It now appears to be accepted by the vast majority of professionals that mediation is a cheap, quick and effective alternative to litigation. A client can get all its advisers together in a room for a day and sort out its dispute. Given its effectiveness, surely it is a process that could easily be applied to negotiations?
Negotiating contracts
One area where this approach works is lease renewals under the Landlord and Tenant Act 1954. While technically the parties could be said to be litigating if protective proceedings are issued, they are actually negotiating the terms of a new lease. Clients often complain that lease renewals take on a life of their own and can end up with substantial costs being spent if matters become entrenched. This is due to transactional lawyers toing and froing about the terms of the lease, valuers arguing over the rent and litigators trying to keep the court process at bay.
Would it not be sensible for the client to get together with its transactional lawyer and rental valuer in a room for one day and negotiate with the other side via the services of a mediator? I can see no logical difference between this and a dispute.
As well as saving time in getting deals done, this could also lead to fewer disputes in the future. If the client is present while the negotiations are happening there is less scope for there to be any misunderstanding as to instructions or for lawyers to not quite record in the lease or other documents what has been agreed. Everyone’s focus will be on the matter at the same time. As the negotiations progress the lawyers can work through the different options and ramifications with their client and adapt any drafting accordingly, with points being less likely to be missed and/or misunderstood.
There is no reason for this process to be confined to lease renewals. It could also be used for other common forms of agreements; for example, development agreements, sales and purchases, and the wider scope of general commercial contracts. The mediator’s skills would work in exactly the same way as in a dispute.
Section 106 agreements
This process could also be of use in the planning arena; in particular, when negotiating section 106 agreements.
The government has recently published its response to the consultation Section 106 planning obligations – speeding up negotiations (March 2015). This consultation sought views as to whether section 106 negotiations are a significant source of delay within the planning application process. Most of the responses confirmed that to be the case. The government is publishing further guidance on section 106 obligations but also, interestingly, looking at whether some form of binding dispute resolution mechanism should be put in force to resolve disputes that occur in this process. Those who were opposed to such a binding process (which presumably would involve a third party making a decision) pointed out that mediation would be favourable.
Mediation would be ideal for this type of negotiation where so many issues could be in the mix for both parties and it is likely that the parties will be in similar situations with each other in the future. Anything that can preserve the relationship must be worthwhile. It is also in the interests of the parties and the public for the issues to be resolved quickly to enable developments to proceed.
ADR clauses
Parties to major building projects have openly discussed the effectiveness of signing up in advance to their own agreed form of ADR rather than relying on adjudication or court procedures. Again, the emphasis is on saving costs and keeping the project going.
ADR clauses in various guises have been subject to court scrutiny as to their enforceability. There was a run of cases where the courts were reluctant to enforce these clauses, comparing them to agreements to negotiate and stating they were void for uncertainty.
However, last year in Emirates Trading Agency LLC v Prime Mineral Exports Private Ltd [2014] EWHC 2104 (Comm), Teare J delivered a helpful and sensible judgment in this area. The provision in question required that in the case of any dispute arising out of the contract “the parties shall first seek to resolve the dispute or claim by friendly discussions…” If no solution could be found within four weeks then the non-defaulting party could invoke the arbitration clause.
Teare J reviewed the English authorities (which suggested that the clause was unenforceable) and those from other jurisdictions, such as Australia and Singapore (which supported such clauses). He considered that where parties have entered into obligations they reasonably expect the courts to uphold those obligations and that English law “arguably frustrated that expectation.” He did not agree that the concept of “good faith” was too open-ended a concept to provide a sufficient definition of what such an agreement must as a minimum involve. He commented that “difficulty in proving a breach should not be confused with a suggestion that the clause lacks certainty.”
On the facts, he decided he was not bound by the previous English cases and held that the clause was enforceable, commenting that “concluding that the obligation was enforceable would be consistent with the public policy of encouraging parties to resolve disputes without the need for expensive arbitration or litigation”.
In an age when it can cost up to £10,000 just to issue a claim at court, this has to be a sensible conclusion.
Jacqui Joyce is a mediator at The Property Mediators: www.thepropertymediators.co.uk
