Commercial Mediation
By Charlotte Tran
In the recent years, the emphasis on ADR has been heightened by the endorsement of the tribunals. The courts encourage parties to explore ADR in assisting the reduction of high volume of court cases and in attempting to resolve their disputes. At the present, mediation is indeed the fastest-growing segment of the ADR world. Especially, mediation has proven its dominant position in resolving commercial disputes. With the fast pace of the commercial sector, mediation gains popularity in this sector for its efficiency, effectiveness, and flexibility.
What are commercial disputes?
In simple terms, commercial dispute is disagreement arising between two business entities. Commercial disputes generally embody a high level of complexity and require a suitable resolution mechanism on a case-by-case basis. The scope of commercial disputes is rather broad, but the most common types normally involve disagreements on contract terms, pricing, quality or quantity of product and services, intellectual property infringement, and breach of fiduciary responsibility.[1] Breach of contract occurs when one of the parties fails to meet the obligations or responsibities indicated in the contract.[2] In commercial transactions, contracts hold a strong importance and therefore, are commonly subject to disagreements. In our technology-driven era nowadays, intellectual property rights are also extremely crucial aspects of business. Disputes over intellectual property rights tend to be related to trademarks, patents, copyrights, or trade secrets.[3] Infringement of fiduciary duties is another common type of commercial disputes. Fiduciary duties refer to the duty to act in good faith, to maintain confidentiality or to fully disclose of information.[4] Beside these most typical commercial disputes, there is indeed a wide scope of other topics subject to disagreements between business entities. It is also worth mentioning that different areas of commercial disputes, for instance intellectual property disputes, have their own regime and rules.
Mediation in commercial setting
Mediation can be understood as a flexible procedure where a neutral party actively assists the disputed parties to work toward a mutual agreement and the parties have the ultimate decision on the settlement. The entire process is treated with confidentiality and less formality compared to litigation. In a commercial setting, mediation stands out as a highly effective and discreet dispute resolution mechanism. Unlike litigation, the involved parties will not be put on lengthy trials and the pressure of the cross examination.[5] More importantly, the subject dispute will be not be placed in the public discussion. The exposure of the dispute to the public tends to create adverse effects on the business and reputation of both parties. Therefore, the element of confidentiality makes mediation the favourite option for most businesses. Furthermore, the involved parties have the ultimate control to determine the appropriate solution for their disputes.[6] In many cases, parties do not simply seek for monetary outcome, but rather a compromised agreement on contract terms or business transaction. Therefore, mediation can offer entities the opportunity to express their personal interests and the mediation bears the burden to communicate them.[7] In the business world, time values and lengthy court trials are not ideal for the involved parties. Depending on the complexity degree, a commercial litigation can last for several months or even years. Therefore, it is more time-efficient to attempt to resolve the dispute with mediation. Additionally, mediation can offer an amicable post-conflict relationship for both parties. By its nature, mediation functions on a voluntary basis. Hence, entities who seek for solutions with mediation already show their good will to establish an amical relationship with the other disputed party. An amicable setting is always beneficial for entities to operate in the market in the long run.
Commercial mediation in practices
There are four main phases in mediation, including preparation, plenary, negotiation, and settlement.[8] During the preparation or opening phase, the parties will determine the cost of the mediation process and indicate the conduct of the process by clarifying the subject of the dispute.[9] In the plenary phase, both parties have the chance to share their opinions on the dispute.[10] Upon these discussions, the mediation can determine their wishes and personal interests.[11] Following this, possible solutions will be proposed and both parties can negotiate until reach a mutual ground during the negotiation phase.[12] Once a settlement is reached, the terms will be indicated in a settlement agreement. During the entire process, the mediation only plays the role in assisting the parties to reach a mutual agreement.[13] The final decision accordingly lies with the involved parties.
Conclusion
At the present, mediation has successfully proven its prominent role in many areas, especially in commercial sector. Mediation offers a speedy process with high degree of confidentiality and efficiency. It offers businesses the platform to reach a more creative and beneficial outcome with an amicable setting afterwards. Recent figures show that 89% of the disputes are successfully resolved with mediation and more than 74% of the cases are resolved on the day itself.[14] These impressive figures confirm the longstanding reputation of mediation for effectiveness and efficiency.
[1] Bremer Whyte Brown And O'meara, ‘What is a Commercial Dispute?’ (24 October 2018) https://bremerwhyte.com/news-thought-leadership/what-is-a-commercial-dispute/ accessed 10 August 2021.
[2] Ibid.
[3] Ibid.
[4] Ibid.
[5] Mohammed Saleem Tariq, ‘Mediation in Commercial Disputes: is this Workable?’ (Mediate.com) https://www.mediate.com/articles/TariqS1.cfm accessed 10 August 2021.
[6] Ibid.
[7] Ibid.
[8] ‘Commercial mediation in The Netherlands’ (Linklaters) https://www.linklaters.com/en/insights/publications/commercial-mediation-a-global-review/commercial-mediation-a-global-review/the-netherlands accessed 13 August 2021.Du
[9] Ibid.
[10] Ibid.
[11] Ibid.
[12] Ibid.
[13] Ibid.
[14] ‘The Value of Mediation in Resolving Commercial Disputes’ (ashfords) https://www.ashfords.co.uk/news-and-media/general/the-value-of-mediation-in-resolving-commercial-disputes accessed 13 August 2021.