Resolving Disputes Case Study: Business Mediation Example
This case study shows how mediation can be more beneficial to a business relationship than other dispute-resolution mechanisms.
Options to Resolve Business Disputes
Companies that find themselves embroiled in a bitter feud over a contract dispute have three options to find a solution. They can either:
- Litigate their claim through the court system
- Go to arbitration
- Use a mediation process to resolve the dispute
Many companies have invariably used one of these processes to address a dispute. There are significant differences to consider before deciding upon which method to employ.
Arbitration and Litigation
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 out, may not be that much more productive than litigation. That’s because it can 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, the inclination is for arbitrators to impose a settlement on the sides in a dispute. In other countries, there may an inclination 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 business 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.
How Mediation Can Help
This brings us to mediation. Mediation is the least-used process to resolve disputes. So, what are the similarities and the differences? First, both sides agree on a mediator. The mediator will bring their own applicable expertise to the dispute process and an understanding of the basis of the dispute.
More importantly, mediators are both neutral and objective. The mediator will use the resources of both sides 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.
Saving the Business Relationship
In Italy, a company called Nuovo Pignone (NP), 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 a contract job. NP suggested they use a mediator. Both the insurance company and the customer agreed. They called in a retired Italian judge to help with mediation. The judge focused on settlement as his objective in the dispute.
By taking this approach, the sides were able to more realistically gage 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 sides 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, the mediator’s efforts satisfied each side. The sides were able to successfully maintain their business relationship.
Ask for Help
Our advice is to avoid or manage disputes through upgrading your teams’ negotiation skills by investing in a negotiation skills seminar. Mediation can more readily help the sides shape or restructure their agreements. Therefore, mediation is more likely to also preserve a profitable ongoing relationship than 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.