Mediation in commercial contexts

Conflicts and disputes arise from time to time in business life. The big question is not whether they occur, but how to solve them. Mediation is particularly suitable for disputes between parties who have ongoing business relationships. It can e.g. refer to disputes concerning co-ownership of companies and collaborations of other kinds as well as in rent, workplace and contract disputes. It can also involve a contract negotiation, where the parties do not manage to reach a final solution.

Why choose mediation instead of court/arbitration?

Advantages of mediation in commercial contexts, compared to court and arbitration

1. Time and money

Through mediation, the parties can save a lot of time and money.

The table below compares time and costs in different EU countries, regarding a sales dispute of €200,000. The comparison is made between court proceedings, arbitration and mediation. The statistics were published in 2010, before the introduction of the various countries’ mediation laws*, which were added as a consequence of the EU’s Mediation Directive. This shows that mediation both goes much faster and costs much less than court and arbitration proceedings.

* In Sweden: The Act (2011:860) on Mediation in Certain Private Law Disputes

Comparison with court proceedings/arbitration

Here you see the same comparison, but in the form of a “top list”.

2. Efficiency (“settlement rate”)

The English mediation organization CEDR (“The Center for Effective Dispute Resolution”) publishes a report every two years, which, among other things, describes how efficient mediation is (“settlement rate”). The results for the year 2022, based on approx. 17,000 mediations in commercial disputes, are shown in the table below.

The results for 2022 thus show that the parties reached a settlement after a one-day mediation in 72 percent of all mediations. In cases where the parties did not agree at that time, but where the mediation was resumed a short time after the mediation day, an additional 20 percent was added. Thus, 92 percent of all these approx. 17,000 mediations ended in a settlement. This may be considered to mean that there are very good odds of reaching a settlement through mediation. In the remaining eight percent, you can turn to the court or arbitration board to get a decision. Mediation and court proceedings/arbitration are part of the same “family” (dispute resolution) and the statistics clearly show that you should use them in the order just mentioned.

3. Self-determination

In mediation, it is the parties, not judges, who decide their own solution. But they may need the help of a third party, a mediator, to reach an agreement. An educated guess is that the parties themselves – and not one or more judges – know best what best benefits the interests and needs of both parties. A commercial dispute is best resolved, in my view, by a commercial solution, not necessarily the one preferred by the law book (court/arbitration board).

Furthermore, one can ask the following:

Question 1: Do you want to decide for yourself about your life and your money?

Question 2: Or do you want another (unknown) person to do it for you?

Question 3: If you have answered yes to question 1, then how come so many disputes end up in court?

The conclusion is, of course, that most people want to decide for themselves about their life and their money. They get that opportunity in a mediation.

4. Relationships

One can ask the following:

Why end an otherwise lucrative business relationship, just because problems have arisen?

Why divorce every time there is a conflict at home?

How do you create a functioning parental relationship when you have divorced?

The probability that you can continue a relationship is higher if you solve the problems through mediation.

5. Flexibility

In a mediation, the parties and the mediator are largely free to arrange the procedure according to what suits them best. You are not bound by, for example, the procedural rules of the Code of Judicial Procedure. This means, for example, that where appropriate, all of the parties’ disputes can be handled in one and the same mediation, instead of them being forced to litigate simultaneously in different forums. In addition, more parties can be included, if several disputes are connected, for example if an injury involves several parties at several levels, where they are otherwise forced to pursue individual disputes against different parties and perhaps in several different countries.

6. Confidentiality

What occurs in a mediation, what is said and the documents presented are treated with confidentiality. This aims for the parties to be able to speak openly with each other, without risking that the content of the mediation can be used in some other context, for example in a court dispute. The confidentiality aims to create the conditions for understanding and thus increased opportunities to be able to agree.

7. Mediation because the government wants (wanted) it

In the preparatory work for The Act (2011:860) on Mediation in Certain Private Law Disputes, the following appears, among other things:

“The government believes that the option of ordering special mediation should be considered in more cases than is done under the current system. Already from Chapter 42 Section 6 RB [the Swedish Code of Judicial Procedure. My comment] states that the court must clarify whether there are conditions for the parties to reconcile or otherwise achieve a consensual solution. Highlighting special mediation more clearly requires, however, that conciliation negotiations and special mediation in Chapter 42 Section 17 RB is to a greater extent equalized. The court should therefore decide in each individual case whether settlement negotiations or special mediation is the most appropriate based on what the dispute is about, how extensive it is, the attitude of the parties and otherwise what special circumstances exist in the individual case”. For general information about mediation and the mediator, click here.