Commercial mediation for businesses: a lawyer to help you
Commercial mediation for businesses is a peaceful approach to dispute resolution. Based on the voluntary participation of the parties concerned, this passive approach uses non-conventional techniques, far removed from the complex and time-consuming conventional legal procedures. Why use this form of conflict resolution? How does business mediation work? Find out how this approach works.
What is commercial mediation?
Commercial mediation is a dispute resolution process in which an impartial, neutral third party helps disputing parties to reach a mutual agreement. In mediation, it is the parties themselves who find the solution, with the help of the mediator.
Commercial mediation for business: a passive conflict resolution process
Commercial mediation is a dispute resolution process that leads to a win-win solution. It applies to individuals and corporate entities caught up in a conflict of interest. Mediation can take place between a customer and a company, or between 2 companies.
Commercial mediation may be initiated by the 2 parties, or may be required by law. In the latter case, it becomes mandatory. In all respects, commercial mediation remains a voluntary, impartial, confidential and neutral act.
Here’s an example to help you better understand this issue:
Background: Company XYZ, which specializes in the production of electronic components, supplied a batch of these components to Company ABC, a manufacturer of consumer electronics. After delivery, ABC found defects in some components, resulting in production delays and financial losses.
Dispute: ABC is demanding financial compensation for the losses it has suffered, and the repair or replacement of the defective components. For its part, company XYZ acknowledges certain defects, but considers that the compensation demanded by ABC is exaggerated.
Mediator’s intervention: Rather than embark on a long and costly legal battle, the two companies decide to resort to mediation. A commercial mediator is chosen by mutual agreement. During the mediation sessions, the mediator creates an environment conducive to dialogue. He invites each party to present its point of view, while ensuring that each party listens to the other.
After several sessions, with the help of the mediator, the companies reach an agreement. Company XYZ agrees to replace the faulty components and offers a discount on the next order. Company ABC, for its part, accepts this proposal and waives further financial compensation.
We note that this mediation is a means of offsetting the financial burden of major legal proceedings and avoiding certain financial loss.
Commercial mediation for businesses: a voluntary act
As a general rule, commercial mediation is a procedure based on mutual agreement. The parties involved state their positions and attempt to find a solution without confrontation. The process requires the intervention of a professional mediator.
The 2 parties are free to choose their mediator. However, experts recommend that a lawyer specializing in business law act as mediator. In Canada, companies can turn to the not-for-profit Canadian Commercial Arbitration Centre (CCAC) and obtain the assistance of a mediator.
Either party can decide to end the process at any time.
Commercial mediation for businesses: a regulated process
In Canada, commercial mediation for businesses is governed by a number of laws, including the Alberta Commarcial Arbitration Act. It sets out the criteria for choosing a mediator, confidentiality and the mediation process.
The Ontario Arbitration Act, 1991 sets out the rules governing the application of mediation.
The British Columbia Commarcial Arbitration Act sets out the rules governing the appointment of mediators and their roles.
When to use commercial mediation for business?
The dispute resolution process can be used to resolve disputes of the following types :
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- disputes between 2 companies ;
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- disputes related to the sale of a business;
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- disputes between managers or a manager and an executive of the same company;
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- disputes between shareholders;
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- disputes between shareholders and directors;
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- disputes concerning the restructuring of a company;
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- disputes between managers of a family business;
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- disputes between closely-held companies;
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- disputes related to start-ups..
The involvement of a business lawyer is vital to the success of the operation.
The benefits of commercial mediation for businesses
Commercial mediation is a voluntary act that offers many advantages.
Maintaining good relations between disputing parties
The mediation process maintains a healthy, cordial relationship between the parties in conflict. During the process, the parties involved listen to each other and do their utmost to reach a satisfactory solution. The methods of application avoid the risk of subsequent conflicts arising from inappropriate decisions.
This approach is useful if the parties involved wish to maintain an ongoing relationship. This is precisely the case for people in conflict of interest working within the same company.
This approach has the advantage of being flexible, allowing the settlement to be adapted to each individual’s needs.
Rapid conflict resolution
Commercial mediation is faster than legal proceedings. It takes just a few days to organize the session and reach an agreement, whereas it takes months or even years to settle a dispute in court.
The meetings between the parties and the mediator are limited to a few hours, or even a few days. What’s more, the process depends solely on the availability of the parties, and not on a judicial timetable.
A rapid procedure means limited costs, lower than those of a court procedure. This affordable solution is therefore well suited to the needs of companies that cannot afford exorbitant legal expenses. What’s more, mediation costs are shared between the parties involved.
Confidentiality of the process
Commercial mediation is a confidential process. The parties involved, as well as the mediator, have a duty of confidentiality regarding the discussions and information exchanged. This confidentiality guarantees the creation of an environment of trust, conducive to neutral discussion and transparency.
Section 23 of the Canadian Commercial Arbitration Act (CCAA) states that the parties may agree to keep arbitration and commercial mediation confidential.
Legal section 30 of the Ontario Arbitration Act, 1991, however, imposes confidentiality on information exchanged throughout the mediation process, except in certain circumstances.
Section 36 of British Columbia’s Commercial Arbitration Act prohibits the disclosure of information referred to in mediation, except by agreement of the parties.
How does commercial mediation work for companies?
Commercial mediation procedures for businesses vary according to the personalities of the parties involved, the complexity of the problem and the context. Nevertheless, each session is based on these common points.
Preparing for commercial mediation
Once the parties have agreed to hold a commercial mediation for business, they begin the preparation phase. This includes choosing a mediator. The mediator opens the dialogue and takes stock of the situation.
Then comes the choice of a strategy to guide the mediation. This stage includes: evaluating conflict resolution methods and choosing the best problem-solving method.
The final preparatory phase consists of building trust to encourage communication between the parties in conflict.
The mediation session
During the session, the mediator adopts an open, communicative tone. He or she establishes the guidelines to be followed. He defines the problems to be solved and sets the agenda. Explain the points of interest to each party. Delineate the steps to be taken to deal with problems.
The mediator highlights the interests and needs of each party. He assesses how these interests can be met.
Each participant is invited to express his or her point of view and state his or her needs. The mediator, acting impartially, can rephrase what has been said in the event of misunderstanding. He also invites participants to propose solutions.
Signing agreements
2 scenarios can arise after a business mediation session: unanimous agreement or disagreement. If the session results in an agreement, it will be put down on paper and signed. Each party can then record the terms of the agreement in a legally binding contract. The agreement can even be homologated to give it legal force, similar to that of a court judgment.
In the second case, the disputants turn to another conflict resolution solution (arbitration, legal proceedings, etc.).
The role of the mediator in business mediation
The mediator helps the participants reach an agreement. He takes on the role of guide.
What is the role of the commercial mediator?
The mediator :
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- encourages exchange ;
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- shows understanding for all participants;
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- defines problems;
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- explains everyone’s point of view;
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- explains differences in interests and perceptions;
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- encourages open-mindedness;
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- proposes solutions in the interests of all parties;
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- focuses on the future and draws a line under the past;
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- proposes a pause in case of impasse..
Despite the importance of his role, the mediator cannot make a decision.
What skills does a commercial mediator need?
A good commercial mediator has sharp communication skills. This quality makes it easier to understand each other’s points of view. It also implies listening skills, the ability to synthesize and express oneself.
Neutrality is essential to negotiation. The mediator cannot favor one party over the other. He maintains a neutral position and is impartial in all circumstances.
The mediator is able to manage the emotions that arise during the session. They defuse tensions, manage power dynamics and create an environment conducive to communication.
To facilitate discussions, he or she explores every option and works with participants to reach satisfactory agreements.
Should I use a lawyer as a Commercial Mediator?
In Canada, you don’t have to use a lawyer as a commercial mediator. That said, there are a few advantages to doing so, as well as a few points to watch out for. Take a look:
The pluses of having a lawyer as mediator :
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- Legal expertise: They’ve studied the law, so they can help you untangle the legal strings of your situation and see through the legal implications of your dispute.
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- Litigation experience: They’ve been in and out of court. So they can give you an insight into what to expect if disputes get bogged down in a drawn-out legal battle.
But don’t forget to think about :
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- Their mediation experience: Being good at law doesn’t automatically mean being an ace at mediation. Make sure your lawyer also knows how to navigate the sometimes tumultuous waters of mediation.
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- Neutrality: This is the foundation of mediation! Make sure your lawyer has no ties or biases that could distort the game.
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- Budget: A lawyer is often more expensive. Weigh up the pros and cons in terms of cost.
Conclusion
Commercial mediation for business is a strategic choice for conflict resolution. The rapid, affordable approach enables the main parties involved to find a mutually acceptable solution. It is most effective in the presence of a lawyer specialized in business law. The legal representative can become your spokesperson and represent you.
Source :
Mediation – The conflict resolution handbook (justice.gc.ca)
