The traditional way of solving a business dispute is to seek legal action, with a view to settling the matter in court. Yet by pursuing a litigated settlement, which by its very nature is adversarial, you can risk damaging the very relationships on which your business depends.

Furthermore, litigation is a lengthy and expensive process that can cause major disruption to you and your employees' working lives.

Conflicts such as breaches of contract, landlord/tenancy disagreements, disputed insurance claims, on-site construction disputes, employee grievances or consumer complaints are likely to remain a fact of business life. It makes sound commercial and financial sense to consider alternative solutions.

An increasing number of companies in Bermuda are doing just that, and mediation and arbitration - both widely used throughout the world to resolve commercial, family and community disputes, and disputes between nations - are gaining in popularity here as familiarity and awareness of such alternative methods increase.

Mediation is a voluntary settlement process which uses an impartial third party mediator to help resolve conflicts between parties in dispute.

Unlike litigated disputes, most mediated disputes can be settled within a single day, and the conflict is resolved to the satisfaction of both parties.

A mediator is a qualified individual with an understanding of current legal and business practice who helps the parties involved to make informed decisions and develop mutually acceptable agreements.

The advantages of mediation include: Substantially lower costs than apply to a contested suit; A much quicker settlement process than litigation; The promotion of constructive communication; Respecting the interests of each person or party involved; Allowing control of decisions to stay with the parties; Becoming a model for future conflict resolution; and Reducing the likelihood of future disputes.

So how can mediation help in practice? The following case study demonstrates why mediation is growing in popularity: The chief executive officer of a reinsurance company had been employed for over four years when his contract was terminated on six months' notice. He claimed breach of an employment contract which provided that, amongst other things, his employment contract would run for five years before it could be terminated on notice.

The company claimed that the contract was dated prior to its becoming a wholly-owned subsidiary of another company; they claimed that the contract was now void because of its takeover and further claimed that the contract was void by reason of a breach of fiduciary duty by the chief executive officer.

The company also maintained that the CEO had failed to mitigate his loss.

The dispute began in March and litigation was issued one month later.

One of the parties' representatives was familiar with the mediation process and was able to persuade the other legal representative that mediation was a suitable process for resolving the dispute.

The mediation commenced six weeks later and produced an agreed settlement in just one day.

Those were the facts of the case.

Such a swift conclusion would be unheard of in a litigated settlement; moreover, it would be far less likely that all the parties involved in the litigation process would be satisfied with the outcome of the settlement.

Since the cost of a mediation may, in the year 2000, range between $200 and $275 an hour, shared by each of the parties, it is also easy to see how much more cost-effective mediation is.

Mediation is not reconciliation, legal advice, legal representation, or counselling.

A mediator who has legal training, however, is especially well-equipped to facilitate the negotiated settlement of a dispute that might otherwise be determined by a court.

In fact, research has shown that superior mediation outcomes result when an experienced lawyer with mediation training is appointed as mediator.

Participation in mediation is entirely voluntary. Anything that happens at the mediation is confidential and the outcome of the mediation is non-binding unless and until an agreement is reached.

If the dispute settles at mediation, the parties can draw up an agreement with the assistance of their respective lawyers if they have their own representation, or otherwise, with the assistance of a competent mediator.

If the dispute does not settle, the parties are still able to pursue legal proceedings in the usual way.

Whereas mediation is a voluntary process and non-binding on the parties until they have bound themselves by written agreement, arbitration , another alternative procedure for conflict resolution, is the referral of a dispute to a third party for final and binding determination.

Arbitration is conducted more formally than mediation.

Both mediation and arbitration procedures are designed for quick, practical and inexpensive settlement.

The procedures for complex commercial arbitrations, however, tend to mirror those of the litigation process and are therefore less cost-effective than mediated settlements.

Mediation and arbitration as alternative methods of solving disputes are particularly important to a small community such as Bermuda, where the preservation of relationships is especially important.

Keren V.P. Lomas, attorney.

N.B.

This is the exact same Law Matters supplement that ran in The Royal Gazette on 20th September, 2000. However do the printing problems that affected the quality of the print, it was pulled from the circulation and did not appear again until the 9th October, 2000.