Mediation has long been underused as a form of dispute resolution. Now, however, dozens of global companies have signed a pledge to bring it into the heart of business practice. In-House Perspective‘s Rebecca Lowe talks to lawyers determined to go back to basics.

Once upon a time, men arguably wiser and more sensible than those of the present era settled their disputes by sitting down together in a civilised fashion and talking until the problem was solved. No courts, no judges, no longwinded wrangling over technicalities; just a chat by the fireside, overseen by a fine, shrewd fellow with a knack for negotiation.

This was the method favoured by Confucius, and others before him through 4,000 years of Chinese folklore. Buddha championed it in India, while Japanese chukaisha (mutual friends) have long helped businesses resolve their differences. Not to be outdone, the Roman Empire later picked up the tradition, with intercessors, internuncios, interpolators and interlocutors frequently shuttling to and from antagonistic parties in a diplomatic bid for peace.

Over the generations, however, the realm of dispute resolution gradually became more convoluted and complex. Flexibility and prudence gave way to formality and structure. While a fair, regulated court system is doubtless something to be celebrated, it has – some believe – served more to quash the world of common sense negotiation than to complement it.

Now, however, the world of common sense is making something of a comeback. With litigation and arbitration becoming ever-more expensive, time-consuming and aggressive, companies are looking for a less expensive, less complicated method for settling their quarrels. Mediation, it seems, may be the answer. The 21st Century Corporate Alternative Dispute Resolution (ADR) Pledge, launched in November in the UK and ten months earlier in the US, commits companies to resolve disputes through ADR – first and foremost mediation – where possible. Sponsored by the International Institute for Conflict Prevention & Resolution (CPR) and the Centre for Effective Dispute Resolution (CEDR), the pledge currently has 33 multinational signatories and is rapidly growing in popularity.

For Lord Woolf, former Chief Justice of England and Wales, whose seminal 1996 Access to Justice report became a catalyst for the development of ADR in the UK, the time to champion mediation is long overdue. ‘Mediation has progressed from being a marginal activity of limited significance to becoming a major player on the dispute resolution landscape,’ he announced in a speech at the Singapore Mediation Centre in October. ‘The issue is not whether it will continue to be a valuable resource in the future. It is whether it can achieve the greater potential that enthusiasts like myself are confident it has.’

No downside, no-brainer

Mediation does seem to offer a wealth of advantages over the courts. Cheap, quick, confidential and consensual, it can help both sides amicably reach a mutually-acceptable agreement with little damage caused to this relationship. It is unsurprising, then, that growing numbers of companies are turning to mediation as the first step in tackling the bulk of their disputes, leaving the option open to arbitrate or litigate further down the line, should a settlement fail to be agreed upon.

Why businesses have taken so long to incorporate mediation into their strategy – and why so many continue to avoid the option – is something of a mystery, says Michael McIlwrath, Associate General Counsel for Litigation at GE Oil & Gas, a supporter of the pledge. ‘Beats me,’ he tells In-House Perspective. ‘Maybe it’s because they don’t understand the advantages of mediation. It’s a no-brainer, and there isn’t any downside. At a recent conference, some general counsels of large companies in the Nordic countries spoke about mediation as if it was an abstract concept they had never tried.’

GE was one of the founding signatories of the original CPR Corporate Policy Statement for Alternatives to Litigation, which encouraged companies to focus on ADR in the 1980s. The updated version does not replace the original pledge, which has more than 4,000 companies as signatories, but aims to expand it beyond a focus on individual disputes, to a broader systematic approach, whereby mediation is absorbed into everyday best practice.

At Royal Dutch Shell, another pledge devotee, a new in-house global litigation group was created 18 months ago to centralise control over escalating disputes. Whereas the company was previously almost entirely reliant on hundreds of external counsel, it now has a team of 135 in-house lawyers and support staff to coordinate how disputes are managed and resolved across the world.

For Brad Nielson, Shell Global Litigation Group General Counsel, it is the lack of control which companies have over dispute management that has led to mediation falling under the radar. ‘In the past we’ve dealt with litigation by throwing it over the fence to external counsel, instead of taking accountability and responsibility for the dispute,’ he says. ‘It’s about getting out of the litigation mind-set and saying, what is this really about, where is it going and what do we need out of it?’

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