Why businesses should opt for mediation to solve rows

According to research, litigation cost has increased over the years and it is eating into corporate earnings.

More businesses are becoming litigious owing to better awareness of the law and their rights. Litigation is very costly and it includes the cost of legal and court filing fees.

A civil litigation cost index has been developed to measure the cost to companies.

Many firms have legal departments, which are provided with a litigation budget.

Experts have noted that reduction of civil litigation cost does not only require the legal department to stay within its budget but also the company to monitor the cost of litigation.

A survey of Fortune 500 companies found that they had spent $210 billion on litigation between 2012-2013.

Some of the disputes revolved around intellectual property infringement and enforcement and required the services of highly specialised lawyers. Specialised lawyers do not come cheap. The intellectual property dispute between Samsung and Apple, for instance, has been estimated at $1.8 billion according to reports.

From the survey, it was found that the aggregate money spent on litigation did not include the settlement amount, which is a further cost to the company.

Some court decisions can affect company value negatively. According to an online article, a ruling against Pennzoil caused its market value to fall by $1.8 billion within seven days.

A further litigation cost is the amount of time it takes to finalise a case. In Kenya, litigation is a long process. At times it makes little economic sense to litigate in the first place.

For this reason, alternative dispute resolution methods are becoming increasingly relevant. I would recommend the adoption of mediation as a dispute resolution tool.

Mediation is an out-of-court settlement, which is structured and which enables parties to resolve the dispute through an impartial third party known as the mediator. Trained mediators can pick up the issues quickly and guide the parties into settling the core issues.

Mediation helps parties preserve relationships. It is not a hostile process, unlike litigation where there is a winner and a loser. Mediation helps parties get to a win-win settlement further strengthening their bond.

Mediation settlements are private. Therefore, the reputation and image of the disputants are preserved. In the Pennzoil case, an adverse ruling affected its market share. However, with mediation the public may not be privy to the settlement details, preserving the image of the company.

Mediation has the added advantage of cutting costs. It helps companies reduce litigation costs. As illustrated above, the litigation costs can be quite high. Mediation is affordable. On top of that mediation is faster and helps parties save time.

Mediation is convenient as it happens at a place and time convenient to both parties.

In Kenya, leading disputes in the corporate sector have gone into mediation. Keroche Breweries and Kenya Revenue Authority were able to reach an amicable settlement over a tax dispute that would have led to the closure of the former’s factory.

Mediation was able to improve the relationship between the parties and provide a win-win settlement for both parties. It cut costs and time that would have been spent if the matter were to be litigated.

Mediation is highly encouraged for businesses as opposed to litigation. I would urge companies to adopt mediation structures and policies if they have already not done so. It is also prudent to have mediation as a dispute resolution option during contract drafting.