Mediation – A Middle East Perspective

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, HKA
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