What keeps parties from mediating and what stops some settling?

7 Jul 2015

These of course are fundamental questions of human nature, conflict dynamics etc. about which libraries have been written and I cannot hope to do them justice in a blog post.

As mediators, we believe every dispute can and should be resolved through mediation, that most disputes are at least capable of resolution through mediation and that few if any actually need to be litigated. Why then are so few disputes referred to mediation, relative say to the number of civil court proceedings commenced each year ? Most sources suggest mediation enjoys a 75% plus success rate and yet 0.5% or fewer civil / commercial disputes are actually referred to mediation. If we accept that more than 90% of civil proceedings issued in Ireland for example, settle without a trial or judicial determination, what then is the great attraction of litigation for disputing commercial parties over mediation or other voluntary dispute resolution process? Of those disputes that are referred, why do some not settle?

The recent McIlroy –v- Horizon case is a classic example of commercial dispute dynamics, particularly in the developed Common Law world. Current World No. 1 golfer, Rory McIlroy was reported to have entered into a representation contract with Horizon in December 2011 when he was 22 yrs old. We read that the relationship failed within 2 years and McIlroy issued High Court proceedings in Dublin in September 2013 which were then admitted into the Court’s Commercial List for high-value disputes. McIlroy allegedly sought to rescind the contract because of undue influence, that the contract terms were unfair and he had signed without legal advice. Horizon denied his claims and counterclaimed for the commissions it claimed to be owed. McIlroy was reported to have signed a multi-million dollar sponsorship deal with Nike while still with Horizon.

At a procedural hearing in September 2014, 12 months into the Commercial List proceedings, the Judge suggested mediation to the parties. They agreed. On 20 October 2014 however, the parties’ lawyers reported to the Judge that the mediation had failed and dates were fixed for the trial of the action in February 2015. On 4 February 2015, some 18 months after the parties’ commercial relationship broke down, they settled on the steps of the Court amid great public fanfare following two days of direct negotiations, with McIlroy allegedly agreeing to pay Horizon USD25,000,000 plus legal costs in settlement of all matters in dispute between them. They were roundly congratulated by the same judge who had suggested mediation 6 months earlier. The parties issued a joint statement that they had settled on terms satisfactory to all, that they wished each other well in the future and confirmed that neither would make any further public comment on the dispute or settlement.

We can only speculate as to why they had not referred their dispute to mediation earlier, without prompting from the Court or why having done so in October 2014, they had not reached a settlement. What was it about these parties and their bitter commercial dispute that prevented them from agreeing to refer it to mediation before issuing proceedings in September 2013? And what was it about the settlement terms agreed between them through direct negotiation on the steps of the Court in February 2015 that could not have been reached in October 2014 or even earlier in September 2013 with the assistance of a mediator?

Commercial counterparties are, like everyone else in Ireland, entitled to sue in the courts and there is no requirement to mediate first. Mediation is therefore entirely voluntary and parties ultimately chose to mediate or not. Solicitors in Ireland are encouraged to recommend litigation alternatives such as mediation to their clients but this may not be persuasive in all cases. In the case reported above, the parties only agreed to mediate on the suggestion of a judge 12 months into the litigation.

For mediation to succeed, many factors must be present but perhaps two are of particular importance. Firstly parties must enter into and participate in mediation not only voluntarily but in good faith. If they have ulterior motives for mediating, such as wanting to be seen by a court to be attempting an alternative for example, mediation is far less likely to be successful. Second, all parties must have a real intention to settle their dispute. If both of these are present and assuming parties have prepared properly for mediation and have appointed a competent and experienced mediator, then they have a high probability of success in resolving their dispute in mediation.

Precisely because it is a voluntary process, mediators have a role in screening disputes. If mediators become aware that parties may not be acting in good faith or that they have less than a real intention to settle, they should not continue to facilitate negotiations and should withdraw.

As mediators, we know that mediation saves time, money and relationships. It saves time because mediation can be completed in a fraction of the time it takes to litigate, even in a fast track process such as the Commercial List. It saves money because disputes can be fully resolved through mediation without parties incurring any litigation costs, depending on when they agree to mediate. It saves relationships because mediation is conducted entirely in private so that no one need ever know that parties were even in dispute with each other, if they do not what that known.

Litigation is and will continue to be a modern alternative to gladiatorial contest and there will always be willing commercial disputants who relish their day in court regardless of the advice, cost, publicity or likelihood they will settle on the steps in the end. For the ever growing number of canny businessmen who are prepared to work at it, mediation offers a clever, more sophisticated model for resolving what may first appear to be the most bitter and intractable disputes, in private in a fraction of the time taken to litigate and for a fraction of the cost of litigation.