This article by Eileen Carroll and Kate Jackson first appeared in The Lawyer on 26 July 2010.
When dealing with difficult or intransigent disputants, having the ability to use a neutral to facilitate a negotiated settlement can be invaluable. Having in place the mechanism to do this is a wise move. This can be done without price by the inclusion of a simple clause in the underlying contract requiring that the parties mediate any disputes that arise, thus saving much pain, money and time further down the road by avoiding stalled negotiations and litigation.
The Centre for Effective Dispute Resolution’s (CEDR) 2010 Mediation Audit, a survey including general counsel, showed that as many as 90 per cent of the organizations surveyed now include mediation clauses in some of their commercial, IT, employment, or supplier contracts.
A further survey of transactional departments of City law firms showed that a number of major firms now include a mediation clause as an option in their standard form of precedent documentation for clients to select when entering into commercial contracts. Long-term infrastructure, PFI and other international contracts increasingly have escalation clauses which include reference to mediation.
Trial lawyers aside, few people enjoy litigation. It is costly, disruptive, and can escalate to a level where no one benefits. Companies manage how they conduct their day-to-day operations carefully, but surprisingly neglect to manage the potentially largest and most disruptive factor in their business: their disputes. In mediation, clients retain control over their dispute and often solve them the way they solve other issues in their business, commercially, yet it can be easier to invoke if mediation is referred to in the original contract.
In the past couple of years there has been a noticeable increase in referrals to the CEDR where chief executives have wanted to mediate and have been successful without any formal litigation or arbitration. The disciplined approach to negotiation afforded by the mediation framework is now a tool that senior businessmen are using.
By Eilleen Carroll and Kate Jackson