WHAT IS MEDIATION?

1. WHAT IS MEDIATION

Simply, ‘mediation’ refers to the process where an independent facilitator assists parties to resolve a dispute between them, usually ‘by facilitating discussions between parties, assisting them with identifying issues, clarifying priorities, exploring areas of compromise and generating options in an attempt to resolve a dispute’.[1]

When considering mediation in the greater context of Alternative Dispute Resolution (hereafter ADR), it is clear that mediation, and in fact all forms of ADR, has specific niche circumstances where it would be most useful. Whereas negotiation involves parties entering a discussion with the aim of attaining agreement alone, mediation calls on an independent facilitator to assists in helping opponents reach a mutually acceptable solution. Although mediation and conciliation are often used interchangeably, the difference usually concerns the role of the independent third party; during conciliation, it is the conciliator and not the parties who develops and advises a settlement. Arbitration, on the other hand, can be likened to an external, informal ‘court’ where an adjudicator usually sits as a ‘judge’ who delivers a binding outcome, which is usually not appealable.

Mediation is based on consensus,[2] where parties agree to set aside legal rights and obligations to an extent so that interests can be realised.[3] Lovenheim and Guerin underlines that the traditional legal system does not aim to solve peoples’ problems effectively, but rather has a nobler aim of analysing the law and uncovering the juristic truth.[4] Former US Chief Justice Warren Burger identified that ‘the notion that ordinary people want black-robed judges, well dressed lawyers and fine courtrooms as settings to resolve their disputes is incorrect.’[5] Regular people want their problems solved quickly and fairly.

2. BENEFITS OF MEDIATION

What usually attracts parties to mediation is the promise that the process to resolve the dispute is speedy and less expensive than litigation in the courts. Yet, there are several further advantages that often prove mediation beneficial, including creative win-win settlements, expertise of the meditator if the dispute involves a technical subject matter as well as the flexibility and informality offered to the parties.[6]  Acland emphasises that situations where speed, maintenance of relationships, control and confidentiality are important, mediation would be practical for both parties.[7]

Comparatively, Court Proceedings and Arbitration may have unpredictable outcomes to which the parties are bound[8] and decision makers are often limited by facts before it and based upon law[9]. In addition to placing a financial and administrative burden on the state, litigation is usually backward looking, with emphasis placed on what went wrong in the past rather than on how it can be fixed in the future.[10]

Of course, there are instances where circumstances do not lend themselves to mediation, including: instances where precedent must be set, where it would be against public policy to have a person compromise their rights, where the remedy called for requires a court order or where there is no bona fide dispute and one party is merely trying to stall or gain information.[11] Note that engaging in mediation does not interrupt prescription, so it is advised that court papers be filed or a standstill agreement undertaken.

3. MEDIATION IN SOUTH AFRICA

Commercial mediation is fast becoming a trend in the UK and other developed countries; the Legal and Corporate worlds are realising that mediation can ‘achieve goals, reduce risk, secure certainty, take less time, cost less, save face and preserve reputation’.[12] But why has it not gained traction in the South African setting? It has been suggested that mediation has long been overlooked due to the inherent conservative nature of Commercial legal practice and a perception that mediation is a ‘soft’ form of dispute resolution that may be interpreted as weak or uncertain.[13]

The South African Courts simply cannot handle the mass number of disputes referred to them. As such, the Courts have started to escalate the mediation process. The benefits of mediation and why it works has been expressly recognised by the South African judicial system in the case of MB v NB: [14]

“Mediation can produce remarkable results in the most unpropitious of circumstances, especially when conducted by one of the several hundred people in this country who have been trained in the process. The success of the process lies in its very nature. Unlike settlement negotiations between legal advisers, in themselves frequently fruitful, the process is conducted by an independent expert who can under conditions of the strictest confidentiality, isolate underlying interests, use the information to identify common ground and, by drawing on his or her own legal and other knowledge, sensitively encourage an evaluation of the prospects of success in the litigation and an appreciation of the costs and practical consequences of continued litigation.”

Currently, High Court rules require that parties at a pre-trial conference consider mediation[15] and a few Magistrates Courts have incorporated a Mediation Rule (Rule 74)[16], which calls on parties to Mediate before commencing a trial in certain instances. However, High Court practitioners do not take mediation seriously and often see mediation as an artificial box to tick in order to proceed to trial.  Similarly, although Magistrates may take a party’s refusal to participate in bona fide mediation when making cost orders into consideration,[17] mediation remains voluntary per Rule 74.

A suggested approach would be to make mediation mandatory, even if it is frowned upon due to considered as violating a party’s Constitutional Right of Access to Courts.[18] As highlighted by Brand et al., mediation merely encompasses assisted negotiation between parties; mediation does not result in a binding, one-sided decision. An outcome is reached by mutual agreement and nothing bars parties from approaching a court if attempts at settlement fail.[19]

It is submitted that if the Courts want to avoid being ‘a place for the warehousing of disputes’,[20] the introduction of mandatory mediation will have to be considered at all levels of adjudication in courts.

4. MEDIATION AT COMPANIES TRIBUNAL

When considering the current commercial arena in South Africa, the use of the Companies Tribunal for the settling of disputes by way of mediation provide an effective forum to deal with specialised corporate disputes. The importance of efficient resolution of company disputes is emphasised in paragraph 81 of Chapter 8 of King III Code where a duty is placed onto executives and directors, under the duty of due care and skill owed to the company, to ensure that disputes are ‘effectively’ and ‘expeditiously’ dealt with.[21] The Code emphasises that ‘dispute resolution should be cost effective’ and may not ‘be a drain on the finances and resources of the company’.[22] Further, paragraph 84 specifically notes that although an external dispute may be referred to a Court or for arbitration, mediation is expressly proposed as a more appropriate manner of solving disputes in many cases.[23]

The Draft King IV Report acknowledged that ADR has become an ‘established element of good governance’ and emphasised that mechanisms should be adopted and implemented as set out in the King III Code.[24] Although these propositions were removed from the final Report, it retained recognition of Dispute Resolution as a Fundamental Concept and recognised the importance the role that it may play in maintaining commercial relationships.[25] Similarly, the importance of incorporating ADR when facing disputes with stakeholders is stressed.[26]

The 2008 Companies Act allows persons to refer disputes for ADR to the Companies Tribunal, an accredited entity or any other person.[27] The Companies Tribunal has an established group of persons who often sit as mediators for matters that have been referred to it. It is incumbent upon Directors to seek out cheaper ways to settle disputes and whilst mediation itself is a cheaper solution than litigation, applying for mediation at the Companies Tribunal would go even further in conserving funds.  When a matter is referred to the Companies Tribunal, they will provide a mediator as well as a facility. Thus, when comparing mediation facilitated by the Companies Tribunal to independent mediation, it is roughly estimated that the former could be R20,000.00 cheaper than the latter per day due to savings in mediator fees alone.

5. DRAFT MEDIATION CLAUSE

A mediation clause is a simple term to insert into a contract that could prove advantageous in the long run, as parties often overlook a bona fide attempt at settlement when a dispute gets heated. The parties may agree, as is common, that in the event of mediation being unsuccessful, that arbitration could follow. Such a clause would read as follows:

“Mediation  / Arbitration Clause for possible inclusion in the Standard form MOI’s and contracts

1. This clause is a separate, divisible agreement from the rest of this Agreement and shall not be or become void, voidable or unenforceable by reason only of any alleged misrepresentation, mistake, duress, undue influence, impossibility (initial or supervening), illegality, immorality, absence of consensus, lack of authority or other cause relating in substance to the rest of this Agreement and not specifically to this clause. The parties intend that any such issue shall be subject to mediation and or to arbitration in terms of this clause.
2. Any dispute arising out of or in connection with this Agreement or the subject matter of this Agreement including, without limitation, any dispute concerning

2.1.   the existence of this Agreement apart from this clause;

2.2.   the interpretation and effect of this Agreement;

2.3.   the parties’ respective rights or obligations under this Agreement;

2.4.   the rectification of this Agreement;

2.5.   the breach, or any matter arising out of the breach of this Agreement; or

2.6.   damages in delict, compensation for unjust enrichment or any other claim, whether or not the rest of this Agreement apart from this clause is valid and enforceable;

shall be resolved by mediation and if that is unsuccessful by arbitration, on the basis as set out below.

3. Any party may give written notice to the other party or parties to initiate the procedure set out below (“the Dispute Notice”).
4. The parties shall first endeavour to settle the dispute by mediation.
5. The parties shall agree on a mediator within 5 (five) business days of the notice referred to in clause 3.
6. If for any reason the parties do not agree on a mediator within 5 (five) business days of the Dispute Notice or the mediator agreed upon by the parties cannot or does not accept an invitation to mediate and the parties have for any reason failed to agree on another mediator within 10 (ten) business days of the Dispute Notice then any party may ask the Registrar of the Companies Tribunal of South Africa for the time being to appoint a mediator.
7. The parties shall agree on the mediation procedure and failing agreement within 5 (five) business days of the Dispute Notice or such longer period of time as may be agreed to in writing, then the mediation shall take place in accordance with the rules decided by the Mediator appointed, at the time of the dispute.
8. If for any reason, including lack of co-operation by the parties, a dispute is not settled by mediation within thirty (30) days of the Dispute Notice or such longer period of time as may be agreed to in writing, then the dispute shall be settled by arbitration as set out below. The decision of the arbitrator shall be final and binding on the parties, provided that any party may institute review proceedings in accordance with the provisions of the Companies Act, 2008, as amended.
9. The parties shall agree on the arbitrator and if agreement is not reached within ten (10) days after either party in writing calls for agreement, the arbitrator shall be appointed by the Registrar of the Companies Tribunal of South Africa for the time being.
10. The request to nominate an arbitrator shall be in writing and on the prescribed form CTR132.1 outlining the claim and any counterclaim of which the party concerned is aware of and a copy shall be furnished to the other party in the prescribed manner.
11. The arbitration shall be held in at the place determined by the Registrar of the Companies Tribunal of South Africa and the parties shall endeavour to ensure that it is completed within ninety (90) days after the notice requiring the claim to be referred to arbitration is given.
12. The arbitration shall be governed by the Arbitration Act, 1965 or any replacement Act and shall take place in accordance with the Expedited Arbitration Rules of AFSA.[28]
13. Nothing in this clause shall preclude any party from seeking urgent interim relief from any Court of competent jurisdiction.”

Mediation clauses can further be tailored to include potential requirements for a mediator, the scope of when mediation is to be undertaken, amongst others.

6. MEDIATOR ACCREDITATION

There are various Mediator Accreditation programs available locally and internationally. Arguably the best training body in the world is The Centre for Effective Dispute Resolution (CEDR), based in London. CEDR is the ‘largest conflict management and resolution consultancy in the world’,[29] offering various training courses in mediation and other forms of ADR. After completing an intensive five-day skills training program where participants are taught to effectively facilitate dispute resolution, they are assessed for CEDR Accreditation.

Locally, Conflict Dynamics is seen as a leader in the South African Mediator Training landscape. They provide a range of ADR courses; including the CEDR award winning ‘Commercial and Court-Referred Mediator Skills’ training.

7. IN SUMMARY

Although mediation is starting to gain traction, largely in part due to Court emphasis and the benefits offered, South Africa needs to actively pursue ways to fall in line with International ADR Trends. Where Arbitration often suffers is due to the fact that it remains an adjudicative setting, where a ‘judge’ decides the matter and parties are bound. Mediation allows parties, with the assistance of a third party, to actually engage with the issues themselves so that they can quickly and cheaply have their interests satisfied. Although mediation is a cheaper alternative to arbitration, mediation facilitated by the Companies Tribunal is even more cost effective, which is particularly important when King IV Code’s directive to resolve disputes as cheaply and speedily as possible is considered.