What is mediation
Mediation is a form of dispute resolution in which the parties attempt to reach a settlement with the help of a professional third-party mediator. It is a confidential negotiation process that usually takes no more than a few weeks. The discussions between the mediator and the parties separately are also confidential, which significantly increases the chances of success. Mediation is voluntary and non-binding. Any of the parties and the mediator can terminate the mediation if they do not expect it to be successful. If the parties cannot reach a solution, the dispute can still be settled in arbitration or by a court of law. Even if arbitration or legal proceedings are pending, the parties can decide to try to reach a solution through mediation. The arbitration or legal proceedings will then be suspended.
What is business mediation?
Business mediation focuses on disputes between and within companies. A widely accepted definition of business mediation is: ‘Mediation in disputes between companies and business units and in disputes between other professional parties, including shareholder disputes and contractual conflicts.’ (See E. Schutte, Mediation in business (law) disputes). Business mediation must be distinguished from family mediation and employment law mediation. The table below provides an overview of some of the differences between business and non-business mediation.
| Feature | Business mediation | Non-business mediation |
|---|---|---|
| Type of conflict | Business, contractual, organisational | Personal, family, social |
| Parties | Legal entities, entrepreneurs, directors (often assisted by advisors) | Individuals, families, citizens, governments |
| Mediator | Business, legal/business administration profile | Individuals, families, citizens, governments |
| Mediation style | Evaluative / facilitating | Facilitating |
| Objective | Business solution, damage limitation | Relationship repair, balanced agreements |
| Emotion | Secondarily, emotions will need to be regulated. | Primary focus |
Why business mediation?
Companies choose mediation to resolve business disputes because of the following advantages:
- Confidentiality: Safeguarding sensitive business information, such as trade secrets and intellectual property, and protecting reputation.
- Speed: Mediation is usually much faster than court proceedings and often faster than arbitration. This is an important advantage, especially when time-sensitive business activities are at stake.
- Control over the outcome: In mediation, the parties retain control over the outcome of the proceedings. This is different in court proceedings or arbitration, where a third party decides on a claim. Save on legal fees because the dispute is resolved in one go and there is no appeal.
- Preservation of the business relationship: If it is important to maintain a good business relationship with the other party, for example because there are few other parties with the expertise or because it concerns a long-term contract, it is preferable to try mediation. Court proceedings or arbitration are generally not conducive to the relationship.
- Lower costs: Due to the shorter turnaround time and limited written exchange of documents, business mediation is generally very cost-effective.
- Room for customisation and creativity: In complex business disputes, customisation is desirable. In addition, mediation offers the opportunity to come up with creative, out-of-the-box solutions.
What is a mediation clause?
A mediation clause is a provision in a contract in which the parties agree to first attempt to resolve existing or emerging disputes through mediation before taking formal steps to go to court or arbitration. Mediation clauses can be tailored to the specific needs and preferences of the parties, including the choice of mediator, the procedures and the location. A mediation clause is often included in combination with an arbitration clause, known as a multi-tier clause.
The recommended NAI mediation clause reads as follows:
‘The parties will first attempt to resolve any dispute that has arisen or may arise in connection with this agreement or any further agreements that may result from it through mediation in accordance with the Mediation Rules of the Netherlands Arbitration Institute as in force on the date of signing this agreement and will only commence arbitration or legal proceedings if mediation has not led to a solution, without prejudice to the right of the parties to take measures in arbitration or court proceedings to preserve their rights.”
The recommended NAI mediation clause, possibly followed by NAI arbitration, reads as follows:
‘The parties will first attempt to resolve any dispute that arises or may arise in connection with this agreement or any further agreements that may result from it through mediation in accordance with the Mediation Rules of the Netherlands Arbitration Institute as in force on the date of this agreement and will only commence arbitration or legal proceedings if mediation has not led to a solution, without prejudice to the right of the parties to take measures in arbitration or court proceedings to preserve their rights. If mediation has not led to a comprehensive solution or if the parties jointly decide not to proceed with mediation, these disputes or the unresolved parts thereof will be settled in accordance with the Arbitration Rules of the Netherlands Arbitration Institute as in force on the date of signing this agreement.’
Draft a mediation clause