The growing adoption of mediation as an alternative dispute resolution method amidst the Covid-19 pandemic
The Covid-19 pandemic has not only reshaped the global economy but also changed how businesses approach disputes. As industries faced unprecedented challenges, including supply chain disruptions and financial strain, companies began to rethink the traditional methods of resolving conflicts. Mediation has increasingly become the preferred approach, offering a more efficient and cost-effective alternative to lengthy and expensive legal battles.
One notable example of this shift is the Singapore International Mediation Centre (SIMC), which has seen a dramatic rise in the number of cases mediated during the pandemic. In 2021 alone, SIMC has been handling 1 to 2 cases per week, a significant increase from the centre’s early years when only a handful of cases were filed annually. This surge reflects a growing appetite for mediation in the business world, particularly as disputes become more complex and involve higher stakes.
In the first ten months of 2021, the average value of disputes being mediated at SIMC was around US$55 million—more than three times the amount seen in 2019. High-value cases, such as one involving claims of US$1 billion between US and South Korean parties, illustrate the importance of mediation in resolving disputes even on a global scale. Mediation is also gaining traction in cases involving foreign investors and states, with SIMC successfully mediating a complex case between an investor and a foreign government.
The Commercial Benefits of Mediation
Mediation offers several advantages over traditional litigation and arbitration. Unlike court proceedings, which can drag on for months or even years, mediation typically takes just a few days. This means that businesses can resolve disputes quickly, without the need to allocate significant resources to a drawn-out legal process. Moreover, the costs associated with mediation are far lower than those of court cases or arbitration, making it an attractive option for companies looking to protect their bottom line during times of uncertainty.
SIMC has introduced a Covid-19 Protocol, which offers expedited mediation services at subsidised rates, further encouraging businesses to turn to mediation as a first option. Since the signing of the Singapore Convention on Mediation in August 2019, the international recognition of mediated agreements has also strengthened confidence in mediation as a viable dispute resolution method. With 55 countries now signatories to the treaty, businesses can be assured that the terms of mediated settlements will be enforceable globally.
The Mediation Process and Its Success Rate
Mediation involves a neutral, trained mediator who helps disputing parties understand each other’s underlying interests and explore potential solutions. This process is confidential, fostering open dialogue and allowing for flexible solutions that go beyond mere monetary compensation. The success rate of mediation is impressive, with seven out of ten cases resulting in a settlement. Even in instances where a settlement is not reached, the process helps clarify the issues, saving both time and resources that would otherwise be spent on further legal proceedings.
One standout case earlier this year was a joint venture dispute between Indian and Japanese businesses, mediated by both SIMC and the Japan International Mediation Centre (JIMC). Although the companies initially began with arbitration, they chose to try mediation first. The process, which took just six to seven weeks, led to an in-principle settlement after only two days of discussions. A senior lawyer for the Japanese company involved praised the experience, calling it “very successful” and recommending mediation as a first step in future disputes.
Looking Ahead: Mediation as a Long-Term Solution
The growing acceptance of mediation during the pandemic highlights the need for businesses to adopt a “mediation-first” mindset as they navigate future challenges. This mindset shift is essential for maintaining healthy business relationships and avoiding the adversarial nature of litigation. Going forward, businesses should ensure that their contracts include mediation clauses, requiring mediation before escalating disputes to arbitration or court proceedings. Training key decision-makers, including C-suite executives and legal teams, to understand the value of mediation will be crucial for embedding this approach into corporate culture.
Ultimately, mediation not only offers a faster and more affordable way to resolve disputes but also preserves or even strengthens relationships between parties. As one participant in a recent mediation commented, “I may or may not have made a friend, but I have one less enemy.” For businesses navigating the post-pandemic world, mediation offers a path to both resolution and reconciliation.
