Since May 2020, I have been involved in some virtual dispute resolution events. One of the events are hosted by Mtre. Mendelsohn, a well-known pragmatic deal-maker with over 50 years’ experience in restructuring and insolvency law in Canada. Mtre. Mendelsohn has not only shared his recent experience on remote mediation via Zoom with us, but also talked about some techniques that he used to facilitate the negotiation among the parties in some complex and sophisticated dispute resolution process. The conversation with Mtre. Mendelsohn has inspired me to further my research on commercial mediation.
This article endeavours to summarize my research on the following subjects: 1. What is commercial mediation? 2. What is the role of commercial mediation in the entire dispute resolution process? 3. How can we prepare for the commercial mediation as a counsel?
1. What is commercial mediation?
There is no single definition of commercial mediation. However, commercial mediation could mean a confidential, flexible and efficient dispute settlement process, irrespective of the expression used or the basis upon which the process is carried out, whereby parties attempt to reach an amicable settlement of their dispute arising from business transactions with the assistance of a third person or persons (“the mediator”) who won’t use any authority to impose a solution upon the parties to the dispute.
The commercial mediation is different from the judicial mediation, family mediation, administrative mediation and the people’s mediation/community mediation(人民调解/社区调解) which is a dispute settlement process with Chinese characteristics. The commercial mediation should not be expected to resolve consumer disputes. Furthermore, it’s worth to remind that the settlement agreements concluded by commercial mediation may cause employment issues, insolvency and bankruptcy issues and some other issues related to public policy, such as Conformitè Europëenne marking.
The Centre for Effective Dispute Resolution (CEDR) reported that its overall success rate of mediation is 89 percent. CEDR estimates that businesses are saving over $3.8 billion USD a year through mediation by avoiding wasted management time, damaged commercial reputation and relationships, lost productivity and legal fees. However, it is important to remind that some settlement agreement may not be executed in certain jurisdiction if its content is against the local public policy and that some commercial disputes should not be resolved by mediation in some circumstances.
(See Art. 1 and 2 of the Singapore Mediation Convention/United Nations Convention on International Settlement Agreements Resulting from Mediation)
2. What is the role of commercial mediation in the entire dispute resolution process?
I consider commercial mediation as an important mechanism in resolving commercial disputes. It could be used successfully and effectively together with negotiation, arbitration and litigation. It does not require intensive documents and evidence transmission. It provides a confidential and flexible environment for the disputants and their lawyers to address their requests, to share their facts and stories and to analyze what they care most. It also gives the mediator(s) the chance to “create a dynamic where the parties and their lawyers could develop a level of trust that makes them more comfortable to show flexibility without feeling that it’s a sign of weakness and without any loss of face” (Interview with Mtre. Max Mendelsohn in July 2020). A well-prepared and experienced mediator could even inspire the parties to agree on some creative solutions that would be beyond the jurisdiction of a judge or an arbitrator, for example, finding a “win/win” solution for the landlord and the tenant of a commercial lease by introducing different ways to pay the rent instead of restricting their vision in the amount of the rental rate.
Although commercial mediation has been playing an important role in the entire dispute resolution process, I would like to remind that the disputants and their lawyers still have to invest their energy and time in preparing themselves for the litigation and arbitration as the core motivation for the opposing parties to participate in commercial mediation is their fear and anxiety for the legal risks as well as the commercial risks that they have to bear with in arbitration and litigation. For instance, in 2019, Apple and Qualcomm had not settled their patent licensing battle until their trial kicked off at the courthouse in Southern California. Their settlement agreement ends all ongoing litigation and contains a six-year global patent license agreement as well as a multiyear chipset supply agreement between Apple and Qualcomm. Thanks to this successful settlement, the iPhone consumers could probably have access to Qualcomm’s 5G modems in their iPhones in 2020. (See Qualcomm and Apple agree to drop all litigation, April 16, 2019)
3. How can we prepare for the commercial mediation as a counsel?
The answer depends on the nature of the disputes and the relationship of the involving parties. Generally speaking, the counsels should evaluate the legal risks and commercial risks for their clients to decide (a) whether they should mediate the dispute or not; (b) when they should mediate it; (c) how they should mediate the dispute.
(a) Whether the dispute should be mediated
It is acknowledged that most of the commercial disputes could be mediated. However, in some jurisdiction, some dispute should not be recommended to be settled by mediation. For instance, a company from Dubai (“D”), UAE invested $10 billion USD to an American company (“A”) to develop an artificial intelligence project. Later, D found out that the project does not exist and that A was suspected to commit commercial fraud. As a consequence, D filed a civil lawsuit against A at the courthouse in the USA. Then, A filed for bankruptcy in the USA immediately. Afterwards, A contacted D for settlement of their debt of $ 10 billion USD. A agreed to pay $ 9.5 billion USD to D after they sign the settlement agreement. In this circumstance, should D sign the settlement agreement? NO! This is because the settlement agreement in the present case may change the nature of the debt which may make D lose its right for the compensation.
(b) When the dispute should be mediated
The counsels will have to keep all kinds of prescriptions as well as some dates of some special business events in mind to establish their plan and their rythm of mediation.
(c) How the dispute should be mediated
It’s always recommended that the counsels should appoint a well-prepared and experienced mediator to conduct the mediation. Some intellectual property disputes may require the mediator to have certain expertise. The counsels and the disputants may also consider to contact some professional alternative dispute resolution institutions for information regarding how to ensure the confidentiality of the mediation process. In Quebec, l’Institut de médiation et d’arbitrage du Québec (IMAQ) could be an option. The Centre for Effective Dispute Resolution (CEDR) and JAMS are also the top ADR institutions which could resolve and manage business and legal disputes by providing efficient, cost-effective and confidential commercial mediation service. Last but not the least, the companies involving in the construction and infrastructure projects related to the Belt and Road Initiative could consider to contact International Chamber of Commerce (https://iccwbo.org/dispute-resolution-services/belt-road-dispute-resolution/) or BnR International Commercial Mediation Center (http://www.bnrmediation.com/) for mediation services.
La médiation commerciale est un processus flexible et volontaire, qui se déroule dans un cadre privé et confidentiel. Le médiateur n’impose pas une solution aux personnes impliquées dans un conflit. Le médiateur aide des personnes impliquées à négocier plus efficacement. Un médiateur bien préparé et expérimenté pourrait inciter les parties à s’entendre sur des solutions créatives qui ne relèveraient pas de la compétence d’un juge ou d’un arbitre. Bien que la médiation commerciale joue un rôle important dans le processus de règlement des différends, il convient de rappeler que les parties en litige investissent toujours leur temps pour se préparer au litige et à l’arbitrage parce que la motivation principale de la contrepartie à participer à la médiation commerciale est leur peur pour les risques juridiques ainsi que les risques commerciaux qu’elles devraient supporter dans l’arbitrage et dans le système judiciaire.
En fin, je voudrais remercier Mtre. Mendelsohn d’avoir partagé sa sagesse et son expérience en médiation commerciale avec moi en juillet 2020.
(Reminder: The purpose of this article is to provide general legal information. It does not contain a full analysis of the law nor does it constitute a legal advice on the points of law discussed. To minimize the legal risk for your business, you must take specific legal advice from a lawyer on any particular matter which concerns you. Thanks for your attention. ?)