Specialist construction and engineering solicitor Christopher Cox of Michael Gerard Solicitors, explores why mediation is the best way of achieving a satisfactory outcome for all parties in most construction disputes
Mediation is a voluntary process in which an independent third party is appointed to act as an impartial neutral, assisting parties in dispute to cooperate in arriving at a settlement. The process is confidential, can be arranged in a matter of days and the outcome is only binding if the parties agree.
What are the costs?
Compared to other forms of dispute resolution, which can rack up bills of tens of thousands of pounds with stress levels to match, the cost of mediation is relatively low. Fees are based on a senior lawyer’s rate per hour spent on the case, divided by the number of parties, plus the cost of the mediation forum.
When mediation is agreed as a form of Alternative Dispute Resolution (ADR) without court proceedings, both sides pay for legal opinions prior to the mediation, to be used as the basis of their negotiation.
Do I have to use mediation?
Currently, courts only order mediation if the parties agree. It is all too common for lawyers to spend significant time and effort on a case only for the parties see sense and agree to mediation. Huge expense has already occurred in relation to “red mist” processes like litigation, arbitration or adjudication – and there is nothing to show for it but deadlock. At this point, mediation may seem like yet another expense but, in most cases, it remains the best option.
In a move that will simplify the process and ultimately save businesses time and money, the UK courts are soon to order that mediation must take place before parties can go to court. So ideally, construction disputes should start not with a claim letter but with an agreement to reach a deal by mediation.
Why is mediation so effective?
Mediation focuses on what you and your opponent need, as opposed to what you both think your rights might be.
Because of this, in most cases, the only preferable alternative to mediation is the avoidance of construction disputes through the use of well-drafted contracts that guard against problems arising in the first place. In addition to its relative affordability and speed, reasons why mediation is nearly always the right choice include:
- Accountability: It is your dispute and with expert legal help, it is better for you and the other party to reach out across a table to understand why the dispute exists and what is obstructing it being solved rather than providing facts to lawyers and hoping a judge rules in your favour.
- Positivity: Working with another party can help you develop strong relationships as opposed to litigation which can foster ongoing bad feelings.
- Pragmatism: As opposed to adversarial forms of ADR, mediation focuses on an outcome every party can live with. Even where strong feelings of grievance exist, this is usually preferable to spending huge amounts of time and money on being proven right.
- Flexibility: Although litigation can be used as a weapon of punishment, it is a high stakes strategy and court proceedings can provide only a limited range of remedies in comparison to mediation.
- Professionalism: Far from a sign of weakness, deciding to negotiate is a wise business decision given that expensive legal proceedings may well erode any financial gain made.
- Objectivity: Because it is a non-threatening process, research shows mediation enables the parties to reflect and reconsider under the guidance of the mediator.
- Court avoidance: In a best-case scenario, both parties will seek legal opinions to negotiate with at the mediation, as opposed to opting for mediation on the advice of the court.
How does the process work?
Getting to the point where mediation is agreed is often the hardest part. The next step is to seek advice from a lawyer with mediation experience or one of the many mediation service providers available such as CEDR, Civil Mediation Council or Clerksroom.
The mediator must not have provided legal advice to either party in advance of the mediation. Rather than passing judgement, the mediator is there to help facilitate a settlement based on needs.
The mediation begins with both parties and their position statements, which list what they need; these are exchanged before the day of the mediation. Their positions are then backed up and clarified in an opening statement they each deliver orally. Working with the positions and taking account of each party’s needs, the mediator comes up with an answer to resolve areas of impasse. All this takes place in private in a neutral space conducive to bringing about resolution.
Are there any drawbacks?
Once a mediation has been agreed, our overwhelming experience is that clients are satisfied with the outcome as they are reconciled to the fact that a degree of shared pain is likely to be part of any settlement via mediation. However, as all parties must sign up to terms to get a settlement at mediation, you are always in control of the situation.
Is mediation the right choice for me?
To consider what might be best for your circumstances, think about:
- The time processes can take.
- The cost.
- The risk involved.
- The quality of the outcome of each process.
In my experience, this thought process will point to mediation as the best choice in about 98% of cases. However, if you can get what you need without going to mediation then go direct. Also, if you can benefit from a “smash and grab” cashflow enhancing adjudication decision, need an injunction or require a precedent from the court, that is the way to go.
Other forms of ADR include:
Avoidance: In some cases, deciding to walk away from a dispute can be the best decision to avoid stress and expense.
Arbitration: Although generally confidential, this can be an expensive, complicated and time-consuming process with numerous different rules at play. The decisions, called awards, can be enforced by a court if need be. This process is the only option for international construction disputes, which rely on treaties for enforcement. There is a high degree of quality in the decision.
Adjudication: A rules-based process very similar to arbitration but with the advantage of speed (35 days). It is more governed by statute, which means the parties must abide by the rules set by the law. The decision is quick, of average quality with the winner and the loser generally paying their own costs. The decision can be enforced in a court, provided the adjudicator has stuck to the rules. If it is enforced in court, the privacy aspect disappears. This once-cheap option is now becoming expensive.
Litigation: The contest is conducted by lawyers and run by an independent judiciary paid for by the state and in the public eye. The outcome is a legal decision which may be appealed to be either overturned or given a higher status in law. The overall winner is awarded costs which the loser pays. The decision is of high quality, public and takes time. However, court fees have become prohibitive for most businesses.
Expert determination: A specialised rules-based process in which the parties mutually decide that disputes will be referred to an expert to decide the factual dispute in a decision that is generally agreed to be final and binding. It is quick, cost efficient and useful for specific technical areas if an appropriate expert is appointed.
Early neutral evaluation: A rules-based process where the parties exchange information and invite a neutral third party to indicate what the legal outcome of a dispute might be if it were to be taken to court. The quality of the outcome should be high because it promotes settlement by agreement. The process is designed to short circuit the litigation or arbitration process. The outcome is not binding unless the parties accept it as such. The cost is less than going to litigation and arbitration, and similar to mediation.
Before you take any action in relation to a construction dispute, it’s essential to get the advice of a specialist construction lawyer, who will only advise an alternative to mediation in certain circumstances. In most cases, the highly cost effective, private and low risk option of mediation will be the clear path for all parties to reach an agreement so they can draw a line under the issue and move on relatively unscathed.
Christopher Cox
Consultant solicitor
Michael Gerard Solicitors
+44 (0) 1858 414290
