A suitable alternative

Andrew Kincaid, dispute resolution specialist, feels that resolving disputes by any method other than litigation or arbitration just makes good business sense

Why Alternative Dispute Resolution?
People’s working definitions will vary, but a fair working definition of alternative dispute resolution (ADR) is any method other than court or arbitration to resolve disputes. Alternative dispute resolution methods include negotiation (assisted or otherwise), mediation by a third neutral party, conciliation, on occasion linked with the ability of the third party to make a non-binding or binding determination of the issues in dispute.

The avoiding of uncertainty, legal costs and delay is a major reason why ADR is preferred: Parties have said to me, time and again, that they only wish they had not incurred the costs (both legal costs and management time) delays, stress and the uncertainty of going to court or arbitration, having earlier declined the opportunity of resolving the dispute by agreement. It is easy, when a court hearing is a long way off, for a party to “block out” the case against it. It can become painfully apparent during the hearing, that the judge may not agree with the party’s version of the facts in dispute, or may misunderstand some technical aspects. Questions of law, at first appearing to be of a straightforward nature, can result in lengthy submissions and debate. By then, especially in jurisdictions (unlike Oman) where a good proportion of incurred legal costs are awarded to the “successful” party, the case has adopted a life of its own, from which point it is difficult to settle the dispute without substantial compromise. A principal advantage of ADR methods is that they allow the parties to keep control of the dispute in a necessarily private setting, and allow creative remedies to be adopted. A judge or arbitrator is bound to find for one party or the other and, generally, to order remedies known to the law, such as a judgment in debt, an award of damages for breach of a contract, or a declaration of a party’s rights or obligations. ADR allows the parties creatively to fashion their own resolution. In summary, the certainty of a commercial result achieved by ADR beats the uncertainty of the court system.

The state of different industry sectors will also influence the extent to which ADR methods are adopted. The current stage of the “post GFC” construction sector in Oman, and the Middle East generally, is that governments are the major procurers of major infrastructure and building developments. International and local construction companies for instance, who undertake these projects, have a long-term interest in maintaining good working relationships with government procurers, so that they may not be ruled out of repeat work. Governments naturally also wish to maintain good commercial relationships with these companies. This means that both parties have an interest in avoiding litigation or arbitration which, by their combative nature, generally cause the collapse of commercial relationships. I will now discuss the processes themselves.

What is Mediation?
Mediation is a process by which an independent person, usually trained in particular mediation skills, facilitates and encourages the parties coming to their own agreement on how a dispute is to be resolved. In order to encourage candour, nothing said or done in a mediation can be relied on in any subsequent legal or arbitral proceedings. Once the parties’ agreement is put in writing, it becomes a contract, usually in place of the contract upon which the dispute arose. If, as is usually the case, it provides for the payment of a sum of money by party A, then party B may sue party A in the event of non-payment by party A. In Oman, the Court will often records the contract in a judgment disposing of the proceeding.

It is important to understand that the mediator is not usually empowered to impose a solution on the parties. Either party is free to walk away from the process at any time. In this event, a skilled mediator will prevail upon the party to see the process out, if he or she considers that the parties are still capable of resolving their dispute. Good mediators can be quite persuasive in this respect. Mediation of disputes is widespread in business circles in Muscat and, indeed, is deeply rooted in bedouin culture throughout Arabia.

What is the process?
Some would argue that a mediator is someone who simply has the trust of the parties, who can preside over negotiations in an avuncular fashion, dispensing advice on process and the merits of the parties’ respective cases. This is not what trained mediators do. At the first “open session” of the mediation hearing, the mediator should adopt the classic approach of providing each of the parties an opportunity to state its case, and to allow time for the mediator’s questions or those of the counterparty. This is generally followed by the mediator’s summarising on a white board the amount claimed by the claimant, any amount claimed by the respondent, and the issues in dispute. The white board is then used as the mediator’s and the parties’ working document. The parties’ then agree that all issues have been set out. The issues are then discussed sequentially.

A prime feature of mediation is that the mediator then interviews each party separately, behind closed doors. This is why a properly conducted mediation requires at least two rooms, and preferably three! There are always matters which a party will be happier to disclose to the mediator in this setting rather than the open session. It is a strict rule that anything said to the mediator in this phase is confidential, unless the mediator obtains express instructions from the party to disclose it to the other side. This process recognises that the mediator, armed privately with information about each party’s’ real priorities and concerns, is better able to fashion a suggested resolution than if he or she is armed only with information disclosed during the first open session. The completion of the closed sessions will often lead to an offer being made by one party to the other. It can be a very difficult process for the mediator to persuade a party to make the first offer but, having done so, the mediator often becomes involved in “shuttle diplomacy”, conveying offers and counter offers between the respective rooms.

What skills does a trained mediator bring to the table?
Negotiation is obviously the first method by which protracted disputes are resolved. A trained mediator, however, also reminds each party of its “best alternative to a negotiated agreement” (known as the BATNA) (viz. the amount it is likely to recover if it ‘wins the case’, discounted by a percentage representing its prospects of success, and a further discount representing its irrecoverable legal costs and management time to get there) and worst alternative (known as the WATNA) (viz. the amount it will have to pay to the other side if it if it loses the case, the amount it will have paid to its own lawyers in irrecoverable legal costs, and costs paid to the successful side and wasted management time). These devices focus the minds of the disputants.

Importantly, a trained mediator is a good listener and observer of human behaviour and body language. There is often an issue lying at the heart of a dispute which is not brought out in the parties’ public pronouncements. Such underlying issues may be very complex. However, mediators have often discovered that the words “I’m sorry”, offered by one party to the other, can have an instant ameliorating effect on the course of a dispute.

Conciliation
This is a more muscular form of mediation, where the mediator, being experienced in the type of issues in dispute, is given authority, in open session, to express his or her views on the merits of positions adopted by the parties. This is generally not done in classic mediation where, in private sessions only, a mediator will force a party to reflect on the merits of its position by asking carefully constructed questions.

Deadlock breaking
The parties may, however, agree to the mediator having “evaluative” powers after a failed mediation. This can break deadlocks. It involves the mediator, being experienced in the issues in dispute, and having generally been provided with documents and statements relating to the case, subsequently expressing a non-binding view on the merits of the parties’ respective positions. I have often seen a non-binding “early neutral evaluation” of this sort to cause one party to soften its subsequent negotiating stance, leading to resolution.
Another deadlock breaking mechanism involves the claimant providing privately to the mediator the lowest amount it will accept to settle the claim, and the respondent similarly providing to the mediator the highest amount it would be prepared to pay to settle the claim. The mediator will thereby obtain a ready snapshot as to whether there is scope for settlement, from which the mediator can communicate to each party a proposed solution.

What if the parties are exhausted from mediation and simply require a fast, no frills, binding determination?
For certain claims, and for those parties with an appetite for a robust, fast-track ‘winner takes all’ approach, a respected mediator, well informed about the technical and/or legal issues in dispute, can be asked to decide which of the parties’ announced positions say, on a money claim, is the more reasonable in all the circumstances. The parties commit themselves to accepting the determination. This is a known as “baseball mediation”. Alternatively, the parties do not announce their respective positions, but simply ask the expert to determine what would be reasonable, and the party whose position is the closer to the determination ‘wins the case’ (known as “night baseball mediation!). If mediation fails, what are the alternatives apart from Court? This question continues to be the subject of particular interest in Omani business circles.


 

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