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. However, there are significant differences that should be considered before deciding upon which method to take.
It probably goes without saying that litigation is likely the more expensive and is the most time consuming. Lawyers have a knack (or 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 a hypothetical example.
In Singapore, a company called Neo Pyramid, 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 High Court 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 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.
A mediator 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 in a dispute, check out the available mediation services before you give your lawyer a call and enter the point of no return.
Other than litigation,mediation and arbitration are different approaches within the alternative dispute resolution systems.Research into and outline the different types of alternatives dispute resolution systems available to resolve disputes.In particular,examine whether the dispute can be prevented in the first place.
The case study highlighted the usefulness of mediation as an effective and preferred alternatives dispute resolution approach.Discuss why this is the case and appraise the conditions where it is most applicable.Give examples.
Are there situations where mediation may not be appropriate?If so,which of the alternative dispute resolution approaches are more appropriate? Why? Demonstrate with relevant examples.