There is a cost of litigation very few lawyers will warn you about: the human cost. It should be considered just as much as the monetary costs. It is a cost your insurance will not cover and you will not get it reimbursed by the other party either. In your business, having a dispute can be a huge distraction for your organisation. While I can concede that the human impact and indirect cost of a litigation for your enterprise is difficult to quantify, it should nevertheless be considered by the management before pursuing proceedings. Is time better spent on growing the business or on this battle? Of course, court or arbitration proceedings are often necessary, but just not in all cases. So before spending on formal proceedings, ask yourself:
Mediation as an alternative
Did you know that the new Mediation Rules of the Finland Chamber of Commerce entered into force on June 1, 2016? Do you know what mediation means in practice?
Mediation is a voluntary method of settling disputes amicably with the assistance of a neutral third party, the mediator(s). In most cases, only one mediator will be appointed but nothing prevents the parties from appointing more if the circumstances justify it. Mediation is confidential, it is more flexible than courts or arbitration proceedings on how the matter can be resolved (think solutions beyond a monetary award), it does not burn bridges like a full-blown litigation might and it is faster and cheaper than traditional proceedings. What is there not to like?
The mediator will not take side nor will he/she rule on the case. The mediator will assist the parties in finding a solution which satisfies both sides. Having a solution which was crafted by the parties themselves will also ensure better compliance once the process is over.
The parties can provide for mediation in their contract but they can also opt for mediation afterwards, even after the initiation of proceedings. If proceedings are ongoing, I would recommend for them to be stayed not to impair the parties’ chance at a fruitful mediation. I would also recommend to have the right persons at the mediation table: someone who understands the case and has the authority to agree on a solution but who is not too close to the heart of the dispute in order to avoid pride or conflict of interest detrimentally affecting the chance of a resolution.
Mediation does work. I have even seen it work in divorce cases. In some jurisdictions, mediation is in fact a mandatory step in divorce proceedings. If mediation can be successful in emotionally charged disputes, it needs to work in contractual matters. What I have learnt is that one of the advantages of mediation is the possibility for the parties to vent out, explain their position and feel heard not only by the mediator but by the other side. That is therapeutic. It helps – I believe – the parties to move on and start focusing on getting closure through a negotiated settlement. As for the mediator, without taking side, he/she can help realign expectations and present elements of a case from a different, more neutral and therefore acceptable angle.
Some may say I am simplifying the issue. Maybe I am. But I believe this is also what mediation can do for you: simplify. Give it a chance.