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The next mediation. Risk for mercantilist lawyers? And for arbitration?

After the meeting with Craig Woods and in the same line of argument, here is a recent article on business mediation written by our colleagues Blanca Iturmendi and Fernando Rodriguez Prieto, published in Spain Arbitration Review, Magazine of the Spanish Arbitration Club. The authors explain to us with abundance of data that the enormous advantages that commercial companies can find in mediation will end up dissipating any mistrust of this process that makes it easier for entrepreneurs to take charge of their own conflicts.

 

The next mediation. Risk for mercantilist lawyers? And for arbitration?

 

ABSTRACT.

 

Mediation is still little known and little used in Spain in the commercial sphere. Nevertheless, a global perspective allows us to deduce that mediation, as a way of solving many business disputes, will develop and eventually take hold. Our arbitrators and commercial lawyers may feel apprehension at this prospect. It will undoubtedly mean changes in their professional life. They will need to expand the range of solutions offered to clients in order to find the most suitable to each conflict. Ultimately, these changes can be beneficial for these professionals, potentially including a more satisfactory legal practice.

 

 

Introduction: between skepticism and suspicion.

From the obviousness of its very limited use in Spain, mediation does not inspire particularly positive feelings in a sector of our mercantilist lawyers and our arbitrators. Some are skeptical about its potential usefulness. And others may be suspicious of the expectation of how it might affect them. Both positions are perfectly explicable from an insufficient knowledge of this instrument in our legal field.
Mediation, as a form of negotiation assisted by one or neutral third parties, is a sophisticated product. It is not easy to understand that a third party can intervene to transform the dialogue between opposing parties and thus make their negotiations fruitful. That’s why among the skeptics we often hear phrases like these: “That’s no use at all”, “It’s not worth it or try it”, “I do not know if that works in the United States, but here it will never do it”, ” If I already know how to negotiate without the help of a third party! “Or” With a mediator I would not have gotten more “. The prejudice against its usefulness also has to its favor, with the scarcity of nearby real mediations that allow it to be tested.
Those who, on the contrary, believe that it can be a useful and successful instrument can live that perspective with fear, as a threat to their professional status. And, therefore, to wish that the figure remains in the distance and the ignorance, or that, at least, its consolidation between us is delayed. This fear is based on an insufficient knowledge of the role of lawyers in commercial mediations.
This article is an opportunity to explain why, in our opinion, neither the contempt nor the distrust of these mercantilist professionals have any basis.

 

The myth of its uselessness.

If we observe the evolution of the use of mediation in the world, the idea of its alleged uselessness falters. Companies, starting with the largest, increasingly use mediation when they discover its advantages over traditional media, such as the judicial ones, in the treatment of a wide range of internal and external conflicts.
In some advanced countries, the proportion of cases in which it is used is already surprisingly high. In the United States, for example, the “Fortune 1,000” survey of 2011 among its largest companies revealed that 83% of respondents recalled having used mediation in the previous three years. And an even higher figure, 86%, considered its use likely in the immediate years. Those that used mediation as a preferred system or very frequently, and without needing a court order to do so, already reached almost 50%. And, in contrast, those that did not use it or did so rarely had been reduced to 15%.
The phenomenon is not located in North America. In Australia, New Zealand and Canada is used today by companies as much or even more than in the United States. In the United Kingdom and the Netherlands it has already been incorporated into the legal culture, especially of large companies. And in the center and north of Europe the phenomenon begins to develop also with force.

In many countries, companies and their organizations even want to promote their use. And for this they use instruments such as the “Pledgs”, or the creation and maintenance of institutions for their study and dissemination. The case of Germany is significant, where a group of companies, including some of the most important, have formed a so-called Mediation Roundtable to promote and finance its study, its adaptation and its dissemination.
This global growth is also qualitative. More and more mediation is voluntarily undertaken once the companies, for example, by virtue of judicial referrals, have been able to verify its usefulness. It is used in more and more conflicts. And it tends to be done in earlier phases of the dispute, so as not to let the problem grow.
Although mediation does not always guarantee that the negotiation between the companies faced concludes with the success of an agreement, in the hands of good mediators the average percentages exceed 70 or even 80 percent of the cases. And with the use of tiered contractual agreements or clauses, the remaining cases can be resolved, for example through arbitration.
This global trend to growth is understandable. Mediation is a faster and cheaper resource than traditional media, it expands and improves the range of possible solutions, avoids uncertainties and allows companies to have a valuable control over the final result. In addition, it promotes the improvement of relations between the opposing entities instead of triggering their hostility in the confrontation, guarantees confidentiality and can even help to improve the reputation of the companies. In short, it is for them a useful and profitable instrument.
The 2013 study by Viktoria Peto for the Business School of the Regent’s University of London, on the perception of the impact of mediation in the British business world [4], provides us with interesting data on the perception of companies . They appreciate mediation as a highly effective tool to resolve many business disputes, both internally and externally, and consider it already incorporated into their legal-business culture. And they value the saving of costs and time and, very important for them, the overcoming of the inconvenience of the absence of control in situations of uncertainty.
In view of this panorama it does not seem possible to continue doubting the potential utility of mediation. It would not be understandable that so many companies, and many of them so large, were so wrong along the wide world.

 

The myth of the displacement and harm of lawyers.

This manifest and progressive global growth should not generate a special concern among our mercantilist lawyers. A new situation where business mediation becomes important will not mean its displacement in the treatment of mercantile legal conflicts. Not only does it not have to go against you, it can even benefit you. All they will need is some open-mindedness and adaptability to introduce changes in their professional way of proceeding. Changes that, in the end, will even be satisfactory.
Most mediators do not advise or guide or propose solutions. And even the so-called “evaluative”, which can do so, do not do so from the beginning but from a certain phase of the negotiation. And therefore, in any legal dispute that is mediated, as well as the one that does it before the courts, the parties must count on the assistance of their lawyers. The mediator, in accordance with article 13.1 of Law 5/2012 on mediation in civil and commercial matters, must ensure that the parties have sufficient information and advice. Which means that in a commercial legal issue, for example, you have to make sure that each of the participants has enough legal assistance.
In mercantile matters, the role of lawyers on behalf of not only is essential, but it is also very intense. They are usually decisive in choosing the most appropriate mediator. They prepare with their clients the strategy to follow before the mediation and also during the same, with their attendance at each session. They also write the briefs (briefs) that in these mediations usually request the mediator prior to its inception, which are confidential with respect to the other party, and that can be a great help for the mediator. Writings in which each party exposes their view of the dispute, their claims and, often, also the account of previous negotiation attempts, and which can be as detailed and complete as a demand or more. And during the mediation the lawyer helps his client to generate options and to evaluate the offers that are presented, with a advice that, often, goes beyond the purely legal.
In his recent exhibition on April 12 in Madrid, Craig Woods, well-known North American mercantilist lawyer, gave some conclusive information about the perception and use of mediation in his professional field. There he not only liked and was increasingly sued by companies. It was also increasingly appreciated by the lawyers, who had discovered that with it agreements were reached where it did not seem possible to achieve it, and that these were of higher quality and better compliments. It considered that already more than half of its companions of profession declared in favor of its use, or even fans of this means. And that the lawyers who recommended and assisted him to his clients were for them more attractive and, far from losing business, they had increased it.
The referred study of 2013 of Viktoria Peto picks up that in the United Kingdom the companies consider that the legal professionals have to adapt to this instrument to the speed that require the needs of the companies. They regret the reluctance of some of them. And they believe that to maintain their clientele, they should be able to offer enough alternatives to the judicial system. Although there are still misgivings there, especially among less innovative lawyers, generally of the older generations, there is no evidence that the revenues of legal firms have decreased overall. Although probably there has been a displacement in favor of those who have adapted better.
Significant has been the case of countries that have adopted by formulas of previous necessary assistance to a mediation session to be able to litigate in certain conflicts, such as Argentina and Italy. In them, the bar associations have already abandoned their initial opposition to the system. Or even in some cases, as in the City of Buenos Aires, they have gone on to defend it.

 

The difficulties of adaptation in Spanish mercantile law.

In Spain, despite the fact that the use of commercial mediation is still very limited, the international panorama predicts changes that will eventually affect our legal culture. Although its speed of development and consolidation is still uncertain. Probably because they have sensed this, a significant group of lawyers, probably thousands, has tried to train to be mediators. But the vast majority of them, even within that group, do not take their clients to mediation and, therefore, do not act in it as lawyers on behalf of.
This situation seems paradoxical. Those who have shown interest have pointed to the most difficult, try to become mediators, when the process to become good is long and hard and requires conditions, such as the development of skills in real cases, which are rare in Spain. And yet the vast majority reject something much simpler and probably more profitable: adapt and open to intervene as lawyers in mediations.
There are, however, reasons that explain this phenomenon. A priori it is not easy to appreciate the difficulty of the work of the mediator and, therefore, of his training. And, in contrast, taking an official title for it is simple. Although on too many occasions the teaching is very mediocre, even to the point of not giving students a sufficient understanding of the figure and its potential.
On the other hand, the referral to mediation by lawyers comes up against important barriers, some of which we can try to synthesize:
  • -The clients and, still, the majority of the companies, are unaware of the mediation, so they do not demand it. And the easiest for lawyers is not to leave their comfort zone, where despite the inconveniences they can feel safe stepping on familiar ground.
  • -As a new and less well-trodden pathway results, there may be a greater fear of the lawyer to be held accountable for unsatisfactory results. Actually that risk is scarce, because the client will maintain control over the final result. And this potential dissatisfaction, due to expense or loss of time, will be reduced, where appropriate, to some cases in which an agreement is not obtained. But the ignorance of the figure fosters this perception.
  • -For the same lack of social knowledge, the lawyer, even convinced of its usefulness, may have qualms to propose this means to the other party. Or even the fear that the proposal will be interpreted as an implicit recognition of the legal weakness of their position before the courts.
  • -Especially in the mercantile field we are focusing on, it can be difficult to know how to find an adequate mediator for that conflict, in a service market as immature and saturated as this one, where mediocrity and lack of practice abound. And, as we have insisted, mediating well is very difficult.
  • -It has also been pointed out the fear of some lawyers to lose their clients by putting them in contact with other professionals who, in addition to being mediators, can also be lawyers. The proper understanding of the role of each will end up weakening that suspicion. In addition to that a dishonest act of the mediator in that sense would not have much travel as such. But today still that prevention can have an added weight to the natural distrust of the unknown.
  • -To this is added the aforementioned fear that using this route instead of the judicial one supposes for the lawyer a reduction of his income.
As we have already pointed out, the latter has not occurred in other countries. In the commercial field, the intense participation of the lawyer justifies some minutes that are also based on the highest degree of satisfaction of their clients. With the added advantage of being able to solve the case in much less time. In Spain, a change of mentality and customs is still necessary to favor this remuneration of lawyers for satisfaction, rather than for time, and a better evaluation of their work outside the courts. Although in the mercantile field that transformation is already taking place and with great force. In any case, it will also help a good explanation of the lawyer to his client of the existing alternatives, with its advantages and disadvantages, and an adequate forecast and assessment in the order sheet of the possible actions to be developed.
The obstacles, therefore, are not few or negligible. But neither are insurmountable. In much of the world where this tool is now consolidated these problems have also existed. And mediation has been able to overcome them.

 

The option of lawyersa.

The aforementioned obstacles explain the difficulty of lawyers to propose the voluntary use of mediation in Spain today. Overcoming them and getting their clients to mediation, to assist them in the same, will demand from them an innovative and proactive intervention.
In view of the guidelines that have been given in international experience, we can foresee that a group of lawyers and mercantilist law firms, when direct negotiation between the opposing parties does not produce results, will not offer this route to their clients and will continue to resort directly to the traditional judicial route. Or the arbitration when there is a binding clause to that effect. And in the contracts in whose drafting they take part they may propose the introduction of such arbitration clauses, but hardly clauses with a step prior to mediation. The lawyers of this more conservative and inertial group will be able to resist when their clients, for example the companies, begin to demand the use of mediation. And some will not consider adapting to this path until their use is an inescapable requirement of those.
However, we also predict that there will be another group of legal professionals who feel a special responsibility to offer their clients the best possible services, and do not fear, to do so, prepare and be able to propose innovative ways, such as mediation, when be adequate.
These lawyers will be at the forefront of the transformation instead of resisting it. They will help their clients to discover an instrument that will allow them to find much more satisfactory solutions to many of their problems. And, with this, they will also help companies to be more efficient, more profitable and more competitive. And that adaptation effort will pay off for those same lawyers, who will increase their clientele, their brand image, their business and their degree of professional satisfaction.
The trend over time, as has occurred in other countries in the commercial field, will lead to the progressive expansion of this latter group and the reduction of the former. But already today each lawyer or each mercantilist firm can make their choice.

 

The impact on arbitration.

In much of the Spanish arbitration there is also a certain diffuse fear, sometimes also disguised as contempt, to the impact that the development and consolidation of mediation could entail. It is explicable. However, a look with a certain perspective and depth should lead us to overcome this prevention.
Some reasons seem to pay that suspicion. If today, where simple arbitration clauses are included tomorrow, step clauses are put in place, with a previous mediation phase, a reduction of arbitrations will be foreseeable in the many controversies that would not reach arbitration because they were solved before in mediation.
The vision of the evolution of the methods preferred by the North American companies in the “Fortune 1000” surveys may not seem reassuring either. At the turn of the century, mediation surpassed arbitration in the United States as the preferred means of mediation for the resolution of conflicts. In the 1997 survey, 77% of the companies replied that they had recently used mediations, and 87% arbitrated. In 2011, the figure had risen to 83% for mediations, and had fallen to 62% for arbitrations. The arbitration, which had been the main protagonist there of the first phase of the so-called “Quiet Revolution” with its explosion in the use of extrajudicial methods of resolution, has been clearly displaced to a second place. And that same evolution continues today.
These figures, however, should not confuse us. In Spain, the great problem of arbitration is not the threat of other ADRs, such as mediation, but rather the limited use of these alternative systems to the judicial system. And this despite the great disadvantages of this. Not even in the at least apparently more sophisticated business world has there been any implosion that can anticipate our own “silent revolution” in this field. The distrust of arbitration, which leads to prefer the judicial process, is still present in the representatives of an excessive number of companies. Although it is unfair and unfounded. And despite the efforts made to overcome it.
Mediation, as a self-determined system that seeks an agreed solution, must be an ally for arbitration against those misgivings that suppose an excessive and costly dependence on the courts for our companies. The possibility of finding a controlled and agreed solution, and that if this were not possible, the resolution in any case was guaranteed, should make the use of tiered clauses multiply [12]. The balance of this change in our corporate legal culture would be, we have no doubt, clearly favorable to arbitration regarding its current situation.
However, to achieve this effect, it is necessary to provide the mediation with sufficient trust and prestige. And for this to have skillful and qualified mediators, governed by a strict professional ethics. To that end, there are temptations to avoid all those formulas for which excessive dependencies of the mediators are believed with respect to the lawyers of part and of the mercantilist offices.
If we continue observing the guidelines of the most advanced countries in the use of extrajudicial systems, we can predict that the extension of the knowledge of the autocompositive systems will probably also exert an influence in the arbitration in Spain. We do not think it is reasonable, for example, that the promotion of friendly solutions through referral to mediation from the arbitration process, so that the solution can be reflected in an agreed award much more satisfactory for the parties, is discouraged in many Spanish courts by reducing of the retribution of the arbitrators. It is also possible that the search for those solutions less damaging to the parties’ relationships leads to the extension of the use of innovative arbitration solutions such as arbitration of option and other flexible formulas, including non-binding ones. But this should be the subject of a different article.

Conclusion.

In the commercial sphere, mediation in Spain is still little known and used. However, a global view allows us to deduce that mediation will eventually develop and be implemented among us as a way to resolve many of the conflicts of companies. Arbitration and mercantilist lawyers may come to feel suspicious of this perspective that will mean undoubted changes in their professional lives. It will be necessary to expand the range of solutions that can be offered to clients to find the one that is most appropriate to their conflict. However, these changes can be beneficial for them, and favor a more satisfactory legal practice.

 

Blanca Iturmendi Álvarez. Lawyer and mediator

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Fernando Rodríguez Prieto. Notary and mediator

May 2016.

 

 

 

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