A business relationship always starts with some level of cooperation. In the beginning, the parties decide to establish a company or partnership that will hopefully satisfy their needs and the parties are hopeful and optimistic. Together, they sit down and plan what their partnership would look like and how they can succeed together, better than they did on their own. This is how it usually starts, filled with hope and good will. But as the years go by, challenges and difficulties arise, and the hope that previously existed may turn into frustration, anger and disappointment.
When a business relationship is stuck, the parties can choose one of two options: they can either terminate their mutual business affairs or, they can solve the differences and continue their cooperation.
When the parties have more to earn from the business partnership, they are better off arriving to mediation as soon as possible. A quick meeting with a mediator, before making any final and unilateral moves, will enable a better and more creative solution than any other way.
During the mediation process, and within a small of sessions (usually 2-3 sessions), the parties can clearly see their common interests, strengthen their personal relationship, and find creative solutions that enable them to solve their differences.
If they decide to terminate the business relationship, the parties can act in one of four ways:
Independent negotiation – like at the beginning of the relationship also now, the parties can sit on their own or with another individual, acceptable for them both, and determine for themselves, without any external parties, how the business relationship will end.
Legal proceedings – each party can turn for legal counseling in order to understand his legal situation (usually different from the image displayed to the other party) and build a legal strategy towards a solution. This path has many shortcomings, including lack of control over the outcome, high costs, commercial data exposed to the competition etc.
Arbitration – in an arbitration process, the parties choose the arbitrator to set the result for them. Arbitration is much like legal proceedings, only it is conducted privately and not via the public justice system.
Business mediation – mediation that is conducted with the help of a professional business mediator and allows the parties to come up with a solution of their own and determine how to end the partnership together. During the mediation process, we search with the parties for their common interests and generate solid new ground to allow for conflict solving in a respectable way, allowing both parties to emerge as victors.
Sometimes, during a mediation process generated in order to end the partnership, the parties discover that their conflicts can be solved in a way that enables them to maintain their partnership and possibly make it stronger. In such cases, the mediation becomes a process of renewed and improved growth of the business relationship.
For many years, if negotiation failed, legal litigation was the preferred way to resolve harsh conflicts. Today legal litigation is unnecessary. Business mediation fills the gap between the failed negotiations and the legal litigation. A skilled mediator can assist both parties to reach an agreement and settlement they cannot reach on their own. As a result, many firms and business parties save time, money and anguish when choosing mediation over litigation.
In a survey conducted among lawyers working for large firms in the United States about their approach regarding mediation, the vast majority of lawyers stated they prefer mediation over other ways of conflict resolution.
Why do businessmen prefer mediation as a way to solve conflicts and differences of opinion? Here are a few reasons:
- Lower expenditures. Business mediation that ends with a settlement (like most mediations of that type) costs the business but a small part of the price of litigation. The cost of a mediation process is only a few thousand NIS instead of the tens of thousands NIS paid in litigation.
- Saving time. Mediation processes are short and usually end within several days or weeks (sometimes it even ends in a day). On the other hand, an average litigation in Israel lasts between three to six years.
- Prioritizing small and medium-sized businesses. Since mediation takes less time and money than other procedures (trial, litigation) the small businesses can afford this process. If the only alternative available to them was litigation, they would have failed mid-way, and forced into redundant settlements.
- Avoiding escalation and polarization. A business mediation process allows for a friendly and positive dialogue between the parties and therefore can even strengthens their relationship. When conflicted individuals enter court, they do not like each other. When they exit the court – they like each other even less. Each of them listens to how his opponent (or their lawyers) slander The legal confrontation method coerces polarization and the deterioration of the relationship on the parties.
- Encouraging and empowering the communication between the parties. Often, the anger and frustration push the parties apart, in a way that at least one of the parties refuses to talk to the other. The mediator may help them renew their relationship and, if necessary, serve as a pipeline for their messages to one another.
- Confidentiality that enables maintaining your reputation. When discussing business conflicts, mostly the parties have a special interest to solve the conflicts out of the spotlight and not in a public way. The mediation process is completely confidential both in terms of the evidence laws and in terms of court. Therefore, the parties in a business mediation can talk freely without worrying anything will be used against them. If there is any fear that the other party will use things against the speaker, the mediator can be used to control what data is shared between the parties and what data remains the propriety of the speaker and the mediator only.
- Leaving an opening for future cooperation. Parties that hold contacts or that are expected to meet in the future (partners, provider and buyer, seller and buyer, company owners, common owners of property, etc) should start mediation as soon as possible to avoid worsening the relationship worse, and to enable the renewal of their relationship.
- Sense of ease. Mediation is in fact a form of negotiation (with the help of a third party) and businessmen are accustomed to negotiation. Business mediation holds many components of the negotiation and businessmen feel more comfortable when they are in a world of negotiations, which is known to them, than when they fall to the world of law, to which they are estranged.
- Fear of a harmful, misleading or wrong decision. Whereas in court, the case is decided by an individual unfamiliar with the business, in mediation the parties themselves make the final call, and no one can coerce them into a solution they are not interested in or they believe is not in their own best interest.
- Avoiding a stigma of “losers” – business conflicts may rise in any sort of business or commerce, such as a common transaction, partnership, a provision contract, a construction contract, a license contract, rent, or any other service contracts or legal arrangements. Going to mediation before starting legal proceedings helps avoiding polarization and accumulation of rage deriving from the legal proceedings, from reading aggressive arguments by both parties and from hearing words of hatred from the other party.
- Creativity– The mediation process is flexible and opens a window for special, creative solutions (the only condition is that they are agreed on both parties). As mentioned above, reaching this kind of solutions is impossible in legal proceedings.
The businessmen in controversy with another party must ask themselves the following questions:
- Is it important to maintain the business relationship between the parties?
- Will the information disclosed to the public during the trial harm the business?
- Is a quick settlement of the dispute important to the parties?
If the answer to any of these questions is yes – mediation is the preferred and desired way to settle the conflict.
Mediation in Business Disputes
Today, mediation is the best, most efficient way to settle business disputes.
Among the reasons that make mediation an efficient solution for business disputes, the following should be mentioned: First, mediation is a voluntary process to which both parties come at their own will and initiative, while striving to reach a common goal. The mediation process allows the parties to be involved in the decision making and in shaping the final outcome. Moreover, through business mediation, the air between the parties can be cleansed and the parties can continue managing their business relationship even after the mediation process ended.
It should be mentioned that mediation in business disputes is a confidential process (unlike a legal proceeding which is often conducted openly), so one does not have to worry about the process harming either party’s reputation.
How is a business mediation conducted?
A mediation process, and a business dispute mediation, is done under the guidance of a business mediator who is a third, neutral party.
The objective of this process is to form an agreement that is acceptable on both parties, which will lead to the solution of the dispute. This agreement should take into account each party’s needs and interests. The way to achieve this agreement goes through negotiations led by an experienced mediator (as part of the process, the mediator meets with the parties separately and in the following stages, with both parties together).
Turning to mediation should be done before you go to court, as one of the main advantages of this process is its ability to avoid the court – as you know, legal proceedings can be long and difficult and it is impossible to know its end result.
It is important to note that there are cases in which the parties reach mediation after legal proceedings have already started as in quite a few cases the judge will recommend the parties to try such an alternative.