Mediate or litigate – the choice?
Peter McHugh, Partner, Chartered Arbitrator and Mediator who specialises in construction, property and engineering disputes shares his thoughts on why it is advisable to consider mediation as an option to resolve disputes, particularly as we prepare to enter a golden age of green energy infrastructure developments.
Dwight Eisenhower once stated: ‘What is important is seldom urgent, and what is urgent is seldom important’. Today, the urgency and importance of the task in hand relates to disputes that are customarily resolved through the court system by way of time consuming and costly litigation when there is a readily available, quick, cost effective and trusted alternative.
With large infrastructure projects, comes a fertile ground for disputes. The UK Government has placed significant emphasis that the UK will become a world leader in green energy with key infrastructure announcements in recent months. There are plans to bring at least one large scale nuclear project to the point of final investment decision, six new low carbon industrial clusters, 40GW of new offshore wind by 2030. These along with other complex energy generation construction projects will cost many billions of pounds and have the potential of disputes arising which could impact on the objectives of achieving Net Zero, which for the economy and environment need to be minimised.
You just have to look at the building of Hinkley Point C as an example, with many JV’s and consortia agreements, the extensive supply chain and expectations to deliver against contracts, and the time it will take to build the power plant for the potential of disputes to surface. In addition, the emerging sectors such as hydrogen, carbon capture, nuclear fission and fusion are likely to have challenges due to technology and the interdependencies with other sub-sectors of green energy.
With dispute resolution comprising litigation comes expense, coupled with damage to commercial relationships that may take years to rebuild. Those heading up the teams managing disputes need to break the expensive cycle of preparing for Court, Adjudication or Arbitration without carefully considering alternative ways of resolving the dispute. There is a much less litigious alternative which comes at a fraction of the cost of court proceedings whilst preserving relationships between parties.
No matter how big the project or complex the dispute, mediation is an extremely effective tool. With the benefit of an experienced commercial mediator, any deadlock can be broken, and any issues resolved without having to spend days before a High Court Judge or Arbitrator.
The major advantage of mediation is that whilst the mediator retains full control of the process, the parties retain full control of the solution. The role of the mediator, unlike that of a Judge / Arbitrator or Adjudicator in determining and dictating the outcome or decision, is to foster a negotiated settlement in a completely confidential and controlled environment.
Personal experience has demonstrated the benefits accrued from numerous successfully mediated two-party and three-party commercial disputes in which all parties have been able to reach a commercial settlement allowing them to draw a line under the matter and move forward. This has often been achieved through just a single day’s mediation, without the undue stress and financial burden of costly court proceedings. This degree of success is not uncommon through the process of mediation. Statistics continue to illustrate that in the order of 70% of disputes that go to mediation are satisfactorily resolved through settlement on the day or shortly thereafter.
Getting ready to resolve
The key to resolving any dispute is to get yourself organised from the outset. You should:
- Collect all relevant documentation together and statements from those involved before memories fade.
- Set out a detailed chronology that can be updated as more information comes to light. This will identify any gaps in pertinent events that have occurred leading up to the dispute.
- Set out your position the other party once you have carried out all the necessary enquiries and obtained (if necessary) expert evidence.
- Allow the other party to the dispute the opportunity to investigate and respond.
- Once both parties have a real grasp of the facts and the issues in dispute, they should jointly agree to appoint an independent mediator.
At the mediation
An experienced mediator who is familiar with the sector will be able to digest the information relatively quickly and understand the issues in dispute. The mediator will then very often engage with the parties to iron out any matters that require clarification.
The whole process is without prejudice and confidential, so the parties can feel free to discuss the issues openly with the mediator during private sessions.
Anyone can attend the mediation. Individuals with authority to settlement must be in attendance. You will also want those who have a good understanding of the facts and any experts who will usefully be able to assist with settlement.
During the mediation, the mediator will usually start with a joint meeting with all parties in attendance, which is then followed by the mediator asking each party to enter their own respective private rooms. The mediator will then “shuttle” between the rooms to probe the issues and try to facilitate settlement.
If a settlement is achieved, it can be recorded in writing and be binding on the parties.
No matter how technical and complex the dispute there is always a potential solution. I am a firm believer that any dispute is capable of settlement and have acted as mediator in numerous disputes over the last 20 years in which at least 80% have settled on the day of the mediation. It is an effective and cost proportionate tool to resolve disputes. In a recent example, the costs of a mediation, which included the attendance of lawyers representing both sides as well as experts, totalled £15,000 –£20,000 for one full day. Had the parties commenced court proceedings their individual costs would most likely have been in the order of £200,000.
Do the maths. In my opinion having practiced litigation now for well over 20 years and been involved in many commercial cases mainly involving construction and professional negligence claims I believe you are doing yourselves an injustice by not engaging in the process of mediation. This is particularly pertinent at the early stages within a dispute in order to examine if the dispute can be resolved quickly, cost-effectively and confidentially.