Mediation can help preserve or even repair relationships

IF A silver lining may be traced from the dark clouds of the pandemic, it is that Covid-19 has catalysed a change in the mindset of businesses.

Companies are changing the way they do business, with the realisation that the world is unlikely to return to its pre-Covid-state. One mindset shift is in dispute resolution.

In the past two years, more businesses are adopting mediation as the first port-of-call.

At the Singapore International Mediation Centre (SIMC) for example, the caseload reflects a growing appetite for mediation to resolve commercial disputes during the Covid-19 period.

This year, SIMC has been receiving 1 to 2 cases a week. This is far more frequent than in the preceding years and a far cry from 2015 (SIMC's first full year in operation), when 5 cases were filed.

The cases run the gamut of industry sectors and are becoming more complex, as indicated by the dispute values. In the first 10 months of this year, the average amount being disputed in SIMC's mediations is about US$55 million - more than 3 times that of 2019 (about US$17 million). Overall, the total dispute value stands at about US$6.2 billion since SIMC's incorporation. These high-value cases include a recent mediation between US and South Korean parties involving claims of around US$1 billion. Mediation is even catching on for disputes between foreign investors and states, with SIMC successfully mediating a large case between an investor and a foreign government (not Singapore).

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Why?

The strains and stressors of the pandemic have led businesses to become more circumspect in how disputes are resolved. When Covid-19 started to cast a pall from early last year, there were dips in demand, broken supply chains and loss of liquidity. Almost overnight, there was an outbreak of contractual disruptions, which threatened to erupt into full-blown disputes.

THE MEDIATION WAY

In such situations, it is commercially sensible to identify more efficient tools to resolve disputes, rather than divert scarce resources to fight protracted and expensive proceedings in court or arbitration.

Mediation is far more sustainable from a time and cost perspective. A dispute may be mediated over just 1 or 2 days and at a fraction of the cost. Under SIMC's Covid-19 Protocol, a set of rules providing for expedited mediation during this period, SIMC even works with its mediators to organise mediation at subsidised rates.

The Singapore Convention on Mediation has also increased business confidence in using mediation. Since the convention opened for signing in Aug 2019, 55 countries have signed the treaty. There are eight parties, including Singapore,to the United Nations treaty, which provides for the global enforceability of mediated settlements.

This means that businesses that resolve their disputes using mediation will find it easier to hold each other to the terms of their settlement across the world.

But the biggest factor is the realisation that mediation is effective even for the most intractable of disputes, whether on its own or in combination with other mechanisms.

The mediation process involves a neutral party - a trained mediator - helping the disputants to understand their underlying interests and explore options amicably. The sessions are confidential - to promote candid discussion. Should parties reach a settlement, they can agree on flexible and creative solutions beyond monetary payments.

Seven of 10 times, the mediator helps to broker a settlement. Even if there is no settlement, parties will be clearer about the dispute, which saves time and costs in other proceedings.

COMPLEX CASES

Earlier this year, SIMC and the Japan International Mediation Centre (JIMC) jointly managed the mediation of a complex joint venture dispute between Indian and Japanese businesses. While the companies started with arbitration, they agreed to try mediation first.

The centres helped the parties to appoint two mediators - from Japan and Singapore - to facilitate the online discussions. The ability of the mediators to assist the parties in bridging legal, commercial, and cultural differences was instrumental.

At the start of the mediation, the participants agreed to strive for an amicable settlement, given the Covid-19 situation. By the second day of discussions, an in-principle settlement had been struck.

This process took only about 6 to 7 weeks. Noting this, a senior lawyer for the Japanese company remarked that this was a "very successful experience", and he would recommend his clients to mediate every time.

This mindset shift is long overdue.

In the coming months, businesses must continue to innovate and transform to overcome the challenges of Covid-19. According to a recent McKinsey survey, executives continue to cite the pandemic as the biggest risk to growth in most regions, including the Asia-Pacific. In the coming months, as businesses innovate and transform to overcome the challenges, they will no doubt remember the lessons learnt.

One key lesson is the role of mediation in resolving disputes. Even as the skies begin to clear, businesses will do well to ensure that the mediate-first mindset is entrenched in corporate culture for the long run.

This means ensuring that contracts contain clauses that require mediation first, before escalating to arbitration or court proceedings. Key decision-makers - including the C-suite, general counsel, and lawyers - should be trained to understand what mediation can do.

For pandemic or not, mediation has the unique ability to preserve or even repair relationships - a vital aspect of business success.

As one party to a mediation remarked after resolving a bitter commercial dispute: "I may or may not have made a friend, but I have one less enemy."

• The writer is chairman of Singapore International Mediation Centre