What is Mediation?

Mediation is a form of alternative dispute resolution (ADR) that involves a neutral third party, known as a mediator. The mediator is responsible for helping the relevant parties come to an agreement regarding specific issues or conflicts. Contrary to other types of ADR, such as arbitration, mediators do not have the authority to impose a resolution on the parties. In essence, while a mediator may facilitate communication and negotiations between the parties, he or she does not make binding rulings in the matter. The mediator’s goal is to help the parties come to a mutually-agreed upon solution on their own. 

Key Takeaways

• Mediation is a common form of alternative dispute resolution (ADR) that uses a neutral third party, known as the mediator.
• The mediator is responsible for facilitating communication and negotiation between the parties, helping them reach a mutually agreed-upon resolution.
• In general, mediation can be a less costly and time-consuming alternative to traditional litigation.

Mediation in Business Law

In the context of business and corporate law, mediation may be used to resolve disputes that may arise within business relationships. This may refer to conflicts between companies, between company shareholders or employees, or between a company and a third party such as a client or vendor. 

For example, imagine that Company A and Company B have entered into a contract for the supply of goods. During the course of their work together, Company B fails to provide the goods on time to Company A. As a result, Company A suffers a substantial financial loss and aims to seek damages from Company B. However, according to their contract, the parties agreed that all potential conflicts would be solved through mediation instead of litigation. The mediator will work collaboratively with Company A and Company B to help them find a solution to their dispute outside of a formal courtroom. 

Benefits of Mediation

There are a number of key advantages to using mediation to settle disputes within businesses and corporations, including:

• Cost: The costs of formal litigation can be high due to the associated legal and court fees. Mediation, on the other hand, is recognized as one of the most cost-effective ways to solve corporate disagreements. 
• Time-Efficiency: Resolving an issue in court can be a lengthy process, depending on the specific circumstances. Mediation can often be completed more quickly than litigation. In fact, some conflicts may be solved in a single mediation meeting.
• Confidentiality: While some legal proceedings require public disclosure, mediation remains confidential. This allows the parties to protect sensitive information such as trade secrets.

Disadvantages of Mediation

Despite its many benefits, mediation has several drawbacks. Some of the potential downsides of mediation are:

• Limited Remedies: Since the remedies available in mediation are generally limited to those that the parties can agree upon, they may not always be sufficient.
• Lack of Precedent: Given that mediator’s decisions are non-binding, mediation may not be the best option when it comes to resolving future disputes.
• Inefficiency: In particularly difficult situations in which the parties are unwilling to compromise or if there is a significant power imbalance between the parties, mediation may not be effective.

Bottom Line

In summary, mediation can be an effective means of resolving conflicts and disputes while maintaining confidentiality, preserving relationships, and saving time. Nevertheless, mediation is not a one-size-fits-all solution. Depending on the circumstances of the situation at hand, mediation may not be efficient or effective. If you would like to find out if mediation is right for you, reach out to one of our top-tier attorneys today for a consultation.