Why is Negotiation Important: Mediation in Transactional Negotiations

Mediation and arbitration differ greatly in business transactions involving negotiated agreements

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Why is Negotiation Important: Mediation in Transactional Negotiations

We generally think of mediation as a dispute-resolution device. Federal mediators intervene when collective bargaining breaks down. Diplomats are sometimes called in to mediate conflicts between nations.

So-called multi-door courthouses encourage litigants to mediate before incurring the costs – and risks – of going to trial.

Scott R. Peppet, a professor at the University of Colorado School of Law in Boulder, Colo., reports that mediation may be quietly creeping into transactional negotiation, or traditional deal-making, as well.


Download this FREE special report, Mediation Secrets for Better Business Negotiations: Top Techniques from Mediation Training Experts, to discover mediation techniques for selecting the right mediator, understand the mediation process and learn how to engage the mediator to ensure a good outcome from the Program on Negotiation at Harvard Law School.


In a 2012 study, Peppet’s survey of 122 practicing mediators, 48 reported having been involved in deals ranging from $100,000 to $26 million in value. The cases facilitated by the mediators included angel investments, a software joint-venture, a physicians’ partnership, the sale of cable television access rights, and a host of business, community, and personal agreements.

Real estate brokers, investment bankers, and executive search firms also serve as dealmakers, of course, but in the end, they typically represent a specific party. By contrast, a true mediator is a nonpartisan and is equally responsible to everyone at the bargaining table.

Unlike arbitrators, mediators have no power to impose an outcome on the parties involved. Instead they are process specialists, adept at moving people from narrow positional bargaining toward a problem-solving approach.

If negotiators have been cautious about revealing critical information (such as their must-haves and walkaways), a shuttle mediator – someone who goes back and forth between the parties, carrying proposals, floating ideas, etc. – may discover untapped possibilities for mutual gain. Specialized mediators can also contribute their expertise on deal structuring.

While Peppet is generally positive about the prospects for transactional mediation, he notes that it may raise some legal and ethical issues. It’s not clear, for example, when communications with a mediator are covered by the same confidentiality protections that apply to court-annexed proceedings. Also, an argument could be made that a mediator involved in a merger or acquisition might have to comply with security regulations and register as a broker.

Related Mediation Article:  Negotiations and Logrolling: How Win-Win Integrative Negotiations Strategies Enable Negotiators to Breakdown Barriers to Agreement at the Bargaining Table – What is logrolling in negotiation and how can this technique be used to create and claim value at the bargaining table? In this article drawn from negotiation research, the concept of logrolling is explained in terms of both business and political negotiation scenarios.

Mediation and Problem Solving Skills: Sitting Down at the Table – What brings disputants to mediation and what should they do to prepare for mediation? The unique problem solving aspects of mediation are explored and the dynamics of the mediation process are described. How should negotiators prepare for a mediation and what steps can a mediator take to insure a successfully negotiated agreement?

How Does Mediation Work in a Lawsuit? Choosing the Right Mediator – How does the mediation process play out in the court system and how do disputants choose the right mediator for such a situation.

Mediation versus Arbitration: The Alternative Dispute Resolution Process – What are the substantive differences between mediation and arbitration as alternative dispute resolution (ADR) processes? Mediation typically involves a neutral third-party mediator chosen by disputants to assist them in arriving at a mutually satisfactory negotiated agreement while arbitration involves a neutral third-party arbitrator that imposes a decision on disputants after a careful review of the relevant facts whether legal or otherwise. What type of dispute resolution process should disputants choose when faced with irreconciliable differents with a counterpart? The choice of dispute resolution process depends as much on the context of the dispute as it does the likelihood that a mutually satisfactory agreement would be reached with or without imposition.


Download this FREE special report, Mediation Secrets for Better Business Negotiations: Top Techniques from Mediation Training Experts, to discover mediation techniques for selecting the right mediator, understand the mediation process and learn how to engage the mediator to ensure a good outcome from the Program on Negotiation at Harvard Law School.


Originally published 2012.

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