Mediation vs Litigation

Mediation vs Litigation

1. Advantages

   • COST
     • Assuming that a settlement is actually agreed, mediation is likely to be cheaper than litigation.
       • If the dispute between Konicek and Banco del Juegos had instead proceeded to a full trial, the parties would have expended a considerable amount of management time and legal costs.
         • Even if a party is successful at trial, it will not recover 100% of its legal costs – such costs will generally be subject to a detailed assessment and will be assessed on the standard or indemnity basis
           • CPR 44.4
             • Early settlement of the claim accordingly precludes the need for such costs to be incurred in the first place, thereby avoiding any shortfall in recovery. The costs incurred to date could also be included as part of any settlement offer.
               • SPEED
                 • Mediation is likely to be quicker than litigation (assuming that a settlement is actually reached).
                   • Any claim between the parties is likely to require disclosure, witness statements and possibly expert evidence.
                     • Konicek was advised that this dispute might have taken 8 months to get to trial which Konicek had indicated was too long. Both of the parties to this dispute are commercial enterprises and would therefore probably have preferred for the matter to be resolved quickly so that they could focus on their business interests.
                       • FELXIBILITY/INFORMALITY OF PROCESS
                         • The parties play an active role in the whole mediation process. They accordingly have ‘ownership’ of the mediation
                           • (Contrasted with litigation, where the process is much more formal and rigid).
                             • PARTIES HAPPY
                               • A successful mediation will generally result in a solution which all parties are satisfied with.
                                 • Litigation - ‘successful’ party and an ‘unsuccessful’ party.
                                   • COMMERCIAL SOLUTION
                                     • As opposed to a legally correct.
                                       • Greater flexibility to the parties and enables them to agree settlement terms which go beyond those which a judge could order.
                                         • I.e Continue to trade with each other for 5 years - preferential interest rates on loans during the negotiation.
                                           • If commercial enterprises and a constructive and commercially acceptable / favourable resolution to the dispute was likely to be a more attractive option than the rigidity of a court judgment.
                                             • FINALITY
                                               • Cannot be ‘appealed’.
                                                 • The idea is that both parties will be happy with the outcome, so won’t want to.
                                                   • There might therefore be finality (if a settlement is actually reached).
                                                     • Good if parties want matter resolved
                                                       • PRIVACY
                                                         • Unless court order to the contrary, civil trials - heard in open court
                                                           • CPR 39.2
                                                             • Judgments are often also reported.
                                                               • Mediation - confidential and the parties can factor confidentiality agreements into their settlement terms.
                                                                 • If commercial enterprises = concerned about adverse publicity.
                                                                   • Reputation
                                                                     • No adverse publicity in the press, trade magazines or publications.
   • EXPERT IN FIELD
     • Mediator might be an expert in a field
       • Some industry knowledge might, however, facilitate discussions.
         • REALITY TEST ARGUMENT
           • Potentially narrowed the issues in dispute and/or reached a partial settlement.
             • Courts actively encourage ADR. If the parties do not reasonably consider some other form of ADR = may be adverse cost consequences pursuant to CPR 44.2(5) if the matter proceeds to trial.
               • CPR 44.2(5)

2. Disadvantage

   • COST/SPEED
     • Mediation can simply increase costs and delay the resolution of the dispute if no settlement is agreed.
       • Parties will need to share the costs of the mediator.
         • Share cost of location
           • The parties’ lawyers would have incurred fees in preparing for and attending the mediation;
             • Both parties would have expended management time preparing for and attending the mediation.
               • SOLUTION NOT GUARANTEED
                 • A solution is not imposed by the mediator; the mediator instead ‘facilitates’ a settlement.
                   • Trial = binding judgment
                     • NOT BINDING
                       • A party can walk away from the process at any time.
                         • A party could just turn up to the mediation and not engage in the process.
                           • In litigation, this type of behaviour could be penalised in costs, there is no such sanction possible in mediation.
                             • CANNOT PRDICT OUTCOME OF MEDIATION
                               • Litigation is also inherently unpredictable. However, legally ‘correct’ solutions and judicial precedent make this (slightly) less of an issue in the context of court proceedings.
                                 • LEGALLY CORRECT
                                   • Unlikely to be legally correct; but will be commercial ‘happy medium’ agreed between the parties.
                                     • Litigation might therefore be more appropriate for a party that has a very strong (legal) claim and is less willing to make concessions.
                                       • NO PRECEDENT VALUE
                                         • A settlement reached at a mediation provides no precedent value.
                                           • Contract to legally binding judgment
                                             • ENFORCEMENT
                                               • If proceedings have not yet been issued in respect of the substantive dispute between the parties, then any settlement agreed at a mediation can only be enforced as a contract. This will require the claimant to issue proceedings for breach of contract if the terms are not complied with.
                                                 • MEDIATOR NOT EXPERT IN LAW
                                                   • The mediator may not be an expert in law which may be problematic depending on the circumstances of the case. The judge in litigation will understand fully the legal issues and arguments. Having said this, the mediator is there to facilitate a negotiated settlement rather than to provide opinions on the merits of the parties’ respective cases, so this is not necessarily an issue.