Commercial Disputes - new approach needed

By Paul Jamieson

Businesses need to consider seriously using mediation as a technique for resolving commercial disputes since they have the ability to resolve the dispute themselves instead of putting their commercial future into the hands of a judge or arbitrator. Mediation gives all the parties to a dispute a chance to achieve a better outcome overall because the parties themselves are in control.

Businesses want to resolve disputes quickly and effectively so management time is spent on more productive things but they frequently don’t have systems to help achieve good outcomes. Many businesses are too slow to assess and reassess disputes and the options for resolving them as the issues unfold. They are often far too hung up about who makes the first move if mediation is being considered. Sometimes, if the person who has responsibility for a dispute is defending her or his own actions, sensible commercial alternatives are not explored at all, or at least not early enough. The result is inevitable wasted legal expense and management time.

A variety of approaches are needed to address these issues.

This is where mediation, which allows the parties to make their own decisions, comes in.

Another recommendation is having a review of disputes internally by key decision-makers at regular intervals to ensure that all disputes – but especially costly, face-saving disputes- can be resolved in the overall best commercial interests of the business. Sometimes that means biting the bullet and admitting a mistake.

How to encourage such behaviour? It depends on developing a culture where people feel confident about admitting mistakes, learning from them, resolving the problems and moving on. But until such a culture is achieved, the next best alternative is to ensure that a senior executive comes to the dispute without any baggage and has visibility of the dispute at the earliest possible time. That is a useful way of getting some rational, commercially oriented thinking on a dispute before it escalates further.

Another key issue which advisers can help businesses with, and businesses involved in a dispute should insist on getting from their legal advisers, is an early assessment of the chances of success in the dispute, preferably expressed in percentage terms. That early assessment is a vital tool for businesses and advisers alike because it leads to a better-informed decision about how a dispute should be managed and resolved. At the same time, some attempt should be made to define what ‘success’ is in relation to the resolution of the dispute. Clarity on these things can help businesses achieve greater certainty about how they can best achieve their commercial objectives. Naturally, as new facts and legal issues emerge during the life of a dispute, these assessments should be reviewed.

A key issue in mediating a commercial dispute is to help the parties to identify what their commercial interests and drivers are – trite, but you would be surprised at how few lawyers and their clients have spent time focussed on those critical things. No wonder some disputes are hard to work out. With both, or all, parties focussed on their key commercial interests, many disputes can be resolved by mediation.

Copyright Paul Jamieson, 2001

Paul is a former Vodafone NZ commercial director turned commercial mediator. He was also a commercial partner at Buddle Findlay (Auckland).