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Why Businesses Should Mediate

Imagine this scenario.

A and B are the joint directors of a company. They are also the joint shareholders, each holding 50%. A and B are at a total impasse, or in company terms, in deadlock. Things are, in fact, so bad between them they can’t even be in the same room. They argue in front of the staff and morale is beginning to suffer. The latest dispute relates to a distribution agreement where A (sales director) negotiated terms without consulting B (commercial director). There is no shareholders agreement in place setting out their roles and parameters. The company was a start-up and, in the beginning, A and B naturally fell into an informal way of working. They always meant to formalise things but, as with many other aspects of the business, they just never got around to it. Usual story. As the business started growing, the problems grew exponentially and there was just always so much to do. Both A and B work long hours and both agree whilst the start-up part was fun and exciting the running of the business has become less so. The honeymoon period is well and truly over.

If things carry on as they are, they will lose this significant contract and this will be harmful to growth. However, B has now decided he can no longer work with A but doesn’t want A to be the sole director and, in his view, possibly risk the business being run into the ground. B is also not prepared to waste years of hard work, let alone the initial capital investment. B also knows A can’t immediately buy him out at market value as A doesn’t have the funds. B has suggested they sell to a third party but A will not agree.

So A and B are effectively stuck. There is nothing to litigate at this point. No breaches of contract or fiduciary duties. And anyway, they have both had experience of litigation in the past. The costs were high and the lengthy process took its toll. They also know there can only ever be a winner and a loser in litigation. So what can they do?

Cue mediation. Alternative dispute resolution is fast becoming the go to option for settling all kinds of disputes and, given the backlog in court cases due to the pandemic, the courts are starting to direct lawyers towards mediation.

What is mediation? Well. I’ll start by explaining what it’s not. It’s not an adversarial formal process presided over by a judge, where the disputants are only able to put across their grievances through their representatives in formal legal lexicon. Mediation is non-adversarial and unlike a court hearing it's completely confidential. . A mediator, the neutral third party, facilitates the disputants to work through their grievances to reach a mutually satisfactory resolution allowing the parties to move forwards. The mediator untangles the dispute and helps the parties become unstuck.

Mediation is informal and, in these covid times, usually online, which works surprisingly well. Parties to a mediation are often zooming in from home so the process is much more relaxed. Finally, the costs and time commitments of mediation are a fraction of litigation.

Going back to the scenario I set out earlier, A and B opted for mediation and it became clear during the mediation that the contract dispute was only one in a long list of grievances. A felt B was too cautious and held the business back (a typical accountant!) Whilst B felt A was laissez-faire and didn’t think through the consequences in the long term or in the round (a typical salesman!). Both felt the other didn’t respect them and constantly felt undermined. In short, both felt their concerns were not being heard and taken seriously by the other. This conviction often underpins a dispute.

During the mediation, facilitative mediation techniques were used to allow A and B to have their say, using their own words and language. The mediator was able to control bouts of anger, aggression and other emotions blocking the route towards a resolution. A good mediator is present and attentive picking up on tells and clues to alert them to trigger points and the real concerns underlying the “main conflict”. With patience and skill the parties can be shown how to navigate choppy waters and come to a realisation of what they need to say/do without actually being told. Mediation is subtle yet extremely effective. The most important thing is the disputants are given agency to work through the issues but always under the skilled eye of the mediator.

Of course, at the end of the day, there is no guarantee, of resolution. After all it is up to the parties who must be 100% committed to the process, But even when a dispute is not resolved, the parties will usually have shifted in their thinking having spent some time in the other’s shoes and this can have a transformative effect on the relationship going forwards. This is quite unlike the adversarial process of litigation when, I guarantee, the loser will just want to get as far away from the winner as possible, the chasm between them will be wider and the feelings of loss incalculable.

Shelley-Anne Salisbury LLB (Hons) ACIArb is an accredited mediator to international standards and deals with all types of conflict resolution.

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