We need to talk…
7th July 2020
Maybe it was my experience as a disputes lawyer, or a precursor to my career as a mediator, but when I set up a SME with my very dearest friend, I was determined that we would not fall out. At a time when all was rosy and exciting, we sat down for a difficult conversation: what would happen if we disagreed? However uncomfortable that conversation was, it was better to have the debate on a theoretical level whilst we were both capable of being impartial. We agreed that recording those decisions in an enforceable partnership agreement gave us both something to refer back to, should the worst happen.
Of course, it is not always possible to predetermine outcomes, or even anticipate the issues that will be faced in the future. As a result of Covid-19, many unexpected, difficult conversations are taking place on matters such as contract performance and cash-flow and decisions are having to be made about employees and the impact of the pandemic on long term goals and forecasting. It is interesting that the British Institute of International and Comparative Law has called for “new thinking” post-Covid, recommending the introduction of a “breathing space” so that contractual breaches arising from the crisis can be conciliated. Part of the rationale is to avoid the courts being overwhelmed with disputes, but it is also a recognition of the power of a collaborative approach to disputes. This has been confirmed in the Cabinet Office Guidance on responsible contractual behaviour post-Covid, in which the Government “would strongly encourage parties to seek to resolve any emerging contractual issues responsibly – through negotiation, mediation or other alternative or fast-track dispute resolution – before these escalate into formal intractable disputes”.
People may be familiar with mediation, either from its use in resolving a legal dispute, or perhaps from a family law perspective where it has been successfully used for many years in the context of divorce proceedings. Mediation is a form of alternative dispute resolution which can be used alongside or separately from legal proceedings, where a neutral mediator helps participants explore options for resolution by facilitating conversations and providing challenge. The process is entirely voluntary and the mediator cannot impose any solution on the parties. Despite this (or arguably because of it), the success rate is very high: according to the 2018 audit by the Centre for Effective Dispute Resolution, 89% of commercial disputes going to mediation are successfully resolved, with 74% resolved on the day and 15% very shortly thereafter. It is estimated that since 1990, the total value of mediated commercial cases in the UK exceeds £110 billion.
At its heart, mediation is a way to control risk. When a business finds itself embroiled in legal proceedings either as a claimant or defendant, control of the process and outcome passes to the courts. The use of mediation puts control of the process and most importantly outcome, into the hands of business owners. Mediation allows parties to take back control of risk by finding a solution which is acceptable to all parties. Solutions can be much more imaginative than those the courts can impose, such as agreeing a schedule of works to remedy a problem, taking into account availability of future business or even just structuring payments to reflect cash-flow realities. Relationships can (sometimes) be preserved and resources are not diverted away from core-business.
The use of mediation can, however, be much wider than in resolution of a commercial legal claim. Mediation can be used as a process to manage any difficult conversation. From a family business perspective, issues such as how to successfully manage the withdrawal of a family member from the business, or succession planning can be emotive and complicated. Disputes between shareholders and/or directors are very common and the position can be even more difficult if family members are involved. All of these conversations can benefit from a mediator to facilitate open discussion. One of my most memorable mediations was a dispute between two shareholder siblings over a property development project which had gone wrong. Things were so difficult that they had not been able to attend family funerals together. By focussing on what the parties actually wanted from the development rather than just their competing legal positions, and taking into account what was important to them both respectively (money versus the right to live in a family home), we successfully resolved the dispute. I doubt the relationship was instantly repaired, but resolving that dispute without dragging each other and their families through the Courts gave them a better starting place to rebuild from.
Mediation is a way to facilitate difficult conversations about many different challenges faced by family business. Whether those conversations are about an existing dispute, an anticipated problem, a hard choice, or even how to best set up a new business, mediation can help.
And my experience? I’m proud to say she’s still my very dearest friend.
Prior to working as a full time mediator with IPOS Mediation, Rebecca Clark set up and managed her own retail business from scratch, receiving the coveted Drapers Award for Childrenswear Retailer of the Year in 2009. As a result of this, Rebecca has substantial business and accounting experience which she can draw upon in her mediation practice, enabling her to understand and empathise with the commercial issues faced by SMEs in a dispute scenario – often acknowledged by commercial parties during mediation. She has also worked as a solicitor-advocate in a large International law firm. Find out more.