• December 14, 2021
  • 10:57 am

When conflict affects the bottom line

Any dispute occurring within the context of a business relationship is known as a commercial dispute. If not dealt with quickly and effectively, commercial disputes have the potential to destroy livelihoods.

Types of disputes suitable for commercial mediation

Mediation as an alternative to court is suitable for commercial disputes both large and small – and for large and small businesses. Essentially, a commercial dispute can be between individuals or entities, and while there is plenty of variation regarding the exact nature of each dispute, some common disputes suitable for commercial mediation include:

Lease disputes

Real estate disputes

Contract disputes

Supply chain disputes

IP (Intellectual Property) disputes

Business sale disputes

Director/shareholder disputes

In addition to specific disputes, commercial mediation is also used for personal injuries, commercial transactions, and multi-party disputes.

Why dispute resolution is better than court

Unless there is serious criminal activity at play, court should be viewed as a last resort to solving commercial disputes – as it is a significant drain on financial and human resources and often involves a long and protracted process that many businesses do not recover from, irrelevant of how the court rules. In other words, what remains of the business in the aftermath of a long court battle may be a world away from the successful entity it once was. Rarely does a business relationship have a chance to repair itself in court, but when parties work together to negotiate a resolution in mediation, many commercial relationships can continue to exist, ensuring the ongoing operation of the business involved.

When should you enter mediation for a commercial dispute?

Aside from the reality that the courts order most commercial disputes into mediation, there are some compelling reasons to consider mediation as a first step in attempting to resolve the dispute. One key reason is that mediation is a process offering flexibility – neither party is bound to participate and parties commit to the process in good faith. The mediator is a neutral presence and does not provide judgement on the issues in dispute. And importantly, everything discussed in the mediation is confidential and without prejudice. This format allows parties to explore options and introduce new ideas as potential solutions that extend beyond the scope of a court scenario where dialogue is confined to the existing dispute, not allowing for new options to be introduced as potential way forward. Exploration of issues to generate options for moving forward is a cornerstone of facilitated mediation. Once an agreement has been reached, it can be formalised into a binding agreement via each party’s lawyers.

Facilitated mediation towards resolution vs lawyers negotiating a settlement

While parties are certainly encouraged to seek legal advice prior and after mediation taking place, facilitated mediation as a method focuses on a resolution of the dispute rather a settlement. Often lawyers prefer a shuttle form mediation between parties amounting to lawyers negotiating with each other on their client’s behalf without parties participating in the process or being in the same room together. While this form of mediation does happen, it is a technique that tends to lend itself to an adversarial approach. In facilitated mediation, while lawyers can be present, parties negotiate directly with each other with the aim of resolving the dispute together. The facilitated approach sees parties work together to reach an agreement they can move forward with – parties have a voice in the room, not just their lawyers who will come to the mediation with a strategy aimed at a settlement. In facilitated mediation, there is the opportunity for parties to work through issues that act as blocks in the way of open-minded, future-focused negotiation.

 How do I prepare for a commercial mediation?

Whatever the dispute – commercial, family or workplace, preparation is key to the likelihood of parties achieving a resolution via the mediation process. Parties should give practical consideration to the cost/likely outcome if mediation fails, and the commercial and personal toll court proceedings would have on each party. Preparation also includes providing the mediator with valuations, financial and contractual or other relevant documentation relating to the dispute prior to the day of mediation. Parties are also advised to consider the gap between what outcome they want, and what outcome they would accept. Consideration of the other party’s perspective of the dispute is also an important part of preparation as it helps parties bring a negotiating rather than a positional mindset to mediation.

 Mediation is future-focused

And lastly, not all commercial disputes spell the end of the business relationship. In many scenarios, it is in the best interest of both parties to resolve the dispute so the commercial relationship can get back on track and continue. As we discussed earlier, if the dispute is dragged through the courts, while large corporates with plentiful resources may continue once the courts have handed down a judgement – irrelevant of whether it is in their favour, in all reality that is unlikely for smaller businesses. Court often leads to the end of a small business relationship, and in some circumstances, the end of the small business itself. Most parties who choose mediation as a means of resolving their dispute, approach the process with the goal of continuing the relationship within the boundaries of the agreed-to terms negotiated in mediation.

To help you prepare for mediation, we have created a library of helpful information including checklists, tips and added detail around the process of mediation. For useful and relevant content  you can download for free, we encourage you to visit our resources page.

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