Commercial Mediation: Understanding the Key Aspects
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A commercial dispute can be difficult on your key relationships and your bottom line. Litigation can be extremely expensive, and the reputational damage could be unquantifiable.
What is Mediation?
When two parties in a dispute can communicate with one another, mediation is a process that can help them reach a mutually agreeable solution. The mediator serves as a facilitator, helping the parties communicate effectively and navigate any obstacles that may arise during the negotiation process.
It is a voluntary or contractual process that is used to help settle a dispute between two or more parties. It is a method of alternative disputes resolution (ADR) where a neutral third-party entity helps the parties negotiate the settlement of a dispute. During the initial stages of a dispute there is an obligation to attempt to solve.
It’s important to note that the mediator’s role is not to provide legal advice or to make decisions on behalf of the parties. Rather, the mediator is there to help the parties come to an agreement that meets their needs. Further, the discretionary advice of a mediator may be ignored but a court could impose cost sanctions on any party that fails to attempt mediation.
Mediation is a bespoke, flexible, and confidential process that allows the parties to explore their options and come to an agreement that they are both comfortable with. The key benefits of mediation include the fact that the parties have control over the outcome, and mediated agreements are generally successful and adhered to by both parties.
How do you mediate in different jurisdictions?
The UK
Mediation is an accepted form of dispute resolution in the UK. A large majority of disputes are resolved through mediation, although not obliged to do so the courts encourage disputes to be resolved through this process.
A mediator is appointed by the parties, each side does not need separate legal representation, but it is advised. It is believed that over 50% of mediated claims are resolved.
There may be contractual terms that outline that any dispute requires mediation. Court litigation there is a duty on each party to explore ADR, which may include mediation.
Once a settlement is reached, the parties enter into a settlement agreement. This is a contractual arrangement and is enforced accordingly.
Italy
It is obligatory in Italy to mediate some disputes. These include those in relation to banking, insurance, financial agreements, inheritance, family arrangements, leases and medical liability.
Generally, a mediator is appointed and will draw up a settlement proposal following the discussions. Each party can reject the proposal however should a court rule in favour of the proposal, it is unlikely that the party that rejected it could claim its costs.
Mediators are regulated in Italy and must be registered with the Ministry of Justice or with a relevant bar association.
The Legislative Decree states that there is ‘an obligation on parties to pursue mediation before filling a claim’. Should parties accept the mediator’s proposal then a settlement agreement is drawn up and validated by a court.
Germany
There is no obligation to mediate in Germany unless it is obligated contractually. A court can suggest mediation and offer reduction in court fees where settled by mediation.
The EU Mediation Directive was implemented in German law and the resulting Mediation Act were introduced in 2012 to govern mediation provisions. Under article 7 of the EU Mediation Directive and section 4 of the Mediation Act, all proceedings are to be kept confidential. A court may order the information to be disclosed to enforce any agreement or if it is for the public good.
Mediation can be initiated by any of the parties of the dispute or at the court’s direction. Parties do not need legal representation, but it is suggested. The process is intended to be flexible but generally mediators following a five-step procedure to reach a settlement. This includes:
- Mediation agreement outlining procedure;
- Outline of the facts and timeline of the dispute;
- Outline of each parties interests;
- Exploration of possible solutions; and then
- Settlement agreement.
Once a settlement agreement is finalised, it is enforced as a contract under section 779 of the German Civil Code. It may also be executed as a deed.
Mediators must be certified and trained in accordance with the Certified Mediator Training Act. This includes 120 hours of mediation training and then within a year of completing training must have had a supervised session.
What are the benefits of mediation?
The advantages of mediation are that it is usually flexible, takes into consideration the commercials of both sides and looks at each sides legal position. Mediators often have novel solutions to disputes and can guide the negotiations to the most suitable solution.
Further, generally the discussions are confidential and save huge amounts on litigation costs.
At Oracle Solicitors, we have ADR experts who understand the process across Europe. Contact us today to 02030515060 or at info@oraclelawglobal.com to help you navigate your legal challenges.
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