4.2 Preliminary Discussions
4.3 Joint Session
4.4 Private Caucus
4.5 Mediators’ Techniques
4.6 Settlement Agreement
4.8 Other ADR Processes
4.9 Steps after the Process
4.10 Select Practice Issues
A key component of a mediator’s task is providing a framework within which parties can resolve their dispute. A basic mediation outline that a mediator can consult, follow or alter as appropriate is often helpful. As a general rule, mediations in the United States usually feature the necessary preliminary organizational discussions, an opening joint session with statements by the parties, and a combination of sessions between the mediator and each party (called “caucuses”) and sessions involving the mediator and all parties.
However, a mediator must always be willing to deviate from any static format and learn to improvise. Set forth below is a general practice outline with accompanying checklists. For easy reference, an abridged version can be found inside the front cover.
Comments: Before the substantive portion of a mediation session can be held, certain procedural issues typically need to be addressed. In a relatively simple case, the procedural and substantive portions can immediately follow each other. In more complex disputes, typically a time lapse exists between these portions because of the items that must first be exchanged or prepared prior to the substantive session.
¤ U.S.-CHINA Business Mediation Procedure
The U.S.-China Business Mediation Procedure (see Appendix 1) provides for a preliminary discussion of relevant procedural issues (e.g., scheduling, exchange of documents, whether any modifications of the procedure are appropriate, consultations among co-mediators, etc.). Typically, in the context of commercial disputes, both the parties and their respective legal counsel are present during the preliminary discussions.
Practice Tips: Format of Preliminary Discussions. The preliminary discussions may be conducted either in person or by telephone. In some instances, an on-line preliminary meeting may be an appropriate forum.
To expedite the process of preparing administratively for the mediation, the mediator may consider sending a letter to the parties before the preliminary meeting occurs, generally outlining the goal of mediation; listing the items to be discussed during a preliminary meeting; and providing practical information such as pertinent addresses, telephone numbers, fax numbers and e-mail addresses.
A mediator may, as a matter of professional practice, consider distributing to the parties a set of questions that would be helpful to address in a pre-mediation submission to the mediator (e.g., strongest/weakest points of case, anticipated costs of litigation, settlement progress to date, underlying needs and interests of parties, non-legal interests and goals of the parties). A mediator should also discuss whether each party wishes the written submissions given to the mediator to be shared with the other party.
Items a mediator may consider including in preliminary discussions or communications with the parties include:
Practice Tips: Site and Accommodations. If possible, the mediation should occur at a convenient neutral site. There should be sufficient space for both joint sessions and separate caucuses. Refreshments should be available. The option of conducting some or all the meetings by telephone (including videoconferencing) or on-line may be discussed. Moreover, it may be beneficial to have laptop computers at the sessions to generate quick, clean versions of settlement options. The parties and mediator should also discuss whether any videotape presentations (e.g., portions of fact-finding reports or portions of testimony) will be made during the mediation and arrange for the necessary equipment.
Practice Tips: Schedule of Sessions. Not surprisingly, the length of a mediation depends on numerous factors, including the complexity of the disputes, the number of parties and the urgency of reaching resolution. Sessions can occur within a short time frame or be spread over a lengthy period of time. The mediation process typically continues as long as the mediator and parties deem the sessions useful.
The mediator needs to stress the importance of the parties’ blocking out a meaningful amount of time for each session (e.g., a full day; an afternoon session with option to continue into the evening). The mediator and parties should discuss whether a mediation will terminate by a certain date regardless of whether an agreement is reached.
Practice Tips: Confidentiality. The mediator and parties should have a clear understanding of their expectations and agreements concerning the confidential nature of the process, including whether written submissions will be shared with the other party. Written submissions are preliminary memos usually requested by the mediator with a page limit that present a party’s views on the essential facts, law, and documents. Parties can also include issues of a more confidential nature such as interests and case weaknesses when submission statements are not shared with the other party. On the other hand, sharing submission statements can help educate the other side regarding perceptions of facts and legal expectations. Parties and the mediator should address these options when discussing submission statement due dates.
Practice Tips: Mediator’s Style. If the issue previously has not been addressed, mediators should generally discuss their style and practices, including whether they are primarily facilitative or evaluative and what their practices are in meeting jointly or separately with the parties. See Section 2.4 (Mediation Styles).
Practice Tips: Waiver Issues. To the extent a waiver of an actual or potential conflict of interest is required, a written waiver is recommended to avoid any later misunderstanding. See Section 2.5 (Impartiality and Conflicts of Interest Check).
Practice Tips: Mediation and Retention Agreement. If the parties and mediator previously have not done so, they should enter into an appropriate mediation and retention agreement. See Section 3.2 (Mediation and Retention Agreement).
Practice Tips: Client Representatives. A mediator should be mindful that the dynamics of mediation may be influenced by whether party representatives of equal rank are negotiating with each other.
Unless excused by the mediator, it is important that all the parties and decision-makers are present for the entire process. The absence of one party representative during a session can break the momentum towards a successful resolution. The mediator should remind the parties that the selected representative must be committed to participating in the entire process.
¤ U.S.-CHINA Business Mediation Procedure
The U.S.-China Business Mediation Procedure requires that a business executive or other person authorized to settle the dispute attend every mediation session. Often it is preferable to have as the client representative a person who was not directly involved in the underlying dispute and is presumably more objective.
Practice Tips: Identification of All Participants. The parties should consider exchanging a list of all the persons who will participate, including any witnesses, and provide a copy to the mediator.
Practice Tips: Stay or Discovery and Pending Action. If the mediation is occurring after the commencement of litigation or arbitration, the parties need to discuss the option of staying those proceedings in their entirety, limiting discovery, or otherwise avoiding wasteful and costly duplicate efforts.
Practice Tips: Applicability of Two-Track Approach. In some circumstances, a discussion concerning whether to use mediation and litigation simultaneously is appropriate. Under this approach, representatives of the disputing parties who are not involved in the litigation participate in the mediation. All aspects of the litigation proceed forward while the mediation is occurring.
Practice Tips: Discovery for Mediation Sessions (if any). Early use of mediation before any formal discovery has occurred in court proceedings may minimize costs and inconvenience to the parties. However, discovery in some form may be needed for effective participation in the mediation. In that case, the parties discovery on limited subject matter. Mediation “discovery” can be less costly and more effective, consisting of an exchange of information which is targeted and relevant to achieving a settlement.
Practice Tips: Pre-Mediation Submissions to Mediator. A mediator should try to minimize the costs associated with mediation. For that reason, the mediator initially may wish to inquire whether there are any pre-existing documents which could give the mediator an overview of the dispute. As discussed above, if pre-mediation submission papers are requested by the mediator, a mediator may as a matter of practice distribute to the parties beforehand a set of questions that would be helpful to address in those submissions (e.g., strongest/weakest points of case, anticipated costs of litigation, settlement progress, underlying needs and interests of parties, non-legal interests and goals of the parties). Moreover, a mediator may impose a page limit on pre-mediation submissions. Typically, a mediator assures each side that their responses are confidential and will not be shown to the other side, unless they agree otherwise. If such submissions statements are to be exchanged, that fact may somewhat limit the information contained in each statement.
¤ U.S.-CHINA Business Mediation Procedure
The U.S.-China Business Mediation Procedure provides that each side will submit a written statement to the mediator ten days before the first substantive mediation conference that summarizes the background and present status of the dispute, including any settlement efforts that have occurred. It is desirable for the submission to include an analysis of the party’s (i) real interests and needs, and (ii) litigation risks. Any written materials and information submitted to the mediator is confidential. However, the Procedure encourages the parties to exchange with each other all or some of the relevant materials that they submit to the mediator.
Practice Tips: Role of Insurers. A party’s insurer may be expected to bear all or part of the liability in certain cases. Under these circumstances, any settlement will be subject to the insurer’s approval and therefore it is advisable for the party seeking the indemnity either to arrange for the insurer to participate in the mediation, or secure the insurer’s agreement that it does not object to the party’s participation in the mediation. If the insurer will not be participating in the mediation directly, the mediator should confirm that the indemnified party has either an understanding of the parameters of an acceptable settlement or a means of determining those parameters expeditiously during the mediation. Otherwise only a tentative agreement can be reached with the other side, subject to insurer approval.
Practice Tips: Prior Settlement Discussions. The mediator should be informed of any prior settlement efforts on a general level, particularly if pre-mediation submissions are not provided.
Practice Tips: Confirming Letter. At the conclusion of the preliminary session, a mediator may prepare or instruct the parties to prepare a simple letter that confirms dates and other select procedural items.
Comments: The opening substantive portion of a mediation session typically begins with a joint session that all parties and their counsel attend. Usually the mediator begins the session with opening remarks explaining the process. The mediator then requests that each side present an opening statement of their perspectives on the matter.
Practice Tips: When extremely strong hostility and anger exists between the parties, an opening joint session may be counterproductive and the mediator may decide to meet with each side separately before convening a joint session.
4.3.1 Mediator’s Opening Remarks
Comments: The importance of the mediator’s opening remarks cannot be overemphasized because these initial comments will set the tone for the entire mediation.
Practice Tips: A mediator’s opening remarks are largely a function of personal style. Some mediators choose to keep the remarks short for a variety of reasons, including a reference for allowing the parties themselves to express their emotions or to describe the dispute in their own words very early in the process. Other mediators believe that it is more beneficial to use the time to further educate the parties about the process and to establish the legitimacy of the mediator’s expertise.
The length of a mediator’s opening remarks should reflect the level of the participants’ prior experience with mediation.
Regardless of other considerations, the mediator should discuss confidentiality and party control over the outcome in the opening remarks.
A mediator may choose to highlight some or all of the following points:
Practice Tips: Mediator’s Role. Remind parties that the role of a mediator is to act as a facilitator, not a decision-maker or a judge. Instill in the parties the sense of responsibility that they, and not the mediator, hold the power to resolve their own dispute.
Practice Tips: Mediator’s Impartiality. Remind the parties of the mediator’s neutrality and disclaim any personal bias regarding the parties or the outcome of the dispute.
Practice Tips: Goal. Remind the parties that the goal of the mediation is to assist them to reach their own resolution, and that they are limited only by their imaginations and creativity in solving the dispute.
Practice Tips: Voluntary Nature of Mediation. Where appropriate, remind the parties that their participation is voluntary, and that a resolution will be reached will only if it is consensual. If the parties are participating in a mandatory mediation where participation is not voluntary, such as in a mediation required by the court, the mediator should be prepared to educate the parties about the benefits of mediation. Among the general benefits to stress are privacy, timeliness, reduction of costs and a better understanding of the case. Even where participation is mandatory, the mediator should emphasize that any settlement agreement eventually reached must be consensual.
Practice Tips: Informal Nature. Highlight the informal nature of the mediation process. Encourage ideas on how best to structure the process.
Practice Tips: Explain Interest-Based Bargaining. Provide a brief explanation of the difference between “interests” and “positions,” and the advantages of “interest-based” bargaining. In “positional” bargaining, the scope of bargaining can be very narrow and the parties typically exchange offers and demands, usually in strictly monetary terms. By contrast, in “interest-based” bargaining, the parties expand the scope of the bargaining process by considering — and sometimes exchanging — their overall interests and objectives when seeking a resolution to a dispute. Such an approach may lead to solutions that are broader and more useful to the parties than the solutions provided by money, or narrow legal remedies.
Practice Tips: Confidential Nature of Proceedings. Explain the basic premise of why mediations must be confidential. Because the legal issues raised by confidentiality are complex, the mediator should point out to the parties that any confidentiality provisions agreed to by the parties may be subject to laws, regulations, court rules and the limited exceptions they contain.
Practice Tips: Mediator’s Style and Approach. A brief general statement about the mediator’s style may be appropriate. See Section 2.4 (Mediation Styles). The mediator also may wish to state whether he or she will be taking written notes during the process. See also Section 4.9 (Steps after the Process) (retaining notes).
Practice Tips: Role of Parties and Counsel. Stress that the active participation of parties is critical; generally outline the role of counsel. If one of the parties does not have legal counsel, the mediator should ensure that the party generally understands the mediation process. See Section 4.10.3 (Participation of Parties and Role of Counsel).
Practice Tips: Order of Presentations. Typically, the claimant party presents its opening statement without interruption. The respondent party then makes its statement, followed by an opportunity for further comment and questions by each side. Some mediators use other sequences for presentations or ask the parties themselves to determine the order in which statements are made, so as not to restrict the mediation and have it resemble a formal court proceeding. The mediator guides the process at all times, however.
Practice Tips: Purpose of Joint Sessions and Separate Caucuses. The mediator should explain that, during a joint session, the parties may choose to speak directly to each other and exchange information. If there is not too much hostility between the parties, joint sessions also may be useful for “brainstorming” and creating a list of possible, innovative solutions to the problems. The mediator should also briefly explain that the private caucus is a setting where each party meets separately with the mediator to explore settlement possibilities, and whether private caucuses are likely to be used in the proceeding.
Practice Tips: Time Frames and Progress Reports. Imposing a deadline for the conclusion of the mediation can enhance the progress of a mediation. Similarly, a fixed deadline between sessions for the parties to report back to the mediator on their progress can be a useful device. Many mediators ask the parties to perform a variety of tasks between sessions (such as obtaining further information, or considering new ideas on settlement formulations).
Practice Tips: Basic Ground Rules. Confirm basic ground rules after the mediator’s opening statement is completed. Particularly important to stress are the understanding that speakers will not be interrupted and that everything said in the mediation will be held confidential.
Practice Tips: Conclusion and focus on the Future. Close with remarks on the goal of the mediation process. Many mediators find it particularly useful to encourage the parties to look for solutions and “forward-looking” results, and not to focus on past events or seek to pin blame.
Practice Tips: Questions. Provide an opportunity for the parties or their counsel to ask any questions.
4.3.2 The Parties’ Opening Statements
Comments: Normally, at the conclusion of the mediator’s statement each party is given an opportunity to present an opening statement. Typically, a party’s opening statement consists of two parts: (i) an overview of business goals and interests (presented by the party) and (ii) a summary of legal positions and views (presented by the party’s legal counsel).
Practice Tips: Prior to the opening statements, the mediator may wish to instruct the parties to avoid making non-negotiable settlement demands at the outset, thereby keeping the range of alternatives open. After each side’s opening statement, the mediator may ask clarifying questions and give the parties an opportunity to comment on each other’s statements, if appropriate. Some mediators use a technique of asking each party to recapitulate what he understood the other party to have said. This technique not only permits the first party to correct any misunderstanding; it also requires each party, if only momentarily, to place itself in the other party’s position and articulate the logic of its argument.
A mediator can benefit from the parties’ opening statements by creating a list for the mediator’s personal use that:
During the joint presentation phase, the mediator should consider asking:
The Mediator also may privately consider these issues at this point:
4.3.3 Identifying and Organizing the Issues
Comments: Upon completion of the opening statement phase, it is often beneficial for the parties and the mediator to identify the issues in dispute and a proposed order of addressing them.
Practice Tips: There are two general approaches to identifying the issues that are in dispute and need to be mediated. One is for the mediator to summarize an understanding of the disputed issues, and to request confirmation from each of the parties. Another approach is to request that the parties state their understanding of the outstanding issues; if discrepancies exist between the parties’ accounts, the mediator can work with them to obtain general agreement.
The mediator should always be mindful of the importance of “framing” the issues – that is, of choosing the words that describe the dispute. Not surprisingly, each party and its counsel will “frame” the relevant issues in a manner most suitable to them and their desired resolution. An important task of the mediator throughout the process is to “reframe” these descriptions, and to organize the issues so that the parties’ common interests are predominant so that option generation can be considered by both and their respective legal positions are in the background. For example, in a dispute concerning a breach of contract for alleged failure to supply a product, the mediator might frame the issue as “one concern for the parties is how the original contract expectations can be fulfilled for both parties, ” rather than stating it as “one issue is whether there was a breach and the amount of damages.” In the first “framing,” the problem is focused on business needs and invites both parties to consider broad solutions without favoring one side’s perception of the problem. The second frame focuses more narrowly on the legal issue of claimed breach and damages which narrows possible creative solutions.
With regard to the order of addressing the issues, there are several ways to proceed – easy to hard, most urgent to least urgent, general to specific, most important to least important (or the opposite, in each case). Deciding the sequence in which to address the issues can be a collaborative undertaking between the mediator and parties, with the mediator providing guidance as needed. Alternatively, the mediator may decide how to proceed without formally discussing it with the parties. The sequence itself may not become apparent until after a few sessions are held and the mediator better understands the parties’ interests.
4.3.4 Dynamics of Joint Session
Comments: The timing of when (and if) to end a joint session and convene a private caucus with one of the parties, separately, is a function of several considerations. These include the mediator’s style, the particular issues at hand and the degree to which each party understands the other side’s positions and concerns. Generally, a mediator decides to end a joint session when it becomes apparent that further progress will not be made until after the parties have had an opportunity to meet privately with the mediator.
The mediator should always realize that the parties may continue in a joint session throughout the mediation process, if such an approach is the most productive way to proceed. Under these circumstances, no private caucus is held with each party. This approach may be particularly useful if the parties anticipate having a continuing relationship and will need a way to conduct ongoing negotiations with each other in the future.
Practice Tips: The mediator should be mindful that people often need to express pent-up anger, resentment or other emotions before they can resolve a dispute. Within reasonable boundaries, it may be beneficial to allow a certain amount of emotional release by the parties, often called “venting” in a joint session, as well as in later private caucuses. Such venting allows parties to get past their emotions and focus on resolving the dispute. If strong emotions give rise to more strong emotions in response, a rule might be imposed that the parties talk directly to the mediator instead of each other.
Comments: The term “caucus” refers to the separate meetings between the mediator and each party. The private caucus makes mediation the most confidential of ADR processes. In caucus, each side can disclose facts, concerns, and interests to the mediator that they would not or cannot reveal to the other party. These facts and concerns are nevertheless critical to the reasons for the dispute and to its resolution on terms that the party can accept. The utility of the private caucus is therefore to enable the mediator to learn of critical facts and interests that cannot be revealed in any other forum.
Caucuses also are useful to investigate settlement terms, or tentative ideas for settlement, that one party may be reluctant to suggest directly to the other party for fear of being perceived as weak or eager to concede. After such caucus sessions, a mediator may be able to present a settlement proposal made by a party in caucus, as the mediator’s own proposal, and do it in a manner, context, and time frame so that it is not perceived by the other party as coming from the adversary.
In this light, it can be understood that the promise of the mediator that information disclosed by one party will never be revealed to the other party without permission is essential to the efficacy of mediation. Assurance of protection against the unauthorized disclosure of such communications may be obtained by applicable mediation rules, mediator guidelines, the parties’ confidentiality agreement or the mediator’s practice style.
¤ U.S.-CHINA Business Mediation Procedure
Under the U.S.-China Business Mediation Procedure, Professional Ethics, at Appendix 1D, Para. 7, a mediator will not transmit information received in confidence from one party to another party unless authorized to do so by the party or compelled by law.
Practice Tips: If resolution is not feasible during the initial joint session, a mediator typically meets with the parties individually and begins to try to bridge the gap between them. The timing of when to hold caucuses is flexible — they may be held early in the process, or they may be held after the opening joint session and continued until agreement is reached. Moreover, caucuses need not be held at all. For example, if hostilities between the parties are low and they have an ongoing need to negotiate with each other, the mediation process may not require them to convey information or interests to the third-party mediator in confidence.
If the mediator anticipates long caucus sessions with each party, it may be beneficial to schedule them on separate days so that the other party does not have to needlessly spend time waiting to be re-invited into the mediation room. If there are long intervals between caucuses, parties should be assigned tasks during the time when they are not meeting with the mediator. Caucus sessions may on occasion be conducted over the telephone or online.
The mediator must decide which party to caucus with first. One approach is to caucus first with the claimant party. However, if the mediator believes that the respondent party has not disclosed its agenda as fully as the claimant party, or needs to express emotions or frustrations to the claimant to make progress, the respondent caucus may come first. In a multiparty dispute, a mediator needs to decide whether to convene a separate caucus with each party first, or to assemble different groups of parties who may share certain (but not all) interests in certain (but not all) issues. The mediator in a multiparty dispute will need to be sensitive to the development of strategic coalitions that may encourage or impede settlement.
During caucuses, the mediator should continue to assist the parties in moving the focus away from legal positions and toward their underlying economic or business interests. To assist the parties in doing so, the mediator might ask the party representatives open-ended questions such as, “How is the dispute affecting your current business?” (An “openended” question is one that cannot be answered with a terse “yes” or “no” but instead invites the responding party to explain or describe something in detail.)
The mediator should repeat during each caucus the procedures necessary to protect sensitive information from being revealed to the other party. Among these is to expressly repeat, at the end of each caucus, the mediator’s understanding of what information may be revealed to the other party and what information is to remain confidential, and to seek express confirmation of that understanding by the party.
Some common mistakes made by mediators in early caucus sessions include:
Comments: To assist the parties in resolving their dispute, mediators have many tools at their disposal. These include joint sessions, private caucuses, using open-ended and other questioning techniques to probe interests, engaging in reality testing, suggesting numerous options other than “winning” or “losing,” educating parties about options, encouraging the parties to pursue a particular option, proposing solutions, and eventually (if requested) evaluating claims. Throughout the process, the mediator must remember that it is the parties’ ultimate responsibility to resolve their own conflict, and it is the mediator’s responsibility continually to assist the parties to develop creative options in seeking the resolution that yields the most value.
Practice Tips: Settlement proposals are likely to be generated through discussion in caucus. The mediator can help each party to generate ideas, to develop options and alternative proposals that will lead to a mutually acceptable solution, and to try out unusual solutions in a relatively safe and confidential setting. The mediator can also help the parties to frame proposals and responses in such a way as to further the settlement process. With permission, the mediator may advance a party’s proposal as his own, in order to avoid the skepticism with which a party’s proposal is sometimes greeted by an adversary.
The first settlement proposal is seldom the last. Usually, any early proposal will provide a basis for negotiation. Once a first proposal is floated, some mediators will engage in “shuttle diplomacy,” meeting with the parties separately and sequentially to try to bridge a gap or develop a more acceptable solution. Other mediators may conduct joint sessions to discuss proposals with the parties together. When conveying one party’s position to the other, the mediator must take care to state the proposal accurately.
There are many approaches and techniques available to assist the mediator and the parties to resolve the dispute. Which techniques a mediator will use is largely a function of the parties’ desires and a mediator’s style. Here are some methods to draw upon, which mediators have used in joint sessions, caucuses or both:
“Reality Testing” Questions
One effective technique to guide the parties toward resolution and away from simply repeating their positions, particularly during caucus, is to pose “Reality Testing” questions. Such questions ask a party to consider the efficacy of achieving their objectives in a forum other than mediation. Essentially, these questions help them evaluate their alternatives to settling the dispute at the mediation table, and include the following types of inquiries.
“General-to-Specific” Break Down
Obtain a party’s general agreement on a principle that should be applied before tackling individual items. Break down complex or difficult issues and group them into smaller subsets. Then begin to resolve subset issues.
Remind the claimant that the critical issue in mediation is not how much a claimant “deserves” or how much a judge or jury or arbitrator would award, but rather how much a claimant is willing to take to settle the case today. Similarly, the critical issue for the respondent may not be how much it actually owes, but how much it is willing to pay to resolve the case today.
Explain Reasons Underlying Questions
Before asking a series of questions or commencing a session, consider sharing with the parties your objectives – e.g., “I would like you to explore possible creative solutions to your problem. To help me, can you explain to me why the other party’s proposal is not acceptable?” Some mediators call this technique “transparency,” and practice it because it encourages trust in the mediator, and because it sometimes elicits party suggestions for refining the mediation process.
BATNA and WATNA
Explore each party’s “Best Alternative to a Negotiated Agreement” (“BATNA”) and “Worse Alternative to a Negotiated Agreement” (“WATNA”). A realistic understanding of the alternatives to a negotiated agreement at the mediation table is critical for the parties to recognize proposals that are superior or inferior to those alternatives. That is to say, at least in theory, any proposal that is superior to a party’s BATNA is one that should be acceptable. Therefore it is critical to help the parties develop their BATNA in order to distinguish between acceptable proposals and unacceptable proposals.
Apply Accepted Standards
Identify mutually agreed upon or generally accepted standards, and explore the possibility of their application to the situation at hand. For example, if the parties can agree that a particular reference book is a reliable source of pricing information, then they might agree to rely upon that standard as a source for a fair resolution to the pricing aspect of their dispute.
Schedule a “Brainstorming” Session
“Brainstorming” is an American term meaning creating as many new ideas as possible, regardless of whether they will work. There are two ground rules for brainstorming: Rule 1– the goal of brainstorming is to increase the list of options from which to choose, and the more new ideas arise, the more successful the brainstorming session. Rule 2 – any evaluation of any of the options created during the session should be postponed until the very end. No decisions need be made at a brainstorming session. A session can be configured in a variety of ways. Both the parties and the mediator may be present or only one party may be present with the mediator. The mediator may consider involving additional party representatives to obtain fresh ideas and perspectives.
Use “Decision Trees”
Increasingly popular in the American business community, decision analysis can be a very useful tool in assisting the parties to calculate their exposure in arbitration or litigation and the benefits and risks of proposed settlements, in complex cases. Decision trees can also be extremely helpful in sorting out the relative importance of different issues in a case.
Making a decision tree essentially involves four steps: (1) listing the various possible events that might occur in the course of arbitration or litigation (or beyond); (2) considering the risks and benefits associated with each possibility; (3) discounting each possible event by its probability – that is, by the estimated likelihood that the event will occur; and (4) evaluating the overall risk by multiplying each possibility by its probability.
The analysis is depicted via diagrams where the parties’ choices are identified as separate branches with appropriate separation points represented by “decision nodes.” The decision nodes are further divided by “chance nodes” and end at “termination nodes.” In more complex cases, there will be multiple layers of chance nodes. A mediator who is familiar with these techniques can often assist the parties in constructing decision trees, facilitating their assessment of the risks and benefits of a proposed solution when compared to the risks and benefits of likely alternatives.
Expand Available Resources to be Distributed
A mediator can divert the parties’ attention away from fair distribution of the contested resources, and towards increasing the resources available for distribution – that is, not how to split the pie, but how to make the pie bigger so that everyone’s piece is larger. For example, in a pure monetary dispute, a mediator can explore with the parties the possibility of a delayed payment schedule; use of non-cash financial instruments (e.g., letters of credit, stock, low interest loans); use of resources to substitute for money payments, promises of future orders; promise to change a relevant policy in the future; or payment of a portion of the funds to a charity or scholarship fund.
An apology can be a very powerful, sometimes decisive, component of resolving some disputes.
The “one-text” approach is a tool that some mediators use in multi-party mediations to guide the parties toward resolution. This approach is often used late in the process. The mediator prepares a draft or outline of an agreement, incorporating the ideas and proposals of the parties. The draft is circulated to each party for comment and returned to the mediator to address the parties’ comments in a revised draft. The mediator makes no commitment to how, if at all, the draft will be revised, nor does he attribute any change to a particular party. No party keeps any drafts during the process. This process is repeated until the mediator decides that no further revisions can be made. The parties then decide to either accept or reject the settlement that is outlined in the revised draft document.
Some mediators explore the possibility of a conditional offer – that is, an offer by a party that a mediator is authorized to disclose to the other party only if a certain condition is met. This approach can be used to close the gap between the parties. For example, if party A has authorized the mediator to offer $100 and party B is demanding $250, the mediator can attempt to secure party A’s agreement to offer $150 on the condition and only if party B reduces its demand to $175. If party B does reduce its demand to $175, the condition has been met and the mediator can reveal party A’s offer of $150 without further authorization from party A.
This tool is a variation of the conditional offer. A mediator obtains two offers at the same time from the same party: one offer that may be disclosed to the other party immediately, and the second offer can be disclosed only if it will unequivocally settle the case. The second offer may also be used in a hypothetical proposal to the other party to determine if such offer would produce settlement. In this instance, the mediator states, “If I were able to get the other side to $ X amount, would that be sufficient to resolve this matter?” If the hearer of that offer says, “No,” then the hearer never learns that the other party was willing to settle at that X figure.
Use of Evaluation
Current forms of mediation, especially in business and public disputes, often involve some form of assessment by the mediator, called ”evaluation.” However, American practice is generally to postpone evaluation for as long as possible, to encourage the parties to come to their own conclusions. If the parties are unable to propose acceptable solutions to their disputes, the mediator may be called upon to provide a candid, neutral assessment of the value of the claim, the likely outcome in arbitration or court, or a “fair” proposal for settlement for the parties’ consideration. An evaluation can focus on either a single issue or an entire case.
¤ U.S.-CHINA Business Mediation Procedure
The U.S.-China Business Mediation Procedure permits the mediator to offer an evaluation to the parties only if both parties request it, and only if the mediator is professionally competent to do so.
“Impasse” means a dysfunction or breakdown of the negotiation process in which the parties are no longer able to respond creatively to each other. Impasse can occur for a wide variety of reasons. In addition to the techniques above, a mediator can consider using the following approaches to break through an impasse:
— Expert Opinion —
Explore the possibility of obtaining a jointly appointed neutral expert opinion on the factual or business issue causing the impasse.
— Breakout Meetings —
Arrange different sets of breakout meetings to find common ground for settlement – e.g., a meeting between only the business representatives; a meeting between one counsel and mediator only, or a meeting between both counsel and mediator only.
— Hidden Psychological Issues —
Explore the hidden psychological issues, including a party’s emotions and inability to address or set them aside.
— Value of Breaks —
Take breaks to relieve strain.
— Party Homework —
Ask parties to work on particular tasks – for example, finding out additional information on an issue.
— What Happens If No Settlement —
Review the BATNA and WATNA options with each party, and encourage frank discussion relating to the consequences of not settling.
— Best Offers —
Solicit confidential final, best settlement offers; use these offers only as hypothetical proposals by the mediator without identifying that the offer was made by a party to guide further negotiations.
— Contingent or Partial Deals —
Consider the possibility of a contingent or partial resolution.
— Mediator Evaluation —
Provide a case evaluation under agreed upon circumstances. For a complete discussion of the advantages and disadvantages of evaluations, see Section 4.10.2 (Using Evaluations in Mediation).
— Mediator-Proposed Settlement —
If the parties ask for it, and if the mediator is competent to do so, submit a mediator proposed settlement if the parties cannot craft their own. Such an approach raises issues similar to those present when a mediator provides an evaluation. See Section 4.10.2 (Using Evaluations in Mediation).
Comments: If an agreement is reached between the parties, typically a joint session is held without delay and a memorandum of understanding or term sheet is prepared and signed at that time. Thereafter, a formal settlement agreement, based on that document, is drafted and executed. Counsel for the parties typically prepare the settlement documentation.
Mediators who draft a memorandum of understanding or a settlement agreement must be mindful that issues may arise relating to the practice of law. In general, a mediator who is not licensed to practice law in the jurisdiction in which the mediation takes place may be restricted in drafting settlement agreements by laws prohibiting the unauthorized practice of law. If licensed to practice law, the mediator needs to be aware of the implications of ethical limitations on representing clients whose interests conflict since drafting such agreement for both parties could be construed as practicing law. If any party is unrepresented by counsel, some courts and ethics advisory bodies in the United States virtually prohibit the mediator from drafting a legal document. Others permit such activity with carefully proscribed limitations. In most American jurisdictions, the lack of guidelines leaves the mediator without direction.
The enforceability of a mediated settlement agreement under American law is subject to the general rules of contract, including the existence of offer, acceptance and consideration, statutes of fraud, defenses to contract, and rules of construction. A number of American states have enacted statutes dealing with the enforcement of mediated settlement agreements or have case law addressing enforcement issues, such as the requirement that mediated settlement agreements be in writing and be signed by both counsel and the parties. Mediators and counsel should determine whether certain actions must be taken to make a settlement agreement enforceable under Chinese law.
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The U.S.-China Business Mediation Procedure, at Appendix 1, Section 8, contemplates that the parties may request the Center to arrange for entry of the mediated agreement as an arbitral award or may request a court to enter the settlement agreement as a judgment.
If an issue arises concerning the enforceability of a mediated settlement agreement, disclosure of the agreement may be required, and inquiries into how the agreement was reached may be demanded. Some American courts have held that the protection of mediation confidentiality prevents the enforcement of an oral agreement reached during mediation, whereas other courts have found to the contrary.
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The U.S.-China Business Mediation Procedure provides that any written settlement agreement resulting from the mediation may be disclosed for enforcement purposes.
Practice Tips: If it is clear that the parties are in agreement, a memorandum of understanding or term sheet should be prepared and signed immediately before the session is closed or as soon as possible thereafter, to guard against later misunderstandings and to deter the parties from needlessly changing their minds.
A mediator should consider requesting that all of the parties’ counsel be involved in drafting any memorandum and final agreement to avoid later arguments of construction against a drafter if a dispute about the meaning of the terms arises.
Comments: A defining characteristic of the mediation process is its voluntary nature and party-controlled features.
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The U.S.-China Business Mediation Procedure provides that each party may withdraw at any time after attending the first session and before execution of a settlement agreement by written notice to the mediator and the other party.
A mediator also has the ability to terminate the process.
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The U.S.-China Business Mediation Procedure provides that a mediator may withdraw by written notice for serious personal reasons; if the mediator believes that a party is not acting in good faith; or if the mediator concludes that further mediation would be futile.
In some instances, instead of terminating the mediation if a settlement cannot be reached, it may be more appropriate for the mediator to suggest that the parties adjourn and reconvene at some future date. The adjournment can be for either a definite period of time (e.g., two weeks) or until a certain event has occurred (e.g., the issuance of a court decision).
Practice Tips: The mediator should not hesitate to use adjournments to provide needed cooling-off periods, particularly when an impasse threatens or has arisen. If an adjournment occurs, the mediator and parties should review any confidentiality agreement or governing provision to determine the scope of its applicability during the adjournment period.
When the process is terminated rather than adjourned, it may be beneficial to hold a final joint session. A concluding joint session offers an opportunity to hear each side’s final offer and supporting reasons. Such an exchange could, at a minimum, enable the parties to better understand each other’s respective positions and interests, which in turn could lead to a settlement after the formal mediation has concluded. In some cases, a mediator may make optional final offers or give an advisory evaluation at a final session. See Section 4.10.2 (Using Evaluations in Mediation).
Comments: In the event no agreement is reached, a mediator can greatly assist the parties in suggesting, and assisting in designing, another ADR process that meets their needs. Such processes can include advisory (non-binding) or binding arbitration, minitrial, and others. The mediator can also assist the parties in finding a neutral for such processes, or agreeing upon a selection process for one.
If the parties decide to proceed with arbitration, a question arises whether the mediator will serve as the arbitrator.
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The U.S.-China Business Mediation Procedure provides that, unless the parties and the mediator agree otherwise, a mediator should not serve as an arbitrator. CPR further recommends that the parties not agree before the mediation whether the mediator will act as an arbitrator if the mediation is not successful because that may inhibit discussions in caucus between the party and mediator.
Whether the mediation is successful or not, certain items typically need to be addressed after the process ends:
Comments: Returning Documents/Retaining Records. Practice varies with respect to retaining files.
Practice Tips: The mediator may wish to retain a brief, non-substantive memo of the general nature of the dispute, who participated, meeting dates, and whether agreement was reached.
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The U.S.-China Business Mediation Procedure provides that the parties and the mediator shall, upon the request of a party, return all documents received from that party without retaining copies or certify as to the destruction of such materials.
Comments: Reports by Court-Appointed Mediators. If mediation is conducted under a court program, court rules may govern information to be reported by the mediator to the court. Although court rules and practices vary, generally they require only disclosure of the outcome, and not substantive aspects of the mediation.
Practice Tips: A mediator serving pursuant to court order needs to be familiar with the appropriate court rules and practices because they vary from court to court.
Comments: Inform All Parties if Subpoenaed. If the mediator receives a subpoena for documents or testimony regarding the mediated dispute, the mediator should immediately inform all parties, so they have the opportunity to assert confidentiality protections. The mediator also may seek to assert any privileges or confidentiality protections that he/she may have independent of the parties.
Practice Tips: If a mediator is subpoenaed to testify or produce documents about the mediation, he/she may incur costs associated with a motion to quash or other response.
A mediator may seek to negotiate an indemnification provision for expenses incurred in connection with responding to a subpoena as part of his/her retention agreement.
4.10.1 Refresher of Essential Mediator’s Skills
Comments: The mediator often acts as a bridge between the parties. The skills and resources that an effective mediator needs to readily draw upon include:
Practice Tips: A mediator’s attitude and techniques can materially affect the outcome of the mediation. To enhance the likelihood of a successful mediation process, a mediator should avoid:
4.10.2 Using Evaluations in Mediation
Comments: Some mediators believe that evaluation should hold no place in mediation – that mediation should be a purely facilitative process in which parties are free to make their own judgments about the legal merits and business opportunities of a commercial dispute. In a few instances, mediation rules or guidelines may affect the ability of a mediator to provide evaluations.
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The U.S.-China Business Mediation Procedure provides that if the parties do not develop mutually acceptable settlement terms, and only with the parties’ consent, the mediator:
Practice Tips: An evaluation can take many forms and provide many benefits:
However, evaluations can also introduce disruptive elements to the mediation process, including a halt to further bargaining if one party becomes alienated because of the mediator’s proposal. Such risks should be balanced against the possibility that a settlement may be lost without such a frank assessment by the mediator. Other factors to take into account prior to providing an evaluation include whether the parties are ably represented by counsel and whether the mediator would serve as an arbitrator if the dispute is not resolved during mediation. See Section 4.10.3 (Participation of Parties and Role of Counsel) and Section 4.10.5 (Med-Arb Variations and Co-Med-Arb Model) for fuller discussions.
Both the timing of an evaluation and the parties’ understanding of the process itself are extremely important. If a mediator delivers an evaluation too soon, or in the wrong way, the party receiving an unfavorable evaluation may withdraw. Before providing an evaluation, the mediator should ensure that