Mediation 101: It is not who is right or who is wrong, but arriving at solutions

In late 2007, two pharmaceutical behemoths got involved in cross-border IP litigation, which changed the history of cancer in the world. Novartis International AG (“Novartis”), a Swiss MNC, and Sun Pharmaceutical Industries Private Limited (“Sun Pharma”), an Indian MNC were fighting over the patentability of Gleevec – a drug that aids in fighting cancer. Gleevec’s patent application in India was rejected after a long waiting period, by which time several generic versions of the drug came out in India. Novartis had filed a number of cases in India in an attempt to stem the mushrooming of such generic versions. Around the same time, Sun Pharma had filed another application in the United States challenging the patent renewal application for Gleevec in USA and for allowing generic versions to enter the US market.[1] Seven years later, the two pharmaceutical behemoths entered into a settlement agreement, which bought Novartis seven extra months before the generic version of Gleevec entered the US markets.[2] Why did they do that?

Why Mediation?

The following are essential needs of parties in disagreements that are not necessarily met in traditional adjudicatory processes for resolving disputes. These are, however, met through mediation.

  1. Control and Certainty over the Outcome: In the Global Pound Conference[3] (“GPC”) that was held in Chandigarh this year, 63% of the parties wanted a say in how the dispute is resolved and 50% of the parties believed that uncertainty in outcomes was an obstacle to resolving disputes. Like Novartis and Sun Pharma, all parties want to ultimately have some control over the outcome. This is possible in mediation because, parties do not sign a settlement agreement and can walk away from a mediation when they’re not in agreement with the settlement terms or believe that the process is not working for them. Is it any wonder that some of the biggest disputes in the country – such as the Reliance split or the Bajaj family dispute – have been mediated?
  2. Increased Compliance through Mediation: In the GPC, 56% of the users of dispute resolution processes believed that a non-adjudicatory method of dispute resolution would lead to better compliance with settlement agreement, contractual obligations and hence avoid unnecessary costs and sanctions. This understanding is practically reflected in statistics generated on mediation programs in US Courts. For example, rates of compliance and payments in small claims cases conducted in Maine, the United States, were much higher in cases that were mediated as opposed to cases decided by judges. In mediation, 70.6% of the defendants paid the amount in full and 12.8% did not pay at all. In adjudication, 33.8% paid in full and 45.1% did not pay at all.[4] This is because, parties are involved in the decision-making process leads to the final outcome in mediation. Hence, they have increased ownership over the results, leading to higher rates of implementation of mediation settlement agreements.
  3. Maintain relationships: 50% of the parties at the GPC in Chandigarh believed that non-adversarial dispute resolution processes would improve relationships and their understanding is with good reason. In a small claims dispute in a US Court, mediated by a mediator at CAMP, the dispute between a mason and a Buddhist monastery lead to not only payment of the disputed amounts, but also additional contracts for the mason and a small donation made by the mason to the monastery’s charity program.
  4. Confidentiality: Many parties in founder disputes, not only want the terms of their dispute to be confidential, but also the fact of the dispute itself. This is because of fears that the clients of the company may come to adverse conclusions about the state of the organisation. In mediation, confidentiality is maintained with respect to the terms of the conflict, the settlement agreement (if any) and other pertinent details. The fact of the dispute itself can also be confidential, protecting the parties from unnecessary public speculation.
  5. Cost and Time Effective: 67% of the parties in dispute believe that financial or time constraints are the main obstacles in resolving commercial disputes and for 63% of parties in dispute, time and cost efficiency of a process are the most important in determining the choice of dispute resolution process. Unnecessary cost and time expenditure are certainly contained in mediation. Chevron Corporation, the US-based multinational energy company mediated a dispute, which cost US$25,000. In a cost-benefit analysis undertaken by the company, it was discovered that if the same was taken to litigation, the corporation would have had to shell out US$2.5 million over a period of 3 to 5 years.[5] According to the statistics generated by the Singapore Mediation Centre, 90% of the cases that settle in mediation, reach resolution within one working day.[6] Infact, there are cases in Bangalore’s Centre for Advanced Mediation Practice (CAMP), there have been co-founder issues that have been resolved in a day.
  6. Reduction in litigation: When AT&T (the American telecommunications conglomerate) made a firm commitment to ADR, the number of cases filed by the company in the US reduced from 263 in March 1984 to 28 in November 1993.

What happens in Mediation to make it so effective?

The adversarial model of resolving disputes is so deeply entrenched in our psyche that we automatically think in terms of who is right and who is wrong. According to ADR experts Kenneth Cloke and Joan Goldsmith, the ‘right’ and ‘wrong’ that parties try to prove are often the surface tip of the iceberg of the conflict – they are the positions, facts and the law that parties use to justify their actions. The underlying causes of the conflict arise from other reasons such as misunderstandings, miscommunication, differing perspectives, emotions, needs, interests, fears, concerns, values etc. – which form the bottom part of the iceberg of conflict. This is called the Iceberg Model of Conflict. Through mediation, the mediator tries to expose the bottom part of the iceberg to the parties, and this is where solutions usually lie. The mediator exposes the bottom part of the iceberg in the following ways.

  1. Understanding Differing Perspectives: One of the jobs of the mediator is to help parties understand how each side perceives the same set of facts and circumstances differently. By trying to prove the other person wrong through facts, one tries to attribute motives and intentions to the actions of the other side, which may not have been the original intention. Such attributional errors in perspectives are uncovered through mediation.
  2. Identifying Underlying Interests: At the center of all conflicts are core needs, desires, goals and fears that remain unaddressed. It is these interests that drive the positions that parties hold when in dispute. Most dispute resolution mechanisms do not address these underlying needs but restrict the dispute to the facts, positions and the law. The mediation process explores the underlying interests of the parties and through such exploration allows the parties to move into a space of constructive negotiation and find more appropriate and long-lasting solutions.
  3. Creating Multiple Options: When the underlying interests of disputing parties is understood, it could emerge that there are several interests that overlap, be complementary and allow the parties to create multiple options that could meet their interests. Mediation is a flexible process and supports the parties to get creative in their negotiation to find out-of-the box, but legal solutions that holistically meet the parties’ needs and interests.
  4. Finding Mutually Acceptable Solutions: Once the parties have had the opportunity to brainstorm over several possible solutions to their disputes, they can narrow down on those solutions that are acceptable to them and are implementable. Solutions that emerge from mediation are therefore always Win/Win – being a completely voluntary process, parties do not accept settlement terms unless they are benefitted from such terms and they are agreeable to them.

In mediation, the settlement is reached in over 85% of the cases. Settlements are often reached within 1-2 days in CAMP.

The efficacy of mediation as a process for resolving disputes can be best illustrated through a vendor dispute that was recently mediated by one of the mediators at CAMP. X and Y were two companies, where X supplied goods to Y. Y defaulted in payment and X filed a petition to winding-up Y. Y, in turn, denied the amounts due to X and claimed defects in the goods sold by X. In mediation, a safe, non-judgmental environment was created by the mediator, where Y could appreciate the business relationship with X over the years. Being a confidential process, X, admitted that the last batch of goods had certain issues. The mediator also helped X and Y recognize the miscommunication between them. Eventually, Y explained that it had a liquidity crunch because of the diversification and expansion of its business. X saw an opportunity to grow and contribute to Y’s new business plan of expansion. The parties eventually worked out a payment method through several installments and renewed the contract between them which included X being a supplier for Y’s expansion.

With examples like the above, wouldn’t it make more sense to mediate disputes?

[1] http://www.livemint.com/Home-Page/0BR8sNlCZReRyLfbXl0lcP/FDA-admits-Sun8217s-appeal.html

[2] http://in.reuters.com/article/sunpharma-novartis-lawsuit-idINKBN0DV05Z20140515

[3] The success of mediation in America and some other countries led to the Global Pound Conference (“GPC”) series. Since 2016, International Mediation Institute (“IMI”) has been conducting a series of conferences, to discuss world-wide, the effectiveness of the existing dispute resolution processes. The conference is in a unique electronic interactive format; conducted in 40 cities, covering 31 countries. The stakeholders interviewed are lawyers, arbitrators, judges, mediators, conciliators, academicians and parties (litigants). Certain core questions are asked, that enable collection of actionable data on how to better meet the expectations of litigants, locally and transnationally.

[4] http://www.disputeresolutioncounsel.com/2011/03/08/compliance-more-likely-if-cases-are-mediated/

[5] https://hbr.org/1994/05/alternative-dispute-resolution-why-it-doesnt-work-and-why-it-does

[6] http://www.mediation.com.sg/about-us/#mediation-as-a-stance

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