Mediation – an Innovative Approach for Businesses

What is mediation?

Mediation is a form of Alternative Dispute Resolution (ADR) which refers to the different mechanisms of settling a conflict without using litigation or resorting to the courts.

Mediation is defined as an interest-based negotiation process to manage conflict, where the mediation process is facilitated by a neutral third-party mediator with the objective of helping the parties come to an agreement to resolve the conflict without a trial.

In a mediation, the parties retain substantial control over the mediation process, confidentiality of information, and the outcome of the dispute. The control starts from, the choice of mediator, to timing, duration, location, objectives, process, information disclosed, costs and participants.

People are often more satisfied with solutions that they have had hand in creating, as opposed to solutions which were imposed on them by a decision maker. Mediation offers the parties the opportunity to participate in creating and reaching business-driven, innovative, out of the box, technical solutions to their problems, regardless of the strengths or weaknesses, their evidence or their legal arguments.

Is mediation recognized and regulated in the UAE?

Mediation is receiving more widespread attention from legal circles in the UAE after the issuance of UAE Mediation Law (Federal Law No. 6 of 2021), which constitutes a monumental legislation for judicial and non-judicial mediation. The legislator goes further to establishing Conciliation and Mediation Centres pursuant to Federal Law No. 5 of 2021.

The Mediation Law addresses the main issues that prevented the success of mediation in the past, namely concerning “without prejudice communications”. The law still needs to be supplemented by certain regulation which set out the criteria for registration of mediators in the mediator’s list, the

licencing requirements for local and foreign mediation centres, as well as the Code of Professional conduct for mediators. The Code of professional Conduct constitutes a vital piece of legislation and creates a foundation for building trust in the mediator’s ethics.

Is mediation an effective ADR in cross-border disputes?

Mediation has also proven to be an effective way to resolving certain international commercial disputes.

The United Nations Convention on International Settlement Agreements Resulting from Mediation, or simply, The Singapore Convention, signed by 55 states, was paramount in moving mediation forward to an international presence.

The convention aims to address the lack of process by which settlement agreements can be recognised and enforced internationally. Under this convention, parties can apply directly to the Courts of party states which have also ratified the Convention to enforce the settlement agreements resulting from mediation, without issuing new proceedings. The Convention aims to promote mediation as a mechanism for international dispute resolutions.

If disputing parties resort to mediation in the absence of the ratification of such a Convention in the relevant jurisdictions of such parties, the settlement agreement will have the status of contracts only and require further court proceedings to force compliance should one party fail to abide by the terms agreed. In circumstances where the parties are international, this means potentially litigating in a foreign state to enforce the agreement.

In the Middle East, so far, Saudi Arabia, Qatar, and Jordan have ratified the Singapore Convention. The UAE promised to join the convention, which further strengthens their position as a business hub for international trade and relations.

When should I opt for mediation?

Mediation is a strategic business decision rather than a pure legal decision (unless instructed by the law or the Court).

It must be understood, however, that mediation might not be the ultimate dispute resolution mechanism for every conflict. It is important to keep in mind that mediation is a business decision more than it is a legal one. The reality is that most of the positions taken by the parties will be influenced by the business repercussions of the legal issues rather the legal issues themselves. Accordingly, the parties to the dispute, on the advice of their counsels, should make a strategic decision on whether to move into mediation (i.e. whether the parties can compromise to reach a conclusion favourable to both which preserves the business relationship, or forcing a zero-sum game).

Are there any specific industries which can particularly benefit from mediation?

Since mediation is rather a business decision, some industries would greatly benefit from mediation. Especially those which offer business interests and opportunities between the parties which can be explored beyond the dollar value of the dispute.  Indeed, mediation is best leveraged when the mediator finds these lateral business interests between the parties, making the business pie between the parties larger before the final split. The outcome of the mediation in this case is rather beneficial to both parties in the sense that each party exists the mediation process with a larger piece of the pie than the original one he had at the outset of the process.

Industries with relatively short industry clock cycles may also find a particular interest in mediation as the latter may offer a speedy mechanism to resolve the conflict when it still makes sense from the business perspective. In such industries where the pace of market changes is quick, the parties are urged to find quick, practical and outside the box solutions to their disputes

Entrepreneurs and start-ups may also find interest in mediation which is a more affordable mean for them to achieve a solution to their conflict. This is particularly true when the opponent involved is a larger well-established entity with larger financial means and influence.

Industries which rely substantially on confidential know-how to operate businesses, particularly when those are innovation-driven, may also find interest in mediation as the parties would have the freedom to select a mediator of their choice having the required technical expertise which can help them to achieve a solution under the roof of a mediation process which is completely confidential, and where the parties preserve full control over the information they wish to disclose during the process, and where the solution need not to be linked to the specific legal issue in question but may go beyond to explore any outside business solution between the parties.

Industries with uncertainties around the applicable rules and conflicts of laws and enforcement outside physical borders, such as cyberspace, AI, the metaverse, would also benefit from mediation for the flexibility it provides in resolving business issues outside the letter of the law.

Industries with non-commercial or non-profit vocations, such as NGOs and charity organisations, may find benefit and interest resorting to mediation for resolving their disputes which may offer a more cost efficient and friendly environment to achieve a quick solution in line with internal culture and non-commercial vocations.

Other industries, depending on the nature of their businesses, may also benefit from mediation. It is however important to remind that mediation may not be beneficial for all parties and for all cases, and that this decision needs to be strategically taken along with the support of seasoned attorneys.

How can the technology and innovation sectors benefit from mediation?

Indeed, the technology and innovation sector is one of the sectors which can benefit from mediation. Let alone the ability to choose a third-party mediator who has a specific set of skills, and technical expertise to understand the technology in question, a mediator in a technology or innovation-related dispute is able to assess the importance of the technology on the business of each of the parties to the dispute and identify business opportunities and interests between the parties beyond the monetary value of the dispute in question. Also, due to the quickly evolving and changing technology and business landscape in this sector, legal uncertainties make it more costly and difficult for parties to predict the outcome of a trial. This is a consideration among others which may weigh in favour of mediation.

Through mediation, every conflict will be solved depending on its type. In an industry like technology and innovation, business conflicts are often beyond just pure legal issues, and they may often take several forms. Some of these can include issues related to product design, commercialisation of products subject to intellectual property rights and ownership thereof, market entrance, data breaches, and many more.

Particularly when the parties have an interest in an ongoing business relationship, the mediator will be able to roll up his sleeves and dig in beyond the apparent positions of the parties, until he or she identifies the interests and maps the needs of each party. Such a step is usually done through a caucus or private sessions with the mediator. During these sessions, the parties can disclose information, which has to be kept confidential, if requested by the disclosing party. Subsequently, the mediator would be in a position to make the necessary interventions depending on the type of conflict and the relevant interests and needs of each party.

It is important to remember that mediation might not be the ideal mechanism for all cases. In certain instances, where a party has a strong legal position and looking to impose a strong market dominance through its intellectual property rights for example, mediation might not be the most convenient mechanism to adopt.

Can mediation be adopted or used in the Metaverse?

Every new revolutionising technology, for instance the Metaverse or Web3 or cryptocurrency, comes with challenges and potential conflicts, whether legal, financial, moral, or ethical.

The common legal challenges for Web3, the Metaverse, cryptocurrency, and many other technologies are conflict of laws and jurisdiction. Mediation as an innovative approach to dispute resolution could become an interesting mechanism for addressing these challenges.

In the Metaverse world, what is the equivalent authority to a government, legislator, or a court? How is justice served? We hear about DAO (Distributed Autonomous Organizations), but what powers or authorities these DAOs have, and who solves conflicts between DAOs? Can we resolve Metaverse dispute in the Metaverse?

The ADGM has launched “Mediation in the Metaverse” service using Web3 technology. It allows the parties to conduct their mediation in virtual space and surroundings which mimic the physical world. This revolutionary step has not only pushed for sustainability by the reduction of carbon footprint because of reducing travels and in-person meetings, but it particularly serves international disputes, by recreating the physical world which allows the parties to mediate in a pleasant environment of their choosing and facilitate the connection and the trust building between them and the mediator in international disputes.

Being able to create a virtual environment, in which the elements within the space can be manipulated to suit the tastes and needs of the parties, would be a huge benefit to making the mediation process work. Hence, mediation in the Metaverse is a step in the right direction for making mediation more time efficient and overcoming the physical barrier. Essentially, it combines the comfort of online calls with the physical presence of an occupied space. With the help of real-time, VR and AR-assisted, technologies, the Metaverse will revolutionise the speed, accuracy, and costs of the mediation process.

What better way to solve issues related to the Metaverse other than within the Metaverse itself?

The entire life of mediation and settlement within a virtual space has so far been untested, but in any case, laws and rules need to follow the same direction of the winds of change, although it eventually will, it is unlikely that lawmakers and the judicial system are able to keep up with the pace in which technology is growing. More control over the process and the outcome and self-determination might be required in this specific industry amid uncertainty around the applicable rules and conflicts of laws and enforcement outside physical borders. Even if we assumed that laws practised in the real world apply to the Metaverse, it would be a great challenge for states and governments to impose their own laws across the Metaverse. Although the Metaverse lacks proper infrastructure, international agreements would need to be ratified for stakeholders to work more harmoniously, and mediation could be the medium which serves the interests of the Metaverse community as it can quickly adapt to changes and the pace of growth of the Metaverse.

Keeping the above in mind, there might be an interest in innovators and business leaders in the Metaverse and Web3 stakeholders to consider mediation as a dispute resolution mechanism in their smart contracts, which may help resolve their conflicts more creatively and in a more speedy and efficient manner. This would also help them to be more in control in creating solutions to their own industry-related issues and disputes.

How can mediation benefit the Third Sector?

Third Sector organisations is a term used to refer to a range of organisations that are neither considered to be part of the public nor private sector. It includes non-profit organizations, charities, associations, self-help and community groups, social enterprises, mutuals and co-operatives.

Third Sector organizations experience the same disputes that are commonly faced in most organizations.  These include a variety of disputes including conflicts between members, trustees, directors, employees, or donors, complaints from the public, disagreements with local authorities or government bodies, disputes with commercial partners or service providers, as well as disputes around governance, finances and the purpose and function of the organization, including many more.

Many of these organizations are formed by philanthropists and humanitarians, are founded on faith or high moral based principles, offer a wide range of noble and valuable services, and develop unique bonds with their members, donors, volunteers, and beneficiaries because of the nature of their work.

Moreover, the reputation within the sector or the community is usually the deciding factor in whether a third sector organization succeeds. Therefore, internal, or external disputes can be harmful to the mission and core values of third sector organizations. These can result in severe reputational harm.

It is safe to assume that any dispute that arises within an organization that operates in the third sector will be unique and must be handled delicately due to the sensitive nature of the organization involved. In many of these organisations, funds normally come from donors which would not appreciate seeing their donations being spent on legal disputes. Mediation is a very interesting vehicle to address such disputes, since the holy grail of mediation is to help the parties resolve their conflicts amicably and cost-efficiently using a third-party, which naturally fits within the noble mission statements of peace-loving organizations.

Besides that, due to their non-profit status, Third Sector organizations can benefit greatly from mediation as a rapid and inexpensive method of resolving conflicts. Not only does it solve the problems at hand, but it also provides those involved with useful insights for preventing future conflict.

Since mediations are conducted in private and are totally confidential, the risk of media publicity that could arise from other dispute resolution mechanisms causing irreparable reputational damage is eliminated. This could entice Third Sector organizations to have mediation as a go-to mechanism to resolve their disputes, considering that what most matters to these organizations is a spotless reputation.

Aside from this, mediation helps to resolve power imbalances and provides disputing parties with a safe place to express their frustrations, both of which contribute to the healing of individuals and the rebuilding of relationships. This is especially important for these organizations given that they heavily rely solely on volunteers to assist in their mission and would prefer to avoid tension between its members. In addition, mediation is flexible and permits creative solutions unavailable through the court system, such as an apology, or an agreement to amend a procedure or policy.

Can mediation be used to expand a business relationship?

There is a common misunderstanding that mediation is a form of alternative dispute resolution which helps resolve the issue at stake only in a zero-sum game. This is not quite accurate.

A successful and creative mediation may be customized for reaching a settlement agreement between the parties in a dispute which expands on the business relationship between the parties. This enlarges the business pie between them before making compromises.

We propose a customized deal-making mediation, which can be used as a powerful tool to facilitate complex, technical or cross-border business transactions where mediators can use sophisticated mediation techniques to help the parties effectively communicate to reach fair agreements in their multiplex business deals.

Any recommendations for the legal community?

Finally, legislators and the legal community are encouraged to build a robust legal framework for mediation to thrive, educate the business community about the benefits of mediation and train mediation councils and high-calibre mediators to build confidence in the mediation role to ensure that best practices are adopted in mediation to enhance the legal system, and strengthen business ties and economic growth.