Using Mediation for Resolving Disputes
This case study shows how mediation can be more beneficial to a business relationship than other dispute resolution mechanisms.
Companies that find themselves embroiled in a bitter feud over a contract dispute have three options to find a solution. They can litigate their claim through the court system; go to arbitration; or use a mediator to resolve the dispute. Many companies have invariably used one of these processes to address a dispute. There are significant differences that should be considered before deciding upon which method to employ.
It probably goes without saying that litigation is likely the more expensive and is the most time consuming. Lawyers have a knack for tying up a case in a tangle of legal knots for years. The outcome is often uncertain and the resulting benefits can be nebulous at best.
Arbitration, as it turns may not be that much more productive than litigation, as this dispute resolution process can also be both costly and time consuming for the participants. However, the effect and influence of arbitrators can vary quite significantly between countries and cultures. In some countries, arbitrators may be inclined to impose a settlement on the parties in dispute, and in other countries they may be inclined to facilitate a more amicable agreement. Arbitration may be a more proactive venue than litigation. One thing is clear about a dispute in a joint venture partnership though; there is little hope that the relationship between the partners will likely survive either process.
Often, too many companies will resort to either of these first two options first. This may be a mistake.
This brings us to mediation. Mediation is the least used process to resolve disputes. So, what are the similarities and the differences? First, a mediator is chosen by both parties, and will bring their own applicable expertise to the dispute process and an understanding for the basis of the dispute. More importantly, mediators are both neutral and objective. The mediator will use the resources of both parties to help both parties resolve their conflict. In other words, a mediator, more than anyone else, can help mend a contractual dispute and save a relationship. Let’s look at an example.
In Italy, a company called Nuovo Pignone, which manufactured heavy equipment, was being sued by an insurance company to recoup a claim they paid out to one NP’s customers. The customer had lost business when some of the equipment it had purchased from NP failed in contract job. NP suggested they use a mediator. Both the insurance company and the customer who had sustained the loss agreed. A retired Italian judge was called in to mediate. The judge focused on settlement as his objective in the dispute.
By taking this approach, the parties were able to more realistically gauge each other’s strengths and weaknesses. The customer was persuaded to put pressure on the insurance company as he was still a valued customer of both parties despite his dispute with NP. As a result, the insurance company was persuaded to settle for a reasonable amount for a reasonable and acceptable amount of money. In the end, all parties were satisfied through the mediator’s efforts and the business relationship between the parties was successfully maintained.
Our advice is to avoid or manage such disputes through upgrading your teams’ negotiation skills by investing in a negotiation skills seminar. Mediation can more readily help the parties shape or restructure their agreements and is thereby more likely to also preserve a profitable ongoing relationship than would have been achieved through either litigation or arbitration. Next time you enter into a dispute, first evaluate the mediation services available to you before giving your lawyer a call.