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In my previous article on this subject I listed a number of factors which might prevent a settlement being reached at the mediation of an IT dispute. My talk on 29 September provided an opportunity for those attending to share their experiences on the steps which can be taken to minimise the impact of factors of this kind. In this article I will summarise the steps which should be considered in advance of the mediation to provide the best prospect of the mediation succeeding.
1. The timing of the mediation
A mediation may be taking place too soon if the parties have not yet exchanged sufficient information to enable them to make a realistic assessment of the strengths and weaknesses of each party’s case. This may be an especially important point in an IT dispute which involves complex technical issues, such as whether delay was the responsibility of the software supplier (eg in failing to resolve sufficiently quickly difficulties in developing the software) or the responsibility of the customer (eg in failing to provide the supplier promptly with the detailed information required by the supplier).
On the other hand a mediation may be taking place too late if the legal costs incurred by the parties have become so large that neither party is prepared to compromise sufficiently in relation to the costs incurred to enable a settlement to be reached.
It is necessary to try to strike the right balance between these two conflicting considerations. Whenever possible, the mediation should only take place when sufficient information has been exchanged between the parties to enable them to form a realistic assessment of their position. If this point has not yet been reached, the parties and their advisers should consider:
(1) asking for or providing written submissions setting out and explaining the points being made and the evidence relied on, possibly on a sequential basis as opposed to a simultaneous basis;
(2) asking for or providing disclosure of relevant documents which are not available to the other party;
(3) asking for or providing an independent expert’s report; and
(4) arranging without prejudice meetings between independent experts in advance of the mediation.
If necessary, the planned date for the mediation should be postponed to enable these steps to be taken. A mediation which takes place with insufficient time to prepare properly for the mediation is a mediation which is less likely to succeed.
2. Preparation for the mediation
There are a number of respects in which lack of preparation for the mediation could prevent settlement being reached. Preparation for the mediation should include the following:
(1) Identifying and analysing the issues
(2) Making a realistic evaluation of the prospects of success, including (where appropriate) obtaining legal advice, or advice from an independent expert
(3) Thinking about the reasons why the parties have not already been able to negotiate a settlement
(4) Working out what is likely to happen if no settlement is reached and how much it will cost the client if he loses at a trial (the worst-case scenario)
(5) Carrying out a risk analysis
(6) Thinking about what the other party is looking for, not just from the litigation, but also in its business generally
(7) Considering a range of possible settlements:
(a) a good settlement
(b) an acceptable settlement if nothing better can be achieved
(8) Thinking about how the other side will view a particular settlement proposal
(9) Ensuring that the settlement aimed for is a realistic one to aim for, ie one which the other party may be willing to agree to
(10) Adopting a flexible approach to the structure of a possible settlement, including considering settlement proposals which do not involve payment of money – for example continuing with a software project with a renegotiated fixed price and a new timetable
(11) Considering what a party can offer which may not cost him much, but would be of great benefit to the other party
(12) Considering the availability of funds to offer payment, and how long it might take to raise the funds
(13) Investigating the solvency of the other party (he may be insisting that he has no money)
(14) Where the issues are complex (such as technical issues in an IT dispute), ensuring that each party gives the other party enough material prior to the mediation to understand the case being made (see section 1 above)
3. Inappropriate expectations from the mediation
A mediation may not succeed if one or more of the parties has inappropriate expectations from the mediation.
(1) A party may not appreciate what happens at a mediation, for example he may attend the mediation expecting the mediator to tell the parties which side he thinks is more likely to succeed. However many mediators will be reluctant to be drawn into revealing this:
(a) because the mediator does not have sufficient information to decide between the parties, and
(b) because parties who think that the mediator is going to express an opinion on the parties may be less willing to speak frankly to the mediator about their prospects of success.
An erroneous opinion based on insufficient information may actually make it harder for the parties to negotiate a settlement, by widening the issues rather than narrowing them.
(2) A party may have over-ambitious (ie unrealistic) expectations as to the level at which a settlement may be reached, and may have given insufficient thought to the range in which the other party is likely to be willing to negotiate. On finding out that he cannot achieve the desired settlement, he may need time (ie days or weeks) to get used to the idea that he must lower his sights.
The mediator and the advisers to a party should ensure that the parties understand what to expect from the mediation, and that they come to the mediation with realistic expectations.
4. Differing assessments on the issues
Very often the reason for differing assessments is that each side is basing its assessment on different information. Misunderstandings can arise because points have been insufficiently explained or insufficiently understood. Important points may have been overlooked.
Mediation may help to remove misunderstandings, but it may be difficult to explain complex technical points on the day of a one-day mediation. The necessary people may not be present to explain the point or to understand the explanation.
Another possible reason for differing assessments is that one party believes that the other party has important undisclosed documents. These may not available at the mediation.
Before the mediation, it is essential for parties to:
(1) identify the issues,
(2) form an assessment on each of the main issues, with expert advice or detailed legal advice if required,
(3) make sure that the other party knows what are considered to be the main issues and understands the case being made, and
(4) ask the other side for copies of documents which they consider may be particularly important.
Parties must also consider who they need to have present at the mediation, such as the project manager or an independent expert. If there are complex technical issues, consideration should be given to:
(5) fixing a two-day mediation (possibly with several days between the first and second day)
(6) having a mediator or joint mediator who has the expertise to express an opinion on the technical issues (keeping in mind the risks involved in this course which have been referred to above).
5. Difficulties with individual people
The parties directly involved in the dispute may not be the only people who have an interest in the outcome. There may be others who have an interest in the outcome and who may for one reason or another make it more difficult to reach a settlement. Examples of such persons are:
(1) employees who may be criticised,
(2) those who have a budget to stick to,
(3) those who feel that a point of principle is involved,
(4) lawyers or experts who have previously advised that the client has a very strong case, and
(5) underwriters.
Legal advisers may not be giving realistic advice. Expert witnesses may not be adopting a sufficiently objective approach. Difficulties may also occur if the principal decision-makers leave early or arrive late, or are only available by phone.
Each party should normally ensure that the mediation will be attended, for the whole day, by someone who has the authority to conclude a settlement and who will look at things sufficiently objectively.
6. The financial position of the parties
A defendant which is legally aided or has legal expenses insurance may have less incentive to settle. Mediations can fail because insufficient thought has been given to the paying party’s financial ability to meet the claim. The paying party may not have given sufficient thought to how to raise the money. The claimant may not believe the paying party’s protestations that no more money is available.
Before the mediation, each party should consider
(1) how much the paying party can afford to pay,
(2) how long it will take him to raise the money,
(3) whether insurance is relevant,
(4) whether to investigate the means of the other party,
(5) checking the latest accounts of the company itself and its parent company,
(6) the assets which shareholders may be able to use to provide funds.
7. The conduct of the mediation
At the mediation itself, the parties should be frank with the mediator. This will make it easier for the mediator to help them identify appropriate ways of resolving their differences.
Most mediators have been trained in mediation techniques, but there can be many reasons why things may not go smoothly on the day. If a party or his advisers have concerns about the conduct of the mediation, they should consider tactfully explaining their concerns to the mediator. Many mediators would prefer to be told about this at the time, when it may be possible to deal with the problem, rather than hearing about it later after it has been reported on the feedback form.
Conclusions
The feature of IT disputes which is most likely to distinguish them from others is the presence of complex technical issues. It is essential that the parties and their advisers should give sufficient consideration, in advance of the mediation, to how these technical issues should be addressed and whether sufficient steps have been taken to deal with these issues.
If the parties fail to reach settlement at a mediation, after the mediation they should think about why this was so. In many cases they are likely to be able to identify ways in which more careful preparation and planning for the mediation would have improved the prospects of reaching a settlement.
8. Clive Freedman FBCS, FCIArb, of 3 Verulam Buildings, is a Barrister and CEDR Registered Mediator.
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