Commercial Mediation – How do you Bill?

Mediation is pitched as an easy and the most cost-effective route to resolution of high-value disputes. It makes complete business sense when you think of it – a self-determined resolution with a facilitated dialogue and completed within a short span of time. Mediation is an absolute no-brainer to the client when compared to months of arbitration and years of litigation, for disputes where mediation would be suitable. However, for lawyers, unlike litigation or arbitration, mediation calls for flexible fee arrangements that reward efficiency.

So, the million-dollar question that make most lawyers blush is – Will this cost-effective, self-designed and party autonomous process puncture my purse? Following on from their conversation at the Mission Mediation Conclave hosted by The PACT in Delhi recently, the authors will delve into what it would take to encourage lawyers to be proactively involved in commercial mediation in India. The aspects covered in this write-up primarily apply to pre-litigation or pre-arbitration commercial mediation. Further, the suggestions made are borne out of practical experience of the authors and may not be reflective various fact situations.

Mediation is a negotiated, client-driven process and its value lies in speed, confidentiality and tailored outcomes. That reality makes rigid litigation-style billing (many-a-times based on hourly rates) commercially unattractive for many clients. Institutions, corporates and firms are therefore experimenting with fixed, capped, blended or hybrid fees to provide cost predictability while preserving lawyer incentives to achieve a settlement.

There are roughly five billing phases in commercial mediation, where lawyers can build a billing structure that is both transparent and justifiable. The hours (mentioned below) span across weeks / few months and are based on general experience of practitioners in commercial mediation.

This stage usually involves initial client meetings, triaging of facts (from the client’s perspective and from whatever else is known), early risk/reward evaluation in comparison to alternatives to mediation and finally, to make the choice – whether it is the right time to mediate or not; or what would be the appropriate time to mediate in future.  

After making an internal decision, the counsel, with the authority of the client, will approach the counterparty’s counsel to initiate mediation. If this approach fails, the initiating counsel may route the invitation via a mediation institute. Once again, this requires conferences with the institution, where an invitation strategy is developed and executed, keeping in mind the principles of voluntariness and neutrality. This is also when counsel and parties work together to appoint the right mediator for their dispute. In many ways, the disputing parties are already getting in the mood for agreements – collaboratively appointing a mediator, deciding on fees, dates, venues and even the deadlines and timelines to complete the process.

How do you Bill: It is ideal to have a fixed/flat fee or capped hourly estimate for the assessment (clients prefer certainty at this stage, especially when you have chosen it as a first choice). Some international lawyers prefer to simply bill it under ‘mediation preparation’ package. Transparency is key as it avoids unreasonable fees for exploratory calls and gives clients a clear go/no-go cost analysis. Some lawyers choose not to bill for this stage but adjust the cost in other phases if the mediation process commences

At this stage, both sides have agreed to mediate and have appointed their mediator. The mediator now invites both sides to draft a mediation brief (to be submitted to the mediator, in confidence, well ahead of the mediation session). Importantly, lawyers also work with their clients to review documents, past experiences of negotiations, and engage in settlement planning (creating contingency plans of offers to be accepted, pitched and declined). This stage may also involve a pre-mediation logistics conference with the mediator, client, counter-party and their counsel.

How do you Bill: Hourly (often at a reduced or pre-agreed rate) or included within a capped arrangement.

This stage involves the actual days of mediation, including joint conferences with the other side, private caucuses with the mediator and private client sessions to advise on the best negotiation strategies in the mediation. Following opening statements, a clear agenda is drawn out, and issues are listed and addresses based on priority. This is another opportunity for the mediation counsel to demonstrate collaborative dispute resolution skills, while working with the client and mediator to break the impasse with the other side. By using objective criteria and engaging in reality-testing exercises with the supervision of the mediator, the mediation counsel can help their client move beyond rights and liabilities to the next phase of brainstorming solutions.

As the governing body for mediation in India as envisaged in the Mediation Act 2023 (“the Act”) is yet to be formed (see Mediation Council of India – Chapter VIII of the Act), quality control, mediation rules, code of conduct and compliance to international mediation ethical standards rests in the trustful hands of the mediator and mediation service provider. This means an additional responsibility for the mediation counsel to ensure the process is conducted by the neutral akin to what is as enunciated in Sections 15 and 16 of Act (which is yet to be notified).

How do you Bill: Daily rates plus disbursements.

This stage requires the mediation counsel to be involved in drafting the settlement agreement, advising on enforceability, coordinating filings / discontinuances and ensuring performance mechanics. This can be a particularly testing time as mediation counsel needs an appropriate temperament to deal with different drafting styles, decision-making fatigue, and delay mannerisms which may be consciously or unintentionally demonstrated by either side before putting pen to paper. The mediation counsel would also be certain to have a formally authenticated (by mediator and /or mediation service provider) mediated settlement agreement which would be binding on the parties and once Section 27 of the Act is notified it can be enforced like a decree of court. A typical mediated settlement agreement also involves a clause that mentions mediation or other dispute resolution mechanism in case of any future conflict arising out of or in connection with the settlement agreement.

How do you Bill: Fixed fee for drafting / finalising the settlement agreement.

This phase involves different roles, depending on whether the parties reached a settlement or not. If mediation resulted in a settlement, mediation counsel might be tasked to keep a close-eye and maintain collaborative communication channels on execution and implementation of the settlement agreement.

If the mediation did not result in a settlement, mediation counsel would be involved in introspection and debriefing with their clients in terms of what didn’t work out and what might need to change in the future, if mediation is still a possibility. Based on their experiences at the mediation and adhering to the principles of confidentiality [see Section 22 and 23 of the Act (yet to be notified), and also Sections 75 and 81 of the Arbitration & Conciliation Act, 1996], counsel will usually be involved in litigation and arbitration strategy and planning.

How do you Bill: Hourly (often at a reduced or pre-agreed rate) or included within a capped arrangement.

While drafting a mediation engagement letter, a mediation counsel should consider including the various phases of the commercial mediation process and the fee quote for each of those phases, as discussed above. They may also choose to state that they can revise their fee with express agreement of the client in case the number of hours or days involved in the mediation and related work are much more than anticipated. Further, it would be prudent for mediation counsel to clarify with the client (prior to the beginning of mediation) that the fee would be chargeable irrespective of the outcome of the mediation and will be collected as a deposit before the mediation begins.

There has to be a distinction drawn between the use of Mediation as a method for resolution of commercial disputes and disputes arising out of family matters and other areas of law.  While the cause of Mediation is to be cherished it should not be mistaken as a charitable work, rather it has to be treated as a commercially viable mechanism for settlement of business disputes. Only then Mediation can achieve its full potential in India. It is also very important to focus on the lawyer’s role at the mediation table. In our view, we will begin to taste success in private commercial mediation only when we address the profession and practice from the lens of a lawyer.

Jonathan Rodrigues is a Mediator and Partner at The PACT.

Ganesh Chandru is a Partner at Dua Associates.