Parties that have entered into a commercial contract may find themselves at a crossroads that could lead to a dispute. Mediation is one form of alternative dispute resolution that could assist parties in resolving their differences without having to go to court.

What is mediation? It is a non-litigious process that involves a third-party mediator who assists parties to work towards a negotiated settlement. Mediation may sometimes be suggested by the Courts to provide parties an opportunity to resolve the matter at the early stage of proceedings. 

Here are some key features of the mediation process in Malaysia:

  1. Role of Mediator
    The mediator assists parties in reaching a settlement. He can facilitate and assist the parties and assess their position to engage in a negotiation. However, the mediator does not make findings of liability or determine who is “right” or “wrong”. 
  2. Consensual
    Mediation must be consensual, whereby both parties in dispute must agree to submit to mediation. The Courts may suggest parties to consider mediation but it cannot force parties to mediate.
  3. Rules
    Unless otherwise agreed by the parties, mediation does not need to follow any specific set of rules to regulate the process. Some institutions have rules that can be adopted to facilitate the process. For example, the Asian International Arbitration Centre has the AIAC Mediation Rules, which can be adopted by the parties.
  4. Conducted Privately
    Mediation is conducted privately. This is an important factor in respect of resolving a commercial dispute as more often than not, parties intend to keep disputes confidential due to commercial and reputational interests. The resolution also does not become a public record unlike a court judgment.
  5. Informality
    Compared to court litigation, the mediation process is less formal as parties generally have the flexibility to discuss the procedure and logistical arrangements.

How does a mediation work, generally?

  1. Parties would first give their consent if they are willing to submit to mediation. In a court facilitated mediation, parties usually must fill in a consent form to agree to mediation.
  2. Before the mediation, parties should consider what are the terms they will accept as part of a settlement. This would sometimes be called a “mandate”.
  3. During mediation, the mediator and parties have flexibility on the process to adopt.  For example, sometimes, the mediator may have both parties present at the start to each vent their views, before hearing / consulting each party separately. 
  4. During the private discussion with the mediator, parties will usually inform the mediator of their intended settlement terms. The mediator would then consider the terms from each party and to see if the other party can accept the proposed terms. If the proposed terms are too far apart, the mediator would then examine if there are avenues for each party to compromise on their initial position to reach a middle ground.
  5. If the matter is settled, parties enter into a written agreement to record the settlement of the dispute. If the matter is not settled, parties can opt to fix another date for mediation, or otherwise proceed with other dispute resolution methods (eg: arbitration or litigation).

If both parties come to the negotiation table in good faith, mediation is one way to quickly resolve disputes. The mediator, being in a neutral position, is well suited to aid parties into reaching a resolution without the need to resort to the court process.

***

This article was written by Lim Zi-Han (Senior Associate) from Donovan & Ho’s dispute resolution practice. 

Donovan & Ho is a law firm in Malaysia. Our dispute resolution provides advice and legal representation in the civil and industrial courts. We also represent clients in both domestic and international arbitration, as well as other forms of alternative dispute resolution. Our experienced lawyers are also able to assist in commercial and civil disputes (such as debt recovery, shareholders’ or directors’ disputes, breach of contract and claims for injunctive relief), constructive disputes (arbitration and/or adjudication proceedings, disputes relating to delays, liquidated damages, defects and rectification work) and employment disputes (unfair dismissal claims, judicial review proceedings, and employment-related civil claims). Have a question? Please contact us.

 

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