Is out-of-court mediation the solution to messy law suits?

Courtroom drama? Forget it. Out-of-court mediation can provide a simple, cheap and effective alternative to a messy, expensive, full-dress lawsuit

Courtroom drama? Forget it. Out-of-court mediation can provide a simple, cheap and effective alternative to a messy, expensive, full-dress lawsuit

 

YOU'RE INVOLVED IN in a protracted business dispute and you’re volcanic with rage. Maybe your opponent is a business partner or someone you once regarded as a friend. You harbour intense feelings of bitterness and you want your day in court.

That must be how Boris Berezovsky felt when he embarked on his vainglorious lawsuit against Roman Abramovich — the one that contributed such large fees to London’s top lawyers and may have contributed to Berezovsky’s suicidal feelings.

But what if the parties had agreed to use the services of a mediator instead? Mediators, who now preside over 8,000 civil and commercial cases a year, are the unsung heroes who keep would-be litigants away from the law courts. 

‘About 90 per cent of UK mediations get settled, 70 per cent of them on the day of the mediation, and settlement means a binding agreement, enforceable like a court order,’ says Andrew Hildebrand, who was accredited in 2006 and has been conducting substantial mediations since 2010. ‘From a practical perspective, mediation is very simple, quick, inexpensive and relatively stress-free.

‘Why it works is probably because an experienced mediator ought to be able to explain the dynamics of what’s going on, in a similar way to a marriage guidance counsellor with a warring couple.

'It works very well where the legal issues aren’t completely clear-cut and where they are clouded by a relationship or feelings — where inheritance is concerned, or in neighbour disputes, or in partnership or co-investment disputes, anywhere where it isn’t just about a financial solution but the dispute is intertwined with a relationship, and it helps get to the bottom of that as well as to provide a business solution.’ 

There are many advantages to the mediation process, he argues. Indeed, there have been studies that show it is four times quicker and four times cheaper than litigation.

‘There’s also the fact that UK commercial mediations take place and get sorted on the day, whereas litigation can go on for three or four years. I know of one case where it actually went to court at the end of one year and they still didn’t have the judgement six months later. I don’t think people realise when they start litigating that it can easily take this long — or that the costs involved in bringing the action often exceed the amount of the claim.’  

The trouble is that ‘people go into court as a pig and come out as a sausage’, Hildebrand observes. ‘A lawsuit is an enormous lottery. A strong case in the mind of a QC means that you have a 66 per cent chance of winning. That doesn’t mean you’re going to win everything. You might win some of your claim, and by and large the loser pays two-thirds of the costs. For the most part you’ve got a 50 per cent likelihood of winning 50 per cent of your claim.’ 

Hildebrand cites an example from a couple of months earlier. It was £300,000 dispute, in which the parties had already spent £800,000 in combined legal costs. Had the case gone to trial, the costs would have been around £1.5 million. By contrast, the average fee for one-day mediations is £2,500, while more experienced mediators can command a daily fee of around £4,000. Fees vary according to the complexity and value of a claim and the number of parties attached.

 

POWER STRUGGLE

Hildebrand has seen cases in which one party had a great case at law but the real problem was that the other side had cash-flow problems and probably couldn’t pay up anyway, so why on earth were the parties litigating? Another possible scenario is where an entity has a solid case but where litigating might trigger a banking covenant.

‘People go into a fight, all guns blazing, without thinking of the ramifications. Once you press the button, it’s very difficult to un-press it. It’s like a poker game: the odds and the risks change throughout. What is true on day one doesn’t necessarily apply two or three years down the line.’ 

On mediation day, the parties often turn up with solicitors and even QCs in tow. But while QCs are brilliant at dealing with difficult points of law, few people would go to one to get a deal done. A mediator takes the time to listen separately to both parties, which a QC would never do.

Psychologically, unless you’ve done that, people don’t feel heard and they don’t feel that you get what they want. The parties start out equally miserable and impossible, and both their stories sound equally plausible. Sometimes you can’t believe that they were ever together or that it was the same deal or the same problem. 

‘The key thing is to get people thinking about what they want to accomplish, because usually when they get into litigation they become obsessed about the rights and wrongs and they define themselves in terms of the other side. Sometimes, amazingly, they can have been litigating for two or three years and not quite know what they want.’

A mediation allows the parties to sort out a dispute confidentially, avoiding media exposure so reputations and even relationships can remain intact. ‘In a mediation you can say what you want and what you’re frightened of without anything being used against you. And you can reach a settlement without setting a precedent, so that it sorts out this particular problem without leaving you wide open to similar claims.’ 

Illustration by Russ Tudor

SETTLING DOWN

Hildebrand started out in a fairly conventional way as an entertainment lawyer and rose to become a partner at Mishcon de Reya, which had a good commercial practice that specialised in entertainment and media.

‘Although I’d been made a partner very young, I realised early on that I didn’t really like being a lawyer because I wanted to be the client, to make the decisions and not just advise on them.’ He left to join Channel 4 as its head of business affairs. ‘If there was any kind of problem, it was my job to make it go away, make someone settle and safeguard the project.’

Hildebrand left Channel 4, having met his wife, who was the sales director there, and worked with various media businesses for the next ten years trying to turn them into successful enterprises. ‘One of the things I became aware of is how difficult that can be,’ he says.

How does he find dealing with the wild, thrashing egos of wealthy entrepreneurs, owner-operators and CEOs? ‘Strangely, I think the film industry is a very helpful preparation for that. I’ve been used to dealing with difficult people and situations, and people with egos or well-known reputations. Often in my practice I find that I get picked because I’m used to dealing with them. It’s very familiar territory for me.’ 

The mediation profession isn’t very good at getting the word out there, and lawyers don’t exactly have a vested interest in promoting it as a strategy. ‘Businesses don’t appear to know about it, which is pretty amazing,’ Hildebrand points out.

‘Not all mediators are lawyers and lawyers don’t necessarily make good mediators.’ There are various sources of accreditation and potential clients should check to ensure that a mediator has accreditation. Most of the top mediators are represented by mediation providers, who are similar to actors’ agents. For example, Hildebrand is represented by In Place of Strife and Jams International. 

‘What I find strange,’ he says, ‘is that at the end of a mediation at least one of the parties says to me, “At least I can get on with my life.” At the beginning I didn’t understand that. It’s an amazingly big driver behind getting disputes settled. People have had enough. The only reason I think people don’t mediate is that they don’t know about it.’.

mediate.co.uk/mediators/andrew-hildebrand.html  

 

 
 

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