Introduction

When commercial actors enter into a transaction they aim to align their interests to achieve a mutually beneficial result. When a problem subsequently occurs in the performance of their transaction they will seek to resolve it with a view to maximising the value of the relationship. In the first place, they will seek resolution through cooperation in line with ordinary commercial practices and common-sense. If the parties are unable to resolve their conflicting interests together through negotiation, they may turn to other dispute resolution mechanisms that involve a neutral third party who will either assist the parties in creating a commercially-oriented solution, for instance through mediation, or who will decide on the dispute for the parties by enforcing legal rights, for instance through adjudication in the form of arbitration or litigation. These two forms of dispute resolution differ in nature and purpose. In mediation, a neutral third party – the mediator – intervenes to assist the parties in their attempt to reach a settlement agreement that preserves their transaction, salvages their on-going business relationship, and avoids escalation of their conflict into a legal dispute. In contrast, when parties pursue resolution of their dispute through adjudication, they seek strict enforcement of their legal rights laid down in their contract. The court or arbitral tribunal will assess the relative strength of the conflicting legal positions on the basis of an application of the legal norms applicable to the contractual relation. Although adjudication will lead to a resolution of the dispute, it will often have a destructive effect on the on-going business relationship between the parties.

From this brief introduction, it can be seen that these two approaches to dispute resolution have different objectives. Whereas mediation aims at a solution that meets the parties’ commercial interests and expectations; adjudication leads to the settlement of a legal dispute. Due to their different nature and function, they therefore tend to give priority to different normative frameworks. Adjudication occurs entirely on the basis of the legal framework constituted by the law and the contract, while mediation, as a problem-solving process, allows a broader range of considerations to shape the outcome and thus incorporates norms and practices from other, non-legal frameworks.