Mediation is one of a number of forms of Alternative Dispute Resolution (ADR). It is essentially the least formal and most flexible form of ADR and relies on the mediator facilitating discussions between the disputing parties in order to assist them in reaching their own resolution.

This is intended to be a fast-track process of reaching a resolution which is generally achieved through a combination of joint and separate sessions with the parties, where the mediator helps both sides to define the issues clearly, understand each other’s position and move closer to resolution. It is important to recognise from the outset that, unlike in arbitration proceedings, mediation is non-binding, unless and until parties agree on a resolution, and the mediator has no authority to decide the settlement or even compel the parties to settle.

The impact and the application of basic principles of mediation will, however, differ from one culture to another, and what may appear to be the norm in one society may be the opposite elsewhere. Consideration must be given as to whether mediation is a viable option, and how and when it could be appropriate.

In the Middle East there is a rich tradition of, and strong cultural and religious precepts for, parties to amicably settle differences by seeking a compromise and finding a mechanism to settle matters with minimal adversarial feeling. Similarly, there is no “loss of face” if in the early stages of a dispute, parties come together to settle issues to maintain good relations and keep a project on schedule. These circumstances should therefore, provide the perfect basis for the provision of mediation services which, by definition, are neutral, non-binding until such times as all parties to the mediation wish to make a commitment and, through facilitation, provide the parties with an opportunity to find a satisfactory resolution to their issues.

A key element to the successful conclusion of a mediation process is that the representatives are fully authorised to settle by their respective parties. Therefore, the selection of mediation as a suitable medium for dispute resolution needs to consider the following issues, which have been prevalent in the Middle East for some time:

• It is the norm for standard published contract documents to be amended to the extent that the authority for issuing instructions or making decisions is restricted such that Project Managers and “Engineers” may often be referred to as “paper tigers”, having no real power to enforce their instructions or decisions. Likewise, in common contract terminology, the “Employer’s” own site representatives may also have no decision-making capability and only represent the “Employer” in an observer’s capacity.
• Governmental bodies and large developers habitually retain decision-making authority at a high level.
• Comparative rigidity of large organisations evidenced by inflexible and complex procedures and a reluctance of employees to step outside their comfort zones with regards to decision making, innovation and embracing a larger picture.
• “Face” is extremely important and therefore many individuals would rather ignore a potentially embarrassing situation or push it elsewhere rather than address the matter and be seen to be wrong, or perceived to have made a wrong decision.

It is therefore somewhat unlikely that mediation in its purest form would succeed in the Middle East where one of the Parties is a Governmental body or a large recognised developer. How then can mediation become a viable process in such an environment, and what considerations should be taken into account to enhance its prospects of success?

Concentrating on the construction industry, it is necessary to look at the other common areas of dispute particular to the Middle East market and consider whether such disputes would be serious contenders for the mediation process. the following have been identified:

• Contracts between building contractors and their sub-contractors, suppliers or consultants;
• Contracts between lead consultants and their various sub-consultants;
• Contracts where there is an established bond between parties (for example, some developers have strong preferences for working with particular contractors or consultants).
• It is not being suggested that the foregoing would not also, in some cases, be subject to certain levels of the same rigidity and strict processes as the Governmental bodies and large scale developers identified above, but it is considered that smaller parties and companies with greater flexibility to operate would consider the mediation alternative for a number of reasons, several of which have been identified as follows:
• Cost: there is a general absence of the small claims court in the United Arab Emirates and therefore contract disputes generally proceed initially through arbitration. In fact many standard contracts in the UAE refer disputes directly to arbitration or other forms of dispute resolution – e.g. the FIDIC Sub-consultancy Agreement 1992 (reprinted 1998) refers to arbitration and the FIDIC Plant and Design Build 1999 refers initially to a dispute adjudication board and thereafter arbitration. Other consultancy agreements refer solely to compliance with the laws of their country of origin and, in the cases of sub-consultancies, to the main contract which, under a number of prime developers in the UAE, traditionally has only mentioned settlement in good faith or, failing which, referral to arbitration. There is therefore the potential for parties to save significant costs through entering into a mediation process that will be completed within a matter of days rather than having to entertain an extended process with the inevitable associated costs of lawyers, expert witnesses and other necessary parties.

• Time: resorting to court action or arbitration can be costly in terms of both time and also the additional parties involved. The fact that mediation can be carried out over a few days means that resources are not distracted from their main functions and staff disruption is minimised.

• Relationships: there are many occasions where parties desire to retain relationships and resorting to a formal claims process is perceived to be confrontational and detrimental to ongoing relationships. Mediation can provide such parties with an opportunity to air grievances or problems and seek resolution through a non-confrontational environment; mediation in such cases could result in a lead consultant agreeing extended services for a preferred specialist sub-consultant or main contractors responding to claims from regular sub-contractors on one project by agreeing enhanced rates for them on another project.

In the Middle East there is a rich tradition of, and strong cultural and religious precepts for, parties to amicably settle differences by seeking a compromise and finding a mechanism to settle matters with minimal adversarial feeling. Similarly, there is no “loss of face” if in the early stages of a dispute, parties come together to settle issues to maintain good relations and keep a project on schedule.

David Stapleton, Partner

The questions then arise as to why such smaller parties and companies may still elect to ignore the option of mediation. A number of issues can be readily identified:

• Cost: the cost factor can again be a significant dissuasive factor; for example the cost of entering into mediation may be disproportionately high when considering the potential outcome or alternatives. The introduction of the Small Claims Tribunal (SCT) in the UAE means that it may be cheaper for parties now to agree to proceed through the SCT. There are, however, conditions attached to the SCT process (for example, restrictions on use of lawyers and a financial cap on civil and commercial claims). The cost of filing in the SCT is relatively low and is therefore a further consideration in deciding whether or not to consider mediation or arbitration.
• Time: there must be a will to resolve the dispute but unfortunately this is not always the case for all parties and the introduction of mediation is then perceived as the employment of delay tactics and time wasting to further prevent reaching a quick resolution.
• Strength of the case: parties are unlikely to enter mediation where they believe that they have a water-tight case and mediation could only result in a weakening of their position. In such instances the parties must first consider to what extent their position is truly watertight; i.e. are VO’s all properly instructed, have fees been agreed, was approval given to proceed to the next design stage, what was the basis of post-contract staffing (e.g. resources in place or lump sum fee for deliverables), how has change been recorded.

• Parties already engaged in litigation: it is not uncommon for parties who have already commenced formal proceedings in Court to have settled their dispute before the hearing commences. Many such parties will therefore already be incurring legal fees through their own lawyers and, in addition, bear the risks of possibly also having to pay those of the opposing parties. The obvious questions arising in deciding whether or not to go down the mediation route are:

• – What parameters should they set if they elect to use mediation in order to settle their dispute? – At what point in the process do they settle? And – Does mediation offer real costs savings or cost benefits in comparison to conventional negotiation?

• Lack of enforcement: there is a high instance of late payment in the Middle East. Many employers retain the belief, often well-founded, that the other party will not resort immediately to legal remedies but will continue to politely request payment; it is not uncommon for 90 days payment terms to become 180 days, or discussions on variation accounts to be postponed ad infinitum. Therefore, some parties will not consider mediation as there remains a strong chance that any mediation agreement will prove extremely hard to enforce.
• Recognition of available mediators: given that formal mediation proceedings are far from common place, it is possible also that a reticence to engage in mediation comes from a perception that the Middle East is somehow lacking in the required expertise to pursue this form of dispute resolution. Such a presumption is, in my opinion, misplaced as there are in fact numerous experienced construction mediators available and accessible through recognised industry bodies, such as the Royal Institution of Chartered Surveyors (RICS), or professional firms who have been operating in the dispute resolution field within the Middle East for many years.

In summation, whilst difficulties exist in educating various parties about the merits of mediation and its implementation, there are obvious potential gains to be made through the increased use of mediation within the Middle East construction industry, particularly as mediation really is, although perhaps not fully recognised, an existing element of the society and culture.