Pursuing a lawsuit can be a costly and time-consuming affair!
If you are a creditor who has tried all possible means to get back your money from your debtor, you are in all likelihood already considering to sue your debtor.
However, consider these figures.
Every year, companies all over the world lose several billion dollars in expensive litigations.
Lawyer’s fees & indirect cost together add up to the long list of expenses. The high costs and lengthy delays often make litigation quite impractical to solve the issue.
Creditors increasingly find themselves spending more money to recover the loans than the original cost of the debt!
Along with this, litigation has an indirect effect of tarnishing your company’s reputation and might act as a roadblock in gaining potential customers in the future.
What is Mediation?
Mediation is an effective framework for dispute resolution, which comes under the ADR (Alternative Dispute Resolution). In mediation, the parties under dispute discuss their problems with the assistance of a neutral and trained person who assists them in reaching an adequate settlement.
In Malaysia, the Mediation Act 2012 governs the process of mediation.
Stages of mediation
Mediation is a multi-staged process that requires a high level of expertise and experience to solve complex issues.
Parties under litigation will choose a mediator who is not only adept in the chosen field but also skilful in negotiation and understanding the complexities of the problem from different vantage points.
The mediation process is designed in six stages.
Let us take a close look at each stage.
For a successful mediation to work, pre-planning is a must.
The parties, along with the mediator, together decide where to meet and when to meet. Each side should have people who are relevant to the dispute.
2. Formal introduction by the mediator
Once all the chosen parties of each side have assembled, the mediator will start by giving a formal introduction. The participants will be introduced along with the mediation process and rules to be followed.
Finally, the mediator presents the rules and goals of the mediation. Each side will be encouraged to work with full cooperation until a friendly settlement is reached.
3. Opening statements
Once the mediator has finished with the introduction, members from each side will have an opportunity to express their views and feelings. The mediator will ensure that there are no interruptions while either of the party members are expressing their views.
4. Joint discussion
This is a very crucial step in mediation.
Once the members from each side have expressed themselves, the disputants and the mediator are free to ask all the relevant questions. This will help significantly in arriving at a better understanding of the needs of each side.
At times, disputing sides often have difficulty understanding each other due to language barriers. In such a case, the mediators can act as translators, accurately translating the words. They could ask for clarification if necessary.
In a scenario where parties under negotiation become deadlocked and cannot proceed further, the mediators will diagnose the obstacle in their path and work out a plan to clear off the track.
5. Private sessions
In a mediation session, at times, emotions run very high. In such a situation, the mediator will split the two sides into two separate rooms for caucuses or private meetings.
The parties will be relaxed and often open up in front of the mediator, which is often hard during the general discussion.
In this stage, the mediator will formulate ideas and proposals to accommodate each party’s interests. The mediator can bring the parties back in the room for another joint discussion. However, this is quite unusual.
The mediator will usually play “shuttle-diplomacy,” moving back and forth between the two rooms, gathering ideas and proposals between each individual group.
Step 7: Closing of the agreement
This is the last stage of the discussion. If the parties reach an agreement after the conference, the mediator will write a summary of the conference and ask each side to sign.
If the parties fail to reach an amicable agreement, the mediator will help them to assess whether continuing discussion in the future will be fruitful or not.
Is mediation a good strategy for debt recovery?
The insolvency department of Malaysia has reported a sudden upsurge in bankruptcy cases from the year 2007. Newer and innovative ways should be introduced to tackle rising bankruptcy-related cases.
The main advantage of mediation, when compared to ordinary litigation, is that in mediation both parties come together and have an informal discussion in a safe and fair environment.
Reasons why mediation is effective
For litigation in a court, a tremendous amount of money has to be put in for gathering evidence, bringing in witnesses, and paying the fee for lawyers. The cost can sometimes go to thousands of ringgits & you might think you haven’t sued in the first place.
With the help of mediation, parties can seek to discuss the best practical solutions to implement debt recovery through mediation.
The mediator will make sure to come up with a win-win situation for you and your debtor.
Gives more flexibility
Court cases often follow rigid and time-consuming procedures. On the other hand, the option to resolve a dispute with mediation will give more flexibility to the disputants.
Here the parties are free to choose the discovery and procedural rules to follow, such as international law, industry standards, etc.
Easy to arrange and quick
Unlike a standard court case, in mediation, the parties do not need to endlessly wait to get a hearing date. Once the mediator has been decided, the mediation session can be held at the nearest possible date when the disputants are available.
The disputants can choose a mediator of their choice
Once a case is filed in a court, the parties will have no option to choose their judge. On the other hand, for mediation, the disputants have the freedom to select a mediator of their choice.
By selecting a mediator who is well versed in dealing with the disputes in the substantive field involved, chances are high that the dispute will get resolved sooner with a friendly solution.
Confidentiality is maintained
The litigants cannot demand confidentiality for regular debt-related cases, which are conducted in open courts.
By choosing to go for mediation, the disputants can ensure confidentiality by mutually agreeing that the information disclosed during the mediation hearings cannot be used later. This protects the reputation of the debtor as well as the organization and credit manager.
There are also provisions to keep the outcome of the mediation as private.
Helps to preserve the business relationship
Mediation helps to preserve the business relationships between the borrower and the creditor by bringing about a mutually satisfactory outcome through mediation. Litigation, on the other hand, ruins the chance of any future business deals with the client.
Right to express individual views
In a mediation session, the litigants will have an opportunity to express their side of the problem. This includes their perspective on the issue and how it affects them.
This is very effective in helping the other party to have a greater understanding of the situation from the perspective of the other. Thus a sense of empathy and willingness to work together to formulate a satisfactory outcome will be guaranteed.
Difference between Mediation and Arbitration
The process of mediation is often confused with arbitration. Although similar, there are differences when it comes to the legal formalities involved.
Mediation is an informal process of discussion where the mediator moves back and forth between the disputants to resolve and settle the issue under the hand. There are no strict rules. The only goal is to somehow resolve the issue in a friendly and amicable manner.
Arbitration, on the other hand, is somewhat formal in its approach towards the problem. Here the arbitrator sets specific rules to resolve the dispute. This is slightly similar to a court where the judge hears both sides. The only difference being that the hearing happens in a more friendly and informal environment than that of a court.
In a mediation process, the mediators do not issue any order. Instead, they help the parties to reach a settlement after exploring various options, obtaining relevant information, and assisting in communication.
The mediator does not have any right to present his decisions. Here the parties hold power to determine the outcome of the mediation. Once the dispute is successfully resolved, the parties can enter into a written settlement.
However, in arbitration, the entire results of the proceedings are solely vested on the arbitrator. He can come to a decision without the agreement of the parties.
Malaysian Mediation Center
The Malaysian Mediation Centre (MMC) is established by the Bar Council with the sole objective of promoting mediation as an important means of resolving disputes outside the court. The center was established in the year 1999 and is maintained by the Bar Council Alternative Dispute Resolution Committee.
The Malaysian Mediation Centre is located in Kuala Lumpur and shares premises with the Bar Council.
In recent years, mediation has gained immense popularity due to its effectiveness in solving complex disputes. Before proceeding for a court litigation, it is advisable to check with your lawyer to determine whether mediation is a better choice for your case.