(CADRIn Campaign for Professionals, Part I)
For much of the Caribbean, mediation for civil and commercial disputes is a relatively new advancement. This Alternative Dispute Resolution (ADR) process, offering disputing parties an opportunity to settle their claims directly and outside of more formal processes such as court litigation or arbitration, has its own language and frameworks, and relies on a clear understanding and acceptance by the parties and their attorneys of their individual roles, how the mediator will work with them and the key principles which underpin the process.
While mediation has become mandatory in some international jurisdictions, particularly for certain types of cases, in most circumstances, mediation is a voluntary and consensual process, in that it requires the agreement of the parties to proceed. This consent can appear as a clause in a pre-existing contract (in provisions dealing with dispute resolution) or via a Mediation Agreement reached after the dispute has arisen.
Mediation Clause
Inserting ADR clauses within commercial agreements is now standard practice internationally. Guiding the parties from the earliest formation of their relationship, such clauses usually offer a tiered structure including negotiation, mediation, arbitration and / or litigation, depending on the nature of the disagreements between them, to ensure disputes are dealt with in an agreed and appropriate manner.
Within such clauses, mediation is often referred to as a post-negotiation, pre-arbitration/litigation step to see if a direct settlement can be achieved, potentially allowing the parties to save significant time and costs, discussing options for resolution confidentially, and, in some circumstances, to even continue their business relationship. Input from a neutral third party with an objective view can provide the disputants a fresh perspective and help overcome apparently entrenched positions.
Whether the parties’ intention to take part in mediation is rooted in monetary considerations, a desire for procedural flexibility or confidentiality, mediation has several undeniable advantages. The inclusion of a mediation clause in a contractual agreement promotes the increased effectiveness of the process, which can be maximised further by ensuring the following elements are considered:
Precision - A mediation clause, like any other provision in a contract, should be precise, even in summary where the details of the process are to be agreed subsequently by the parties in a Mediation Agreement.
Procedure / Rules – To ensure a clear understanding and acceptance by both parties of how the mediation will be conducted, agreed reference to a set of procedural rules is recommended. These rules may be the standard rules of an ADR institution or the mediation provisions within a code or rules of civil procedure of a particular jurisdiction.
Triggering mechanisms – The clause may indicate the circumstances in which the parties intend to resort to mediation, for example “interpretation of the contract terms relating to X” or elect to exclude certain kinds of disputes from referral to mediation.
Timeline – In most dispute situations, the parties will usually attempt negotiating directly. The clause should identify the point at which such negotiations are seen as concluded, for example following a meeting between the parties' respective management teams, and the mediation can be initiated. Provisions can also be included as to whether the mediation will be attempted as a pre-cursor to arbitration or litigation, or can run concurrently to those other, more formal processes, possibly including agreement to request stays of proceedings.
Timeframes – Building in a timetable within the clause can offer clarity and focus the parties at the earliest stage within the dispute resolution process. The timetable can be tailored to ensure parties have sufficient time to prepare and comply with any other contractual or legal requirements.
Mediator appointment – The choice of mediator may also be dealt with in the mediation clause. The parties can provide that the mediator must have certain qualifications and/or in-depth knowledge of the sector, type of contract etc. While the parties may choose to name an individual mediator within the clause, this can be problematic for a number of reasons; at the time of drafting, a dispute has not yet occurred and different considerations may come to light as the contract progresses; or the mediator may not be able to accept the appointment due to external factors such as intervening conflicts, relocation or health issues. Instead, it is far more common for the clause to refer to an ADR institution as an appointing authority, in the event that the parties are unable to agree a mediator within a certain time period following the clause being triggered.
Costs – To avoid disagreements, the mediation clause can also specify how the costs associated with the mediation are to be shared between the parties.
Including a mediation clause in a contractual agreement is an effective strategy to concretely express the will of the parties, in advance of any possible future dispute or disagreement, to engage in mediation and negotiate a mutually acceptable outcome. In the event that the mediation clause does not cover all the conditions by which the parties wish to be bound, the parties can expand upon the terms and conditions of the mediation process in the mediation agreement signed by them upon appointment of the mediator.
Mediation Agreement
Distinct from the “Settlement Agreement”, which the parties will sign at the end of the process if a settlement is achieved, the Mediation Agreement is drafted early, usually following the appointment of a mediator, and is an important first step in the parties’ commitment towards a collaborative resolution of their disputes and differences. Offering the parties and the mediator an opportunity to turn their minds to issues like confidentiality, the roles of all the participants in the mediation, how private and joint meetings will be run and managed, how legal advice will be obtained, cost and many other issues, the clearer the terms of the Mediation Agreement, the more transparent the process and the firmer the footing for the mediation dialogue.
While there is no legal requirement in many countries for the parties and the mediator to enter into a written Mediation Agreement, it is standard practice to sign a written agreement before the commencement of the mediation. Mediation providers, and often mediators themselves, will have pre-drafted template Mediation Agreements for consideration by the parties and their attorneys, usually sent or made available at the earliest possible stage of the mediation, for example upon receipt of the mediation request from the parties.
Essentially a contractual document, the Mediation Agreement sets out the legal framework for a mediation, including:
the appointment of the mediator and their role and responsibilities;
that the parties agree to negotiate in good faith;
that the representative signing on behalf of each party has authority to bind that party and to settle the dispute;
the procedure for the mediation, including any steps to be taken beforehand, such as exchanging position statements;
the terms as to confidentiality;
that any settlement must be in writing and signed to be enforceable; and
the payment of the mediator’s fees and other costs of the mediation.
Many of the terms and provisions within the document can be amended, subject to the mediator and the parties’ agreement and approval, or additional provisions included as considered necessary and appropriate and, again, by mutual agreement of all signatories.
Regional ADR providers across the Caribbean offer detailed mediation rules and mediation agreements, as well as draft ADR and mediation clauses, for consideration by parties and their attorneys. In the coming weeks, CADRIn will host expert representatives from many of these institutions to discuss their rules, services and experience.
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Author: Baria Ahmed
CADRIn co-founder, Baria Ahmed is a UK barrister, arbitrator, mediator and ADR consultant, and has worked in international ADR since 2003. With a particular focus on international projects, commercial ADR services, professional training and development, Baria worked in the establishment and launch the Arbitration and Mediation Court of the Caribbean (AMCC) in Barbados, stepping down stepped down as the institution’s founding Director General in December 2018. She continues to actively practice in the Caribbean region, and internationally. Connect with Baria via LinkedIn and Twitter.