by S. George Alfonso
Summary:
This article highlights the potential advantages of pursuing dispute resolution through mediation—whether informal or formal—prior to initiating litigation or arbitration. Engaging in mediation at an early stage can facilitate clearer communication between the parties and reveal valuable information that may lead to a partial or complete settlement, thereby avoiding the costs, delays, and unpredictability associated with litigation or arbitration.
The Fog of War:
Throughout my career as a litigator and arbitration counsel, I have consistently observed the inherent unpredictability present in every lawsuit and arbitration. As Mike Tyson famously stated, “Everybody has a plan until they get punched in the mouth.” This observation aptly illustrates how strategies that appear clear and actionable before proceedings begin can quickly lose coherence once the “fog of war” sets in. This phenomenon affects all parties, regardless of whether they are plaintiffs/claimants or defendants/respondents.
Once arbitration proceedings commence, parties inevitably lose a degree of control. That control shifts to the governing authority—whether a judge or arbitral tribunal—as well as to procedural timelines, evidentiary developments through discovery, and evolving legal rulings. The result is a level of uncertainty and risk that is often difficult to predict, quantify, or manage.[1]
Mediation a Method of Dispute Resolution A/K/A “Problem Solving”:
In my practice, dispute resolution—or “problem solving”—frequently involves U.S. and international clients engaged in commercial contracts where one or more disputes have arisen. When circumstances permit—and when all parties agree—I advise clients to pursue mediation as an initial step toward resolution. This may take the form of either informal mediation or formal mediation, as outlined below.
- What is Mediation (“Informal” and “Formal”):
Unlike arbitration, mediation is a non-binding process. No participant in the process—including the mediator—has the authority to issue binding final judgment or any award.
- Informal Mediation:
Informal mediation is a flexible, unstructured exchange of communications between disputing parties aimed at resolving some or all of the issues at hand. This may involve direct discussions between business principals, executives, or legal counsel. When feasible, I encourage clients to explore informal mediation as an initial step, as it allows for efficient and cost-effective engagement without procedural constraints.[2]
- Formal Mediation:
Formal mediation involves the joint selection of a neutral third-party mediator—typically a retired judge or experienced attorney—who facilitates structured negotiations.[3]
The mediator meets with the parties either jointly or separately to help identify common ground and guide discussions toward a mutually acceptable resolution. However, like informal mediation, the mediator has no authority to impose decisions. Mediator fees are typically shared among the participating parties. While formal mediation has traditionally been conducted in person to maximize communication effectiveness, virtual formats have become increasingly common—particularly in international disputes—following the COVID-19 pandemic.[4]
Why Engage in Mediation (Formal or Informal) Before Filing?:
There are several compelling reasons to pursue mediation—whether informal or formal—prior to initiating litigation or arbitration.
- Enhanced Communication Can Lead to Resolution:
Mediation fosters direct communication between parties, often clarifying positions, uncovering misunderstandings, and allowing each side to better evaluate the strengths and weaknesses of their case. This increased transparency can create opportunities for compromise and, ultimately, resolution.
- Pre-Litigation/Arbitration Reconnaissance (In Coordination with Counsel):
Mediation can also serve as a valuable opportunity to gather insight into the opposing party’s objectives, concerns, and strategy. Statements and disclosures—whether intentional or inadvertent—may provide critical information that informs future decision-making. Even if mediation does not result in settlement, the information obtained can be strategically valuable in subsequent proceedings.
- Strategic Advantage Through Early Counsel Involvement
Engaging experienced litigation and arbitration counsel at the earliest stage can significantly enhance the effectiveness of mediation. Early involvement allows counsel to prepare comprehensive confidential demand packages, which clearly articulate the client’s position, anticipate counterarguments, and organize supporting evidence. This preparation not only strengthens the mediation process but also positions the client advantageously should litigation or arbitration ultimately become necessary.
- Conclusion (Optional Addition)
While not appropriate in every case, mediation—whether informal or formal—offers a practical and strategic opportunity to resolve disputes efficiently and with greater control. By engaging in mediation before initiating formal proceedings, parties may reduce risk, manage costs, and achieve more predictable outcomes.
[1]. Arbitration is the binding process to which each party to a contract must agree within the terms of the contract almost always at the time of signing of the contract, regarding the agreement to be required to participate in the arbitration process, including the hearing by an arbitral body and the issuance of a binding award by said body. International arbitration is typically included in an international contracts’ “Dispute Resolution Section” and should be seriously considered as a requirement in any international commercial contract. If your company engages in international transactions all of your company’s international contracts should be reviewed to insure each agreement contains an updated and well-drafted Dispute Resolution Section (if any). The parties’ agreement to enter into arbitration in the Dispute Resolution Section of the contract should include the location of in which the arbitration is to take place (venue), as well as the choice of law (procedural and substantive), the number of arbitrators and the arbitral body of which the parties agreed to use in the event of a dispute, such as for instance, the International Chamber of Commerce (“ICC”). If the parties agree to arbitration in the Dispute Resolution Section, they may further agree for the arbitration process to be the sole and exclusive method to resolve disputes (rendering lawsuits prohibited under the terms of the Dispute Resolution section).
[2]. In some instances representatives of the disputing companies who have a history of good rapport, may consider in direct communications with one another (CEO – to – CEO for example), circumventing their respective counsel. Such a concept may be a viable option in lieu of counsel conducting negotiations, as long as my client understands our jointly devised strategy and is comfortable in effectively communicating with the other party(ies). Further, at this stage in pre-litigation or pre-arbitration mediation, there is no requirement or obligation to disclose to the other party(ies) that your company has even retained counsel. Your company may enjoy the benefits of counsel, while communicating directly with the party(ies) in conflict in order to foster a more cordial line of communications in an attempt to keep tensions low by preventing the direct involvement of counsel vis-à-vis the disputing party(ies).
[3]. In most U.S. jurisdictions, once litigation has begun, the trial court will order the parties to Formal Mediation. The actual mediation typically occurs long after the lawsuit has been filed and often-times closer to the trial date, often after the close of discovery. Delaying mediation until this time period results in substantial legal work and fees being incurred before the mediator has ever been provided an opportunity to try and resolve some-to-all of the issues.
[4]. I am a strong proponent of all-party in-person mediation as there is no substitute for the inter-personal communication and speed of ideas that occurs when all parties to a dispute are in the same office, working in real time with the mediator.
