the mediation, or in certain phases, can be considered. Before agreeing to a settlement the policyholder would need to assure that the terms are acceptable to the insurers. Reaching an agreement with the other side, subject to uncertain insurer approval, is not a desirable solution.
If insurers are denying coverage to which a policyholder believes it is entitled, or if differences exist among two or more insurers as to allocation of coverage among them, a second mediation may be in order, entirely separate from mediation of the underlying dispute or meshed with it. Sometimes it is productive to involve insurers in the primary mediation process, as well as to conduct a "secondary" insurance mediation.
LENGTH OF PROCEDURE
The length of a mediation depends on factors such as the complexity of the case, the number and availability of the parties, the urgency, and the difficulty of reaching agreement on the facts and on settlement terms. The mediator should discuss with the parties the likely length of time required for each phase of the proceeding. Moreover, even during the early phases of the procedure the party representatives will develop a sense of the likelihood of success and of the approximate length of time that will be required. Note that under the CPR Mediation Procedure any party may withdraw from the mediation at any time after the first session.
It is not uncommon for parties to agree to mediation on the express condition that a party will be permitted to commence litigation or arbitration (or resume if it has been suspended) if the mediation is not concluded within a specified period. Presumably that option will not be exercised if, when the deadline is reached, the prospective plaintiff is optimistic as to the outcome of the mediation. If litigation has already commenced, the commencement of mediation does not operate to stay those proceedings, unless the parties agree to this with the Court. [Check position in particular jurisdictions].
If possible, the mediation should occur at a convenient neutral, congenial site, typically the mediator's office. There should be sufficient space for both joint sessions and separate caucuses. Normally the mediator will attempt to reach agreement with the parties on the site, which need not be the same for all meetings.
Among dispute resolution processes, mediation offers a maximum degree of confidentiality and privacy. Contractual and legal protections provide additional assurances against use or disclosure of mediation statements or documents. These confidentiality protections contrast sharply with the public nature of the litigation process and its procedures that lend it to public disclosure.
In mediation, parties can increase the chances that participants will maintain the confidentiality of the process by entering into various confidentiality agreements.
- Parties and mediators can execute a written confidentiality agreement.
- Adoption of the CPR Mediation Procedure provides these assurances of confidentiality, proscribes transcription of meetings and requires the mediator to return documents to the originating party upon request without retention of copies.
- If a witness or expert attends a mediation, some parties and mediators take the precaution of having them sign a confidentiality agreement as well.
Confidentiality contracts are well advised in view of limitations, gaps and variations in existing legal confidentiality protections. Some courts may intrude into mediation confidentiality since the law is still developing in this area. Nonetheless, confidentiality agreements may support party damage claims in the face of party breach. Some mediators may require indemnification from the parties for expenses they incurred in defending the confidentiality of the process and the documents it produces.
Some courts may decide to protect confidentiality, but this cannot be relied on.
PROBLEMS IN SPECIFIC JURISDICTIONS
Austria: It is not possible under Austrian Law to exclude the liability of the mediator and the CPR, either for gross negligence or for willful misconduct. Clause 3.11 of the rules will therefore not apply in full in Austria.
Belgium: Lawyers have a different status as regards confidentiality from non-lawyers. Thus a lawyer who has acted as a mediator or adviser to a party will be more able to invoke professional confidentiality provisions in subsequent litigation. Clause 9 of the rules needs to be considered in this context in Belgium.
There is a danger that a written evaluation given by a mediator pursuant to clause 6 of the rules might not subsequently remain confidential.
Germany: A mediator will not be able to claim the same protection as the judge or arbitrator from being called as a witness in subsequent litigation or arbitration. The parties can agree not to call the mediator as a witness, which agreement will be upheld in the civil courts or arbitrations, but not in the administrative or criminal courts.
The recommended form of confidentiality agreements is as follows:
- "All written and oral information, documents, etc., disclosed in the course of the mediation proceedings are to be kept confidential and are exempted from any use outside the mediation proceedings.
- "All statements, proposals (especially settlement offers), etc. are made 'Ohne Präjudz Für die Sach-und Rechtslage'."
Italy: As regards confidentiality, lawyers have a different status from non-lawyers. Thus, unlike a non-lawyer, a lawyer who has acted as a mediator or in any ADR capacity will be able to invoke professional confidentiality in subsequent litigation. Clause 9 of the rules needs to be considered in the context.
Spain: Liability can be excluded for the mediator, except for fraud. Lawyers have greater confidentiality protection than non-lawyers.
Sweden: Again professional confidentiality privilege can be invoked by lawyers but not by non-lawyers. Thus non-lawyers who act as advisers or mediators may be required to testify in court.
Switzerland: Mediators are held to a fiduciary duty of confidentiality whether they are lawyers or not, provided the information they receive is marked confidential.
For information on how to file a matter with CPR, see File a Case | CPR International Institute for Conflict Prevention & Resolution (cpradr.org).