Traditionally the route for resolving disputes has been through litigation, with the parties using the Court forum to obtain a definitive outcome to their differences. Whilst litigation remains an effective method of dispute resolution, it does have its disadvantages. For example, it can be time-consuming and costly, and often results in lost man hours for key personnel in the business. In small organisations in particular, this may have dire financial consequences for the business as a whole. Whilst litigation will normally result in a definitive outcome, its adversarial nature does little to promote future commercial relations between the parties.
The ultimate outcome of the litigation process can be inflexible as it is dependant on the interpretation of the applicable law and is limited by the powers of the Court. This can sometimes result in the individual needs of the parties being left unaddressed. In contrast, mediation can offer the parties flexibility, both through the process itself and also the likely outcome. Mediation provides a without prejudice forum (if the parties are unable to reach a settlement, concessions made by parties during the process cannot be referred to in any later Court proceedings) through which issues can be identified and discussed, promoting communication between the parties (which can often mean that a commercial relationship is salvaged).
The mediation process is informal in comparison to Court proceedings. The parties are directly involved in the proceedings and the decision-making process, working alongside their legal representatives. The mediator, whilst normally possessing some expertise in the area of the dispute, will not necessarily have a formal legal background. Rather than dictating the outcome, his or her role is to encourage a dialogue between the parties and to explore ways in which the dispute could be resolved.
Mediation is not constrained by formal rules, as is the case with the Court, and as such the pace at which it proceeds will depend upon the parties. This means that, if both parties are willing and co-operative, their dispute may be resolved sooner than would be possible through the Court process and hence more cost effectively.