Don't underestimate the role of emotions and personalities in commercial disputes, says Kate Jackson

Few disagree that mediation is a sensible and effective concept. The courts, the Government and, increasingly, clients agree with lawyers that it should be used where possible. But how can a lawyer make a mediation most effective for his/her client?

Mediators hover in between parties (privy to confidential information from each) and have a fascinating insight into the workings of negotiations between commercial parties. Mediators see firsthand what experienced lawyers can do to maximise the chance of favourable settlement.

New trends

The increase in use of conditional fee arrangements (CFAs) and after-the-event insurance (ATE) makes quite an impact on the mediation process. First, if faced with them, consider mediating early. As a success fee and ATE fee may be recovered from a losing litigant, this can be a significant factor in assessing quantum of costs risk. Not least, it can change the dynamic between that lawyer and client as there may be a point where there is an uncomfortable conversation to have (and lawyers on CFAs will likely be wise to any attempt from the other team to increase this pressure). For lawyers on a CFA, when agreeing splits in advance with a client, make sure you also include the zones in which they do not currently intend to settle (and which surprisingly often become relevant in a mediation).

Old favourite

The insolvency card: if there is a chance that it can be raised, it will be so pre-empt it. Research the counterparty's solvency in advance, find out what you can about their major customers and if there are likely external events (changes in regulations, entry of new competitors into the market, presence of any significant lawsuits, etc) which will impact on them. When they raise it, ask your mediator to ask questions – if you are to take insolvency seriously, they need to prove it. You need to know the specific figures and know exactly what is happening.

Three top tips

1. Preparation is valuable. Most lawyers prepare themselves but it is also important to prepare your client (a) that they are unlikely to leave the mediation punching the air (though even less likely that they would be doing this after a protracted court battle), prepare them to aim for the feeling that they have done an appropriate deal in the circumstances; (b) Not to fix to a particular figure (steer away from bottom lines), warn them that you may even need to update and revise your own firm's advice as new information/dynamics emerge so they do not feel let down by you if it happens; (c) They need the senior client in the room. It is not desirable to have someone who can settle within parameters. Mediation presses a fast-forward button on the litigation process, new information comes out and corporate parties can deal as commercial individuals instead of through lawyers and formal legal documents. The person at the end of the phone will not have been privy to this and it will be difficult to communicate what has happened (they will just think you all caved to pressure).

If you have a high value case and a client inexperienced in mediation, or from a jurisdiction/culture where mediation is not a familiar concept, some form of pre- mediation coaching (by a mediator unconnected with the case) could be useful. Unsurprisingly, if a client expects something or has heard it before, they are likely to be more comfortable and engaged with the process and better able to make rational and considered decisions, thus increasing the chance of settlement.

2. Solve the problem- think creatively; it is likely that there are more options than just cash payments. Financing models allowing cash release from assets (do the research and run the numbers in advance), profit shares in future ventures, deferred payments or the 'softer' options such as introductions to potential customers. There is often an unexpected amount of emotion involved so do not discount the value of apologies or frank discussions purely because it is a commercial case.

3. You need to persuade the other side, not the mediator. There is no need to rehash the pleadings, but put your best case. Further, when it comes to negotiation, offers tend to be much more compelling if linked to objective or particular criteria, for example a comparison of figures in the market, or loss for a particular head of damage or for a particular period that the other team perhaps feel more vulnerable on.

The positive

There will inevitably be a point in the mediation (often after opening offers) where you think it cannot be settled. Warn the client about this and keep working. Settlement is unlikely to be easy or it would have happened before the mediation day. Barriers will come up; feelings that the other side is behaving unreasonably or has been badly advised on the merits are frequent. The flexible nature of mediation allows the mediator to get you over many of these hurdles by convening meetings of smaller groups (with personalities that are more likely to mesh) or by exploring respective cases with each team within the protection of a private meeting. When the going gets tough, remember, most cases mediated will settle.

Kate Jackson is an accredited mediator and US and UK-qualified lawyer who previously practised at Allen & Overy and Simpson Thacher & Bartlett.