Curiosity vs Authority in Commercial Dispute Resolution

What is the best style of mediator to resolve a commercial dispute?

Mediation is an especially appealing means of resolving commercial disputes given the increased speed, and reduced cost and reputational risk, as compared to litigation. Early settlement of disputes minimises the inevitable disruption they create, allowing the parties to focus their energies on growing their businesses.

Lately I've been curious about how lawyers select mediators to resolve commercial disputes, so I've been reaching out to ask.

Many have shared their personal bugbears: mediators who don't arrive early at the venue to greet the parties and ensure they are comfortable; who hide away during lunch rather than spending time with the parties or their legal representatives; and mediators who give up when they reach a substantive impasse, rather than looking for side issues that can be resolved to reduce the areas of conflict (and ensuing cost of litigation). Opinions on these common failings are unsurprisingly uniform!

One area that sharply divides opinion is the style of mediation legal representatives seek to adopt in resolving commercial disputes. What are the pros and cons for a focus on curiosity vs authority in commercial dispute resolution?

In one camp, lawyers look for an evaluative mediator. Typically this mediator will be a recognised legal authority - a former judge or eminent Senior Counsel.

Evaluative mediators, with their extended experience in litigation and the likely outcomes of a dispute, will excel at reality testing and are valued for their ability to push both parties to take a more practical and reasonable approach to settlement. During the mediation they may offer their candid views to the parties on the likely settlement range if the dispute were to be resolved in court.

In essence, this approach is similar to running a lower-cost dress rehearsal for litigation, giving both parties a preview of the likely range of outcomes, and thereby helping them to accelerate to closure with greater certainty and less process. The mediator is primarily selected to play an authority role in the conflict, rather than to facilitate behaviour change that supports constructive negotiation.

This approach is optimal if the dispute in question is a zero-sum game, where there is no potential value in a future relationship between the parties, the reputational impact of the dispute is static, and where there is little scope for creativity in designing terms of settlement. This approach is typically about finding a mutually acceptable compromise, and saves money, time, and stress for the parties as compared to traditional litigation.

The missed opportunity of this approach in many disputes is that it will rarely result in constructive discussion and value creation. Where the mediator plays an evaluative/authority role, the parties are less likely to communicate directly, and to share and explore each others' interests rather than simply arguing for their positions.

The alternative approach is facilitative mediation, which offers the opportunity for a broader range of potential outcomes to a dispute. Mediation is at its most powerful when it is a true alternative to litigation, not merely a streamlined cut-price version of the same adversarial, positional game.

There is often hidden opportunity in conflict. This is especially true in commercial disputes, where both parties usually need to be mindful of their reputations and the future potential value of their relationships.

Even seemingly intractable high stakes disputes can lead to value creation. As an example, during the high profile "Census Fail" in 2016, then Prime Minister Turnbull offered a series of scathing critiques of IBM's role. All parties in the crisis felt the blowtorch of public anger at the failure of the online system. In order to resolve the dispute, IBM offered the Federal Government a public apology and a monetary settlement. Less than two years later, IBM signed a five-year billion dollar whole-of-government contract with the Federal Government (which has now earned the IT company more than $2B).

Facilitative mediation is about interrupting the positions of the parties and creating fresh ground to resolve their dispute, ultimately going beyond "splitting the difference" in a zero-sum game to instead allow emotional release (surprisingly important even in commercial disputes!), improved relationships, reputation repair, and the generation of creative options - even the potential for true value creation.

Lawyers who focus on value creation for their clients will often therefore choose to appoint a facilitative mediator: one whose strengths lie in respect and empathy for the parties plus genuine curiosity in what drives them and what might be possible, rather than selecting for authority and experience in understanding what resolution a judge is likely to impose on a conflict.

(It should be noted at this point that there are former judges and Senior Counsel who take the approach of facilitative, rather than evaluative, mediation).

A genuinely curious, empathetic and respectful mediator creates a stage for the parties: a place where they are seen, their voices are heard, hidden emotions can be legitimately expressed, and where they are encouraged to break out of entrenched positions and behaviours to explore new options. This empowers the parties to take ownership for resolving the dispute, while supporting them with a process to promote constructive negotiation.

This skillset (and the process) often unearths fresh information and unlocks new energy and possibilities.

Curiosity, the antithesis of judgment, has an inherent power to soften entrenched positions, especially when accompanied by empathy and respect.

While the parties to a dispute may have lost all empathy for and curiosity about each other, a genuinely curious, respectful and empathetic mediator injects fresh energy and space into the situation. This fresh energy and respect assists in promoting psychological safety, which is essential to any constructive attempts to resolve a dispute.

The mediator's curiosity (supported by the process including reality testing) helps shift the focus of the dispute from a contest to problem solving, drawing both parties out of their entrenched positions to listen to each other, reveal their interests and needs, and think about how the future might be different to what they've been envisioning.

A mediator with this skillset -- often (but not exclusively) informed by commercial experience in group facilitation, design thinking, communications, organisational development or psychology -- helps the parties focus on a more expansive approach to problem solving, rather than driving a narrow compromise, and therein lies the opportunity to create new value.

What factors do you think should be taken into account when deciding whether to adopt evaluative or facilitative mediation?