Nowadays the international business society is experiencing a “settlement explosion”. This is because of the growing rate of international transactions. The number of factors confronting parties to international business relations is quite significant and may originate from cultural issues which primarily affect the “style” of doing business by the representative of a particular nation state. The most suitable means designed for smoothing away the rough edges is mediation.
As pointed out by Lon Fuller, the specific nature of international business disputes is based on a fact that there are some areas of human activity that don’t lend themselves to a pervasive delimitation of rights or wrong. Thus the essence is that money carries no moral imperative. These facts lead the parties to choose alternative ways to resolve disputes arising from international commercial activities, one of which is considered to be mediation. The advantages of mediating dispute resolutions can be described in respect of two aspects: a) Advantages over litigation; b) Advantages over other means of alternative dispute resolution.
Advantages over litigation
As the core of any commercial activity, money is a factor that may drive parties to a settlement. The reason why mediation turns out to be less expensive lies on tax and procedure fee duties, which parties are obliged to pay while “waiting for the supposed ship to come”. Certainly legal expenses should not exceed damage awards, but sometimes those expenses along with cost of delays may amount to the same, and there is no way to exclude this possibility. Also no one is immune from losing. Therefore instead of playing the “winner take all” game it is rational to negotiate with the mediator to ease the way to a favourable settlement.
Litigation takes time and is often bogged down by delays. This contributes to the high litigation costs and makes the whole process protracted, more elaborate and more expensive. The mediation process avoids the need for senseless hours of hearings, depositions, preparing and filing motions in favour of cutting to the chase.
The myth of judicial infallibility
In addition to the effects of costs and delays on the parties, there is one more factor which leads parties to the decision to mediate. How likely is it that a judge, pressed as he or she is with many other cases and duties, is going to get to the "right" answer in every case? A similar argument can be made with respect to a jury. This raises the distinct possibility of an "oddball" or outlier decision. As the mediator says to the parties, in persuading them to mediate: In litigation, one party could make out like crazy while the other party gets killed, Who wants to take that chance?
A decisions in the court case becomes a matter of public record in a way that mediation does not. In the mediated settlement, there is not a public decision as to who was "right" and who was "wrong. This can be a major factor in the complex international business setting for various reasons. A public finding of "wrongdoing" in the business setting can have repercussions for further business transactions, reputational and otherwise. In addition, a public finding of an example of "wrongdoing" might set the table for further litigation by other plaintiffs on collateral matters.
Advantages over other forms of ADR
Arbitration has many of the disadvantages of litigation including being time-consuming, expensive and stressful. In addition, there are some advantages of mediation which make the latter more efficient compared with arbitration and other forms of ADR.
No appeal vs. no need to appeal
Parties to an international contract are tied up with an arbitration clause, which obliges them to use the particular arbitration institution in order to resolve apparent disputes. No doubt that arbitration is less time-consuming than litigation, but is it more efficient? Does it ease the way for parties or remai a direct analog of litigation. The rules are still the same: One bite at the apple is all one gets, bitter or misguided as the bite might turn out to be. Furthermore, arbitration frequently doesn’t presuppose the right to appeal the dispute solution, which makes this mean that it is even more unflexible than litigation. On the other hand, mediation doesn’t suggest the need of appeal. The point is that in case of misunderstandings the parties may reexamine negotiations. Mostly the decisions are based on a good will of the parties, which leads to the next advantage before arbitration.
Participation in mediation is voluntary and nonbinding
This gives mediation a significant advantage among alternative dispute resolution techniques. The voluntary and nonbinding nature of the mediation process helps to overcome this unwillingness and therefore makes mediation especially attractive.
Mediation is informal
Mediation is considerably less formal than arbitration. Arbitration involves several formal stages and in many respects resembles a trial. The parties make formal presentations of evidence and of arguments and sometimes submit briefs. Furthermore, ex parte communications between the arbitrator and the parties is prohibited. Attorneys present formal arguments to a real judge and a real jury in court. While the parties to a mediation can choose to incorporate a formal exchange of information or arguments, the parties are free to forgo such formalities and all trappings of courtroom proceedings.
Flexibility and a big variety of applied techniques
Another advantageous feature of mediation is its adaptability to a vast, wide-ranging variety of disputes. Mediation can be tried in any kind of dispute resolutions. No law governs its availability or restricts its use. Moreover, it is suitable not only for disputes between two parties but also for multiparty. Mediation also can be employed at any stage in a dispute, whether or not litigation is already pending. The thing that makes mediation flexible is a wide variety of techniques applied by a mediator while helping the parties to find a common language. Those include, for example, conducting “an agreement in principle” or applying “shadow of the law” or external standards.
In conclusion, mediation is rapidly gaining more popularity in contrast to litigation and other forms of ADR with regard to the advantages described above. Mediation changes the whole concept of dispute, transforming it from a battlefield to a negotiating table. The mediation may result in terms which could never have been agreed by parties while using litigation and arbitration, and the risk of failure is no more than to resort to the familiar course of litigation.