Boardroom disputes involving directors and shareholders or even partners and managers are very common but can have the most damaging effect. Usually the root is either down to poor drafting of agreements at the outset or a failure of one party to understand the needs of the other.
Whatever the cause the ramifications can be catastrophic as often the business ends up deadlocked or one party walks out taking with a swathe of clients and contracts. The only beneficiaries in these circumstances are usually solicitors, and the squabbling parties end up so entrenched that homes and life savings can be lost along with the damage done by stress and aggravation.
An independent mediator can often bring the sides back together or at least assist in them seeing reason and creating a plan for an orderly split.
Boardroom mediation is specifically in relation to direct and shareholder disputes or partnership and management disagreements that interfere with the smooth running of a business.
Mediation can be defined as :
(a) The settling or reconciliation or resolution of a disputes by a third party acting as an intermediary between parties engaged in a dispute or conflict.
(b) The bringing about of an agreement or the making of peace through the removal of misunderstanding or misinterpretations, which is achieved by a neutral party.
In practical terms mediation means letting two sides in a dispute understand the issues from the other side's perspective with the express intention of ending the dispute in a manner that both sides are satisfied with. Usually it involves both sides making a compromise or pulling back from their entrenched position for the greater good of both parties.
Lawyers are by profession trained in acting as litigators, i.e. fighting a position. Your lawyer has been hired to take a side (yours) in a dispute. When sides are entrenched and face each other from an adversarial standpoint the process becomes costly without an end in sight to the expenses .A mediator has no interest other than helping the parties to resolve the issues and put the matter to rest as quickly and efficiently as possible at minimal cost to the parties who are in any event sharing the cost in nearly each case.
Each situation is different. Some people will bring a friend or adviser for support, others will bring a professional relevant to the case, such as lawyer, accountant or surveyor. Mediators value the professional expertise of the supporting parties, and will work with them to bring a solution to the dispute.
All mediation is confidential on two levels: internally and externally. Internally: Whatever is said to the mediator by one party may not be repeated to the other party without express permission. Externally: nothing said in mediation, even which is said in front of both parties, may be revealed outside of the mediation. This means that even if the mediation fails and matters proceed to court, nothing that has been revealed in the mediation may be used as evidence in the court proceedings.
The exception to this is if the mediator believes that illegal activity is taking place, in which case the mediator is duty bound to inform the relevant authorities.
The most common format for a mediation is as follows:
Pre mediation: The mediator will be in contact with both parties and request an outline of the case [position statement] and any supporting documents. The mediator will discuss the ground rules for the mediation session.
Opening / joint session: Most mediations begin with a joint session, where both parties have the opportunity to state their case, and to ask questions of the other party.
Private session: After the joint session, the mediator will spend time with each party, and go back and forth between the parties, until a solution is found and agreed.
Having said all this, it is important to note that no two mediations will be the same, and the mediator will vary the process to suit the requirements of the case.
Yes you can, as mediation is a voluntary process. We would advise you to inform the mediator that you are thinking of walking away from the table, and to discuss the reasons for your decision.
At the end of the mediation process, the parties will draw up the agreement in a contract, which will contain the six elements of a legally binding contract, and will sign it. At that point, the agreement becomes a legally binding and enforceable contract.
It is important to note the mediator does not write the agreement but will assist in its drafting, and must be present throughout its drafting, check that it accurately records the intentions of the parties. The mediator must stay at the mediation until it has been finalised and signed by all the parties.
Your mediator will have mediation insurance in case of any complaints arising from the mediation. Always ask the mediator before appointment which body they belong to, and for details of their insurer.
Most mediators are members of a group and abide by its standards. Many of those groups have signed up to the European Code of Conduct for Mediators, and will hold their members accountable to that code.
The most notable mediation standards bodies are:
The Civil Mediation Council: http://www.civilmediation.org/
You do. You are in control of the process from start to finish. That is the beauty of mediation: in a court, the judges makes the decision, and even the best case can see the judgment go against it. In mediation you negotiate the outcome with the other party, and so you control what goes into that final outcome.
A mediator will make contact with the other party and discuss the possibility of mediation, and can use his skills and experience to persuade them to come to the table.
Increasingly, the courts are pushing parties to mediation before litigation. The courts recognise that the law is a last resort, and that there are more effective methods of resolving contentions issues. Where parties have refused to mediate prior to litigation, the courts have been known to impose financial penalties on the party refusing mediation.
Mediator come from all backgrounds: lawyers, accountants, business people, teachers, surveyors etc. A mediator’s core skill is in helping parties to clarify their objectives, to communicate their concerns in a constructive manner, to see the viewpoint of the other party, and to construct a solution themselves. Where legal, accounting or any other professional advice is necessary, the mediator will encourage the parties to take such advice.
Dissolving partnerships can and do give rise to all manner of disputes. If the parties appoint a Commercial Mediator at the outset to act as the neutral chair of the proceedings, the mediator will guide the parties through the dissolution, and assist them in communicating their thoughts constructively. The mediator will assist the parties in resolving contentious matters as they arise, so that both parties can be confident that the process will not drag on needlessly, and they won’t waste precious resources on costly legal arguments.
When two parties are planning a project or a shareholder agreement, a commercial mediator can act as a neutral chair to assist both parties in drawing up their plans and contracts for the project. This will ensure that communication between both parties is clear and constructive, which can save a lot of time and expense later down the line. The designated mediator will also be the first point of contact if there are any issues that arise during the process, and will be on hand to assist the parties in resolving disputes as they arise. This will ensure that disputes are dealt with smoothly and effectively, saving time, energy and expense.
Not necessarily as rosy as that. However, mediation does help the parties find a solution that they can both live with. And, equally, they can both move on without the burden of the dispute draining their resources.
Mediation has an industry average of 80% success rate. Of the 20% that fail to reach agreement on the day, many reach agreement in the weeks following the mediation. If no agreement is reached, there is always the final resort of appealing to the law.
‘Without prejudice’ means that everything said in the process of the mediation is confidential and cannot be used against a party if the mediation fails. This means that the parties can relax and explore issues openly with the mediator, who can use that knowledge to find common ground between the parties.
The law focuses on ‘rights’. When people talk about their ‘rights’ they become entrenched in their positions. However, mediation focuses on ‘needs and interests’. When people focus on what they ‘need’ rather than their ‘rights’, they are able to see things in a different frame of reference, and are able to find solutions.
When you litigate, you are not in control of the outcome; that final outcome will be decided by a judge, and the costs will be astronomical. The Ministry of Justice estimates that mediation is more than 80% less expensive than court proceedings. The only winners in litigation are the lawyers. Furthermore, the law can only consider legal issues when deciding on an outcome. For example, a court can’t order one party to apologise for perceived offence.
By contrast, at a mediation, the parties decide the outcome, and they can bring to the table anything at all for consideration in a final settlement. Consider also the time saved by mediating rather than pursuing a case through lawyers.
A well-meaning friend can often do more damage than good. It takes a level of training and experience to recognise what is really happening in a dispute, and how to avoid the pitfalls that come with being the ‘middle man’. Many times, an inexperienced ‘diplomat’ will unintentionally encourage the parties to dig in deeper instead of guiding them to move forward. The old adage: ‘If you think an expert is expensive, wait till you see the cost of an amateur!’ rings very true in mediation.
Many mediators will come to the party at the behest of lawyers to prevent a dispute going to trial. There are some mediators who take the view that disputes are best resolved before lawyers become involved, when the dispute is still between the people rather than between opposing teams of lawyers. Some mediators will also help parties find out how the breakdown occurred and how they can avoid it in the future.
A mediator is trained to help people find solutions that work for them. Even when positions are deeply entrenched an experienced mediator will know how to get the parties out of the trenches, across no man’s land, and hopefully to a handshake at the end of the day.
There is no such thing as a small deal. Even if the disputed amount is relatively small, if you add the time and energy that disputes consume, as well as the cost of lost goodwill and damaged relationships between clients and colleagues, the real costs are far greater. Director and shareholder disputes have the potential to destroy a business.
If you are involved in a dispute in business or if you think you are about to get involved in one you should speak to a mediator.
Disputes are always much easier to resolve when they are ‘nipped in the bud’. Most disputes are not really about the legal aspects of the case but are about broken communication and relationships. The sooner those lines of communication are re-established and relationships mended, the sooner business will return to normal.