As we have noted earlier, conflicts of parties’ respective interests and needs are inevitable during those transactions that fuel a successful business. They will invariably arise over the inception, interpretation, performance, expectations, or even termination, of the contracts underlying those transactions. If these conflicts are not properly recognized, addressed, and resolved some way or the other, they will become disputes. These disputes, if unresolved amicably or, otherwise voluntarily, by some sort of dialogue, concession or compromise, the next step often is to engage in litigation.
Now, litigation poses several potential undesirable consequences. A few of these are expensive executive and other staff time and resources spent on monitoring developments, attending court sessions, and endlessly reviewing update memos, reports, and the like. The cost can be an alarming dent on the bottom-line. It means money which, if otherwise utilized and invested, could enhance revenues, production, expansion, and growth. Not to mention public relations and CSR. Michael Leathes of the British American Tobacco Company puts it this way:
”Companies are not expected to take silly risks with shareholder assets if there are other ways to secure certainty at less cost. Businesses are increasingly drawing a line under their escalating conflict budgets and demanding much faster outcomes.
They are also perceiving that they need to lead themselves out of the concentric circles which characterise litigation. Practitioners . . . are realizing that to retain their ever more discerning client base, and to win new clients, they need to prove themselves as spontaneous early conflict resolvers and solution providers, not just as good litigators and processors”.
Another great cost, apart from crippling expenses, is the destruction of previously beneficial business relationships, and the stained reputation a public court battle often produces. However, the good thing is that:
“Mediation [can restore trust where] business relationships hav[e] turned sour. Parties who used to be partners, used to act together to fulfil their common interests, have lost confidence. The channel of communication is broken. Using mediation is a method to restore dialogue and confidence.” (Pierre Raoul Duval and Alexandra Munoz, Mediation in France, Appendix B, at 4).
It has now largely been recognized and accepted that litigation over a conflict is, and necessarily must be treated as, a worst-case scenario. The Mediation process provides parties the opportunity of devising a settlement that can be as private and confidential as possible and still genuinely represent their collective interests and satisfy their needs, with minimum or no disruption to business operations or relationships. This is particularly helpful when seeking to resolve disputes and conflicts with governmental and regulatory authorities and institutions.
Planning for the resolution of potential conflicts is a necessary and commendable corporate strategy. Dialogue between two hurting or contending parties can be strenuous and this writer recommends a leaning to avenues which provide for a neutral third-party. One who is skilled and experienced in handling both or all sides and guiding them toward the essential issues. This person helps them to lean less on emotion and sentiments and concentrate on the corporate objectives, interests, and needs. This is the role of a skilled Mediator.
An efficient HR and/or Legal Department(s) must be armed with all avenues providing cost-effective alternatives to litigation for the resolution of conflicts and disputes which, as previously mentioned, are inevitable. It must develop a responsive policy and procedure to cope with all conflicts and disputes with the minimum cost to the company. From a corporate strategy perspective, it is undisputable that planning ahead for Mediation, and other steps that synchronize with mediation, as an alternate means of dispute resolution, gives greater value to the organization. As it is said, “Prevention is better than Cure” or “A stitch in time saves nine.”
The emerging trend in global best practices in governance is the use of Mediation as a key method of resolving disputes and managing conflicts. Mediation is fast becoming the preferred Alternative Dispute Resolution (ADR) mechanism in achieving mutually acceptable solutions to disputes between parties, as opposed to the conventional and adversarial trial/litigation practice or even the Arbitration process. It has proven mostly quicker, more satisfying and, less expensive than the latter.
Regrettably, most companies and individuals these days are learning of Mediation at the point where the Courts have referred them to Mediation after filing their matter there, intent or on pursuing litigation or where, in compliance with relevant applicable Civil Procedure Rules, they have been constrained to consider or submit to it. It is often too late at this stage to get the best of the benefits of Mediation. All those benefits, previously mentioned herein, are usually no longer feasible at this stage, with only a meager number of exceptions. The reality from experience is that parties will more often derive greater benefits when they have incorporated mediation into their dispute resolution culture and mindset.
Planning and agreeing to an effective strategy and contingency plan, which contemplates mediation and related consensual methods of resolving conflicts and disputes, is one of the best ways, if not the best way, of optimizing the tremendous benefits of mediation, when the need issue arises. Such advance planning ensures that the proper parameters for proceeding to litigation, which admittedly is sometimes inevitable, are established.
Two important tools for building or incorporating this culture are: i) establishing a coherent policy and procedure for the management of internal and external conflicts; and ii) a proper administration policy for contracts and external relations. Developing the former will include determining the desired corporate image – e.g. peace loving, community team player, or aloof neighbour, etc.
Watch out for Part 3 of these series where we go into a little more detail about the establishment and implementation of an effective corporate conflict and dispute resolution strategy.
Thank you for reading. What are your experiences, views and thoughts on this issue? Please share these with us, or let’s chat about same, in the comment section below.