May 27, 2024
Regardless of how well-intentioned parties are at contract formation and during preliminary works, there will also be the potential for matters to devolve into lengthy and arduous disputes that cannot be resolved at a project-level.
Parties can seek to mitigate the risks around disputes by ensuring the contract specifically deals with how such matters are to be resolved. In doing so, parties can develop a tailored approach specifically suited for the project.
When developing a dispute resolution process, parties should take into consideration the likely disputes that could arise, specifically around potential quantum and if the issues will be overly complex or technical.
This article series will explore a number of different dispute resolution processes that parties can adopt, including how they can be combined to create a tailored tiered dispute process.
What is Mediation?
In a mediation, the parties will appoint an independent third party to act as a “mediator” between the parties. During a structured mediation process, the mediator will guide the parties through a process which seeks to, at a high level:
- identify issues in dispute;
- articulate clearly the party’s respective positions;
- develop potential options or alternatives that may resolve the issues in dispute; and
- reach an agreement between the parties.
Practically, mediation allows the parties to agree on a way forward, which is not prescribed or determined by a third party. Consequently, the parties are provided the opportunity to agree a resolution that may be outside of the scope of any potential third-party determination.
Where parties engage in the mediation process in good faith and act reasonably, it can facilitate the expeditious resolution of disputes.
Appointing a Mediator
The specific steps involved in a mediation will be determined by the parties, though will at a minimum prescribe for the appointment of a mediator.
Where the contract is silent on the process for appointing a mediator, the parties will often seek to agree on one. This process can involve names of potential mediators being exchanged, to identify any potential individuals both parties are agreeable to.
Failing agreement over such, the parties may refer the matter to an independent body, such as the Resolution Institute, who will take steps to appoint a mediator it determines appropriate.
Once a mediator has been appointed, other matters for the parties to consider include:
- if there are any specific rules that will govern the mediation;
- the content of any agreed bundle of materials that should be provided to the mediator;
- if the parties will prepare and provide to the mediator position papers setting out their respective positions; and
- the timing for when the mediation is to occur.
Benefits of Mediation
Mediation offers a number of benefits to the parties, including:
- Expedited Nature: Mediation can, and often does, occur on an expedited basis whereby an arbitrator can be agreed and the mediation scheduled within a number of weeks or months (as opposed to litigation which can take years in some instances);
- Flexibility: The parties are in complete control of how the mediation progresses and any resolution that may be agreed. This flexibility allows for a resolution to be agreed that extends outside of the typical bounds of a direction the court could give, tailoring it specifically to what the parties seek to achieve;
- Cost: The cost of litigating (or otherwise progressing through more determinative dispute resolution processes) can be considerable, especially given the time associated with each step the parties are required to follow. In contrast, mediation can allow for a quick resolution that avoids incurring significant costs over an extended time period; and
- Confidentiality: Mediation provides the parties a confidential forum within which to resolve the dispute. Where confidentiality is important to the parties, litigation may often be avoided for this reason.
Limitations of Mediation
Notwithstanding the above, the effectiveness of any mediation process will be limited if the parties do not engage in the process in good faith.
If parties merely seek to fall back to their already entrenched positions without engaging in meaningful negotiation and compromise, the utility of mediation will be reflective of such.
Further, if the mediation is unsuccessful, the parties will have expended costs in undertaking the process (including engaging the mediator), without deriving any tangible benefit. To this end, where there are already allowances for prior processes, including executive negotiation, parties should consider the utility in an additional negotiation process (such as meditation) occurring.
Tiered Dispute Resolution Process
To limit the issues associated with the above, parties will often utilise mediation as part of a tiered dispute resolution process.
A tiered dispute resolution parties allows for the parties to continue with alternative dispute processes even if mediation fails.
This can include expert determination or arbitration, where the parties progress to a more determinative process where the dispute cannot be resolved by agreement.
These potential alternative processes will be explored further in future weeks.
LPC Lawyers
The LPC Lawyers team have a wealth of experience to assist across contractual drafting and dispute process. Through providing clients support across the duration of a project’s lifecycle, we can assist in ensuring a project’s successful and efficient delivery.
If you have any questions or concerns about your current or future projects, please do not hesitate to contact LPC Lawyers for a discussion on how we can assist.
The contents of this article is for information purposes only; it does not discuss every important topic or matter of law, and it is not to be relied upon as legal advice. Specialist advice should be sought regarding your specific circumstances.
Contact: Peter Lamont or Ryan Bryett
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