George Y. C. Mok & Co.

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Obtaining the Best out of Mediation

This note contains practical suggestions derived from actual experience as commercial mediators and such suggestions are certainly not exhaustive, as the objective is to get the best out of mediation.

The following are the key stages or processes in a typical mediation and items 1 to 5 are concerned with the lead up to mediation hearing and items 6 to 10 are concerned with the mediation hearing/day itself:-

1. Agreement to Mediate

Some professional mediation bodies would require their members to use their own form of agreement, e.g. The Chartered Institute of Arbitrators in U.K. would require their members who are accredited mediators to use its model form of agreement to mediate.

Therefore, a mediator may not have any choice but to adopt the contents of the agreement prepared by his/her professional mediation body.

2. Choice of Mediator

There are actual benefits in appointing a mediator with experience on the subject matter, or with subject-matter expertise, since the standard of the mediators in Hong Kong varies considerably as a lot of them are social workers with only high school education standard.

It may be advisable to appoint a mediator who is also a lawyer by profession, but much will depend on the dispute in question and on the role that the parties wish the mediator to play. In general terms, the more evaluative the parties want the mediator to be, the more helpful it is for the mediator to have legal experience. Further, if there is confusion between the parties about what the real issues are or where the respective legal arguments required a fair degree of reality testing, a lawyer’s skills can be invaluable.

Not all cases that have the above requirement. A lawyer’s training, and more particularly that of a judge, is to analyze issues and to make decisions. He/she may be excellent at that process, but may find it harder to deal with “softer” issues where, e.g. a dispute has become bogged down by emotion and anger. Therefore, for family business dispute, particularly those involving shareholdings in companies, usually degenerate into bitter feuds between family members. This is not to say that lawyers or judges are unable to mediate such cases, but in those cases they need to observe and adopt the skills as mediators, rather than the skills as a lawyer or judge.

3. Preparation for the Mediation

The importance of preparation cannot be over-emphasized, since mediation presents a unique opportunity for a satisfactory resolution of the dispute.

One important preliminary consideration is whether or not to arrange a preliminary meeting with the mediator, as such meeting will be extremely helpful if the dispute involves a number of different parties. If the submissions or statements of case have not yet been exchanged, then such meeting is often vital. It is not usually necessary for the parties to attend, if they are legally represented. In that case, their legal advisers should attend a short meeting (about 2 hours) with the mediator, some 4 to 6 weeks before the date of the mediation itself. The agenda items are usually as follows:-

(a) Time and place of the mediation;

(b) Identity of parties and of the client’s representatives who will attend on their behalf

(d) Problems that either party can anticipate arising that might derail the process;

(e) Procedure likely to be followed by the mediator at the mediation hearing; and

(f) Shape of potential settlement agreement.

Mediations that fail usually do so for 2 primary reasons. The 1^st is lack of clarity about the issues between the parties, particularly where the true value of the claim or counterclaim has not been vouched or otherwise clarified. Therefore, at the initial meeting, the parties should disclose all relevant information sufficiently enabling both parties to form a realistic view of the intrinsic value of the claim. The initial meeting is often a good opportunity to decide how long to set aside for the mediation itself. If the dispute involves 4 or more parties or the claim is for a large sum of moneys, then it is advisable to pencil a second day for mediation. Very occasionally, a 3^rd day may be necessary. The 2^nd reason for failure of mediation is the absence of critical decision makers or client’s representatives at the mediation hearing. It is, therefore, vital that the appropriate representatives of the parties must attend at the mediation with the requisite authority to resolve the dispute (better ask the parties to produce written authority, if they are representing companies).

4. Representation at the Mediation Hearing

As mentioned above, it is essential to have the appropriate parties with authority to attend at the mediation, in order to resolve the dispute then and there, and without the necessity of seeking for authority at the crucial time from a senior person in a company who happens to be unavailable at that important moment. Equally awful is for one of the parties to be represented by its CEO or chairman, and the other party by a junior or assistant manager etc. In such circumstances, the mediation can make matters worse and not better.

In considering client representation, it is important to consider to bring some or all of the following to the mediation:-

(a) The disputant, together with the claimant and respondent;

(b) The others, e.g. the insurers, spouse or partner, who may sometimes be invaluable in dispute involving individuals;

(d) The experts - they can be invaluable, but can also be awful;

(e) The principals - i.e. the real decision makers must be present, if at all possible, since their lawyers may not have authority to make any decision on behalf of a client, particularly a corporate client.

5. Position Papers

These are short documents that are prepared by each side, usually exchanged, a week or so prior to the mediation. Most commercial mediation agreements stipulate for 10 pages or so for the position paper with a maximum of 100 pages of supporting documents. In preparing such documents, the parties should bear in mind the purpose for which these are to be submitted. The 1^st is to inform the other side about what you or your client believe to be the key issues in the dispute; why it is asserted that its case on these matters is wrong and what that party hopes to achieve in the mediation. The 2^nd is to inform the mediator of the same. Well-drafted position papers can distill the essence of the dispute.

6. Relations with the Mediator

The mediator helps the parties and their lawyers to bring about a resolution of a dispute at lower costs, as a mediator adopts a different approach and process. In particular, he/she:-

(a) is neutral and acts as independent catalyst;

(b) brings to bear a fresh mind which can be useful in the opening joint session;

(d) aids communication and helps the parties understand each other’s case;

(e) focuses the parties on the problem and helps overcome emotional blockages;

(f) Assesses chances of settlement realistically and explores settlement proposals in more depth;

(g) is general team leader, cheerleader and encourager; and

(h) displays limitless resources of patience and persistence.

As mediators must respect confidentiality and not disclose the information provided to him/her by both sides, the temptation is to try to use the mediator as an extension of one’s own negotiating team. It is important to confide to the mediator significant problems or other “hidden agenda” items that are likely to be relevant in the decision making process and to “steer” the mediator in the direction which that party wishes the process to take.

7. The Joint Meeting

Most mediation days begin with short private meetings between the mediator and each respective team. These then lead to a joint meeting of everyone presence, which provides an opportunity for each side to welcome the other (hopefully) to indicate that they are in a genuine attempt to have the dispute resolved. Most experienced commercial mediators have known many instances where emotion or apology expressed openly and honestly at the initial meeting may lead to resolution. The real opportunity is for each side’s decision-maker to speak to each other and therefore, a good mediator should avoid allowing the legal adviser to speak or to make legalistic presentation which may annoy the other party or create a tense atmosphere.

The joint meeting should be short and the mediator should allow each party to speak for about 10-15 minutes only concerning their claim or counter-claim. For other mediation, it may be advisable not to have such joint meeting, particularly when they do not want to talk to each other.

8. Negotiations

This is the most important part of the mediation process and requires careful preparation. It is always helpful to indicate flexibility and if certain issues become obstacles, the mediator should move on to areas where greater progress can be made. Most successful negotiations involve the creation of trust between the parties who are speaking.

There are two ways in which negotiations are conducted - one is for the mediator to act as a “shuttle bus” taking offers backwards and forwards between the parties in their private rooms. This process is time-consuming and may lead to positional bargaining. The other way which is more efficient, is for the decision makers to meet and to negotiate face to face, in the absence of their lawyers, but in the presence of the mediator. In other words, after the separate meeting with each party, the mediator should invite both parties to the joint meeting and let the aggressive party to put forward its offer to the other side. However, if it becomes necessary for the discussion or the meeting to break for a while at their private room to consider the offer or counteroffer etc., the mediator can always speak to each party privately at its room in order to persuade it to reach a settlement.

9. The Settlement Agreement

It is advisable to draft the settlement agreement in advance of the mediation, which should not be lengthy or complex. The agreement should contain 6 or 8 key elements to be resolved, such as:-

(a) what is the “dispute” that is to be settled?;

(b) when are the claims and counterclaims in the legal proceedings are to be withdrawn;

(d) how much needs to be paid by whom to whom to settle the claims?;

(e) confidentiality clause and the costs of the mediation hearing, if any;

(f) the entire agreement between the parties;

(g) a default mechanism to deal with future disputes;

(h) the governing law and jurisdiction of the agreement.

10. Continuation of Mediation after the Hearing/day

Most mediations would settle on the day, but for complicated one involving 4 or more parties or for a huge sum, a second day may be required. However, as far as possible, the dispute should be settled within a day by way of mediation, as people do change their mind after discussing the matter with their friends or relatives etc. in the evening or at a dinner meeting with them.

Dr. G.Y.C. Mok