Conference on Mediation

March 29, 1996, Geneva, Switzerland

 

DISCUSSION

Round Table: Ethical Obligations and Responsibilities of the Mediator and Mediator Immunity


Stephen Goldberg (Chicago, United States of America)

Because mediation is a new area, an emerging area, we do not have firmly developed codes of ethics to guide us through ethical mine fields. We have some emerging codes of ethics, propagated by various groups, but there is nothing with, even in the United States of America, even national validity, much less universal or international validity. In the paper that we have put together and, for which, in all honesty, primary thanks go to Margaret Shaw, on ethics and obligations and responsibilities of the mediator and mediator immunity, we have outlined some of the codes of ethics which have been developed and, most interestingly, some of the areas of greatest controversy or uncertainty which have been identified. These are set out in the paper that is before you.

The role of the mediator in settlements has been the area of, I think, some of the most interesting discussions, debates and uncertainty in the development of ethical codes, at least in the United States of America. You all should have before you a document which was passed out during the pause which is headed "Ethics Discussion Hypotheticals." What we would like to do is to go interactive. Instead of us continuing to pontificate from here, we would like to hear your thoughts on how you think some of these issues should be resolved. Please consider the following issue outlined in the document entitled "Ethics Discussion Hypotheticals." In a separate session, a representative of a corporate defendant tells you, the mediator, that the company’s financial condition is deteriorating quickly, and that it is unlikely the company will survive the year. Now, let us assume you are negotiating an agreement or mediating an agreement between this company and another company. She says to you, ‘Now do not tell them that any deal we enter into may fall apart because we may not survive. Do not tell them that." You have begun the mediation. Do you remember how you have begun the mediation? You said, ‘Of course anything that you tell me that you do not want me to repeat to the other side, I will not do so. I will honour your confidentiality." We promised confidentiality. Now this gets sprung on you. You are the mediator, what are you going to do? Would anyone like to tackle that.

 

Richard Hill (Geneva, Switzerland)

I think you have picked the easiest of the ones here.

 

Stephen Goldberg (Chicago, United States of America)

Well, we shall get to the other ones, Richard.

 

Richard Hill (Geneva, Switzerland)

I think this one is not too difficult. It is clear that in no case can you go tell the other party. Now, if you feel that, on the other hand, this is such a gross misrepresentation that in fact it is somehow unethical to continue the mediation, then you, as mediator, should say that you cannot continue with this mediation. The mediation has to stop there, without explaining the reason why.

 

Bruce Aitken (Washington, United States of America)

I totally agree with that. This is the functional equivalent of handling a dumping proceeding as counsel to a client who disclosures that they have used a false set of books. You cannot disclose it, but you cannot represent them. You have to urge them to come clean.

 

Margaret Shaw (New York, United States of America)

My question to both of you is, what are you going to tell the other party?

 

Richard Hill (Geneva, Switzerland)

I would tell the other party that I could not continue with this mediation for reasons for which I cannot disclose.

 

Margaret Shaw (New York, United States of America)

‘Why Mr. Mediator? I paid you a lot of money to come into this session and now you are telling me you cannot continue with this mediation?’

 

Richard Hill (Geneva, Switzerland)

‘In the discussions that we had at the beginning, it was agreed that any of the three parties, including myself, could terminate the mediation at any time without disclosing the reasons, and I am exercising that option that we have agreed to.’

 

Margaret Shaw (New York, United States of America)

‘Has the other side done something that I should know about?’

 

Richard Hill (Geneva, Switzerland)

‘I cannot answer that question.’

 

Margaret Shaw (New York, United States of America)

‘Ah ha. So they have.’

 

Richard Hill (Geneva, Switzerland)

‘I cannot answer that question.’

 

David Perkins (London, United Kingdom)

I think the answer is that you are mediating. You have to try to find a solution between the parties. You have to come up with some answer which is going to suit both sides. One company is in a poor financial position. Had the parties gone to litigation, there would have been extra financial burdens put on that company. The party in the good financial position would have not benefited by it. I think that, at the end of the day, you should say to the financially weaker company, "what can you offer which would produce a settlement and can I speak to the other side on that basis, because we will reach a settlement far more quickly and it will cost you less and cost the other side less and there will be more money in your pockets." That is the way I would approach it.

 

Makkawi A. El Makkawi (Dubai, United Arab Emirates)

As far as the issue of confidentiality, I agree totally that as long as the mediator tells the parties that he is not going to disclose the information, this is information. But what is the issue that cannot be disclosed. The parties are in dispute, I know that. One of them is telling me that he is in financial difficulty, but what is the bearing of this to the dispute and the other party. Unless this information is disclosed, I would not be able to say whether it is relevant or not. I would have to know more about this before I could give an opinion.

 

Stephen Goldberg (Chicago, United States of America)

So you need more information.

 

Makkawi A. El Makkawi (Dubai, United Arab Emirates)

Exactly. On the dispute.

 

Margaret Shaw (New York, United States of America)

Supposing you found out that the relevance was that, because of this financial deterioration of the company, they were prepared to enter into an agreement, but in fact they knew they could not follow through with whatever payments they agreed to make.

 

Makkawi A. El Makkawi (Dubai, United Arab Emirates)

So, you mean the information is that the whole thing boils down to how much this company, which is in bad shape, is prepared to pay. So that means that I have already one proposal in hand. Then I would go and see the others.

 

Margaret Shaw (New York, United States of America)

Supposing the party says to you, ‘I will agree to pay them two million dollars, but as an aside to you Mr. Mediator, what I would like you to know is that there is no way that I am going to pay that because I am planning to go into bankruptcy next week.’

 

Makkawi A. El Makkawi (Dubai, United Arab Emirates)

Well, I believe that you are offering me nothing. If you are offering to pay two million and you are going to bankruptcy, this is not an offer.

 

Margaret Shaw (New York, United States of America)

‘But I am not offering it to you, Mr. Mediator, I am offering it to the other side and I would appreciate it if you do not tell them what the conditions are of my offer.’

 

David Perkins (London, United Kingdom)

I suggest the mediation calls for a weeks’ adjournment.

 

Stephen Goldberg (Chicago, United States of America)

Let me take it one more step. That is, this is an issue of non-disclosure which may result in harm to the other side if they enter into an agreement. Let us go back to another issue. In an individual session with the claimant, in a trade dress infringement case, the claimant lets slips something that makes you believe - this is in private session in caucus - that the plaintiffs’ surveys have been manufactured, they are fraudulent and the claimant has not told you, but you have learned from what the claimant is proposing that you will participate in the furtherance of an agreement which will be based on fraud. Same question. Is the answer the same? One answer I seem to hear a lot is, ‘Well I just walk away. If they ask me why I will tell them that I will not tell them.’ Is that what you do?

 

Richard Hill (Geneva, Switzerland)

See how much more they are willing to move because maybe the situation is salvageable. You have to explore what could be done.

 

Stephen Goldberg (Chicago, United States of America)

The situation is certainly salvageable because the party that has manufactured this evidence is prepared to manufacture some more evidence.

 

Richard Hill (Geneva, Switzerland)

What I mean is that you might be able to put aside the tainted evidence and still get to some kind of satisfactory resolution.

 

Stephen Goldberg (Chicago, United States of America)

In which you might preserve both the deal and your integrity?

 

Richard Hill (Geneva, Switzerland)

Yes.

 

Stephen Goldberg (Chicago, United States of America)

Let me push you one step further. Suppose that you have been successful as a mediator, and that the disputing parties are prepared to enter into an agreement that they are quite satisfied with and that you become aware will have negative, harmful effects on a party that is not at the negotiating table. The quickest example I can think of, and maybe someone else can think of a better one, the one where we see it happen most often, is in domestic mediation. The feuding husband and wife enter into an agreement that they are both happy with it but it is terrible for the children. You are enough of an expert in this area, you know this will be very bad for the children and the children are not at the table. Do you just say, ‘this is terrible’ and you walk away. What do you do? Richard?

 

Richard Hill (Geneva, Switzerland)

I think in that one, there is a fair amount of practice literature. It is a fiduciary duty to try to tell the people that they are doing something which is wrong. Or the other case would be antitrust where they are agreeing on something which is obviously anti-competitive. I think you have to go and tell them, look you cannot do this. I cannot prevent you from signing this, but I am to have no part in it.

 

Stephen Goldberg (Chicago, United States of America)

And they say, ‘good we will not pay you.’

 

Margaret Shaw (New York, United States of America)

‘I thought you said this is a process in which we get to make our own decisions.’

 

Richard Hill (Geneva, Switzerland)

‘Yes, that is correct. I cannot prevent you from making your own decision and on the question of fees it was agreed that I was paid by the day and I have put in my day’s work, so I would like my day’s pay.’

 

Stephen Goldberg (Chicago, United States of America)

Is there any feeling that the mediator should tell innocent third parties who run the risk of being injured by the agreement between the folks at the table?

 

David Perkins (London, United Kingdom)

I think first you have to tell the parties that that is what you intend to do if they go through with this arrangement.

 

Stephen Goldberg (Chicago, United States of America)

And then you do it? You say you are going to threaten to do it, but are you going to do it, is my question?

 

Richard Hill (Geneva, Switzerland)

I think that depends and you have to actually go to the lawyer who executed the mediation agreement because in a lot of countries, in fact, you are compelled by law to actually go and denounce them regardless of any confidentiality agreement you may have signed. I think especially if you are a lawyer. But even if you are not, you just may be under a legal obligation to do so and you tell them ‘look my legal obligation is to report you to the relevant authorities.’

 

Stephen Goldberg (Chicago, United States of America)

You make it too easy if you tell me the law deals with that issue.

 

Ikbal Al Fallouji (Geneva, Switzerland)

It all depends on whether you are posing a legal or an ethical problem. If you pose a legal problem, then it is resolved legally. One must follow the law. On the other hand, if it is a question of conscience or an ethical question, then one is human and one can have a good or a bad conscience. It all depends on who we are, and it all depends on the legal system. Are you raising a legal or an ethical question?

 

Stephen Goldberg (Chicago, United States of America)

I prefer to raise ethical problems. If they are legal, it is too easy.

 

Ikbal Al Fallouji (Geneva, Switzerland)

If it is an ethical question, we are human beings and we can be either angels or devils.

 

Stephen Goldberg (Chicago, United States of America)

I should like to know how one acts like an angel and how one acts like a devil.

 

Ikbal Al Fallouji (Geneva, Switzerland)

As far as I am concerned, I am an angel and I would refuse, but I cannot guarantee that there are only angels.

 

Margaret Shaw (New York, United States of America)

One of the other questions, I think, is, as this field of mediation matures, whether or not we ought to be enacting codes of ethics that deal with some of these moral questions and therefore take it beyond the realm of legality to a question of ethical codes that mediators subscribe to. So one of the questions that we need to think about is what would be in that kind of code and how do you deal with some of the circumstances we have on this sheet.

 

Stephen Goldberg (Chicago, United States of America)

There are lots of issues which are presented as to your responsibility as mediator, if you have any, to ensure that one side does not take advantage of the other, with your knowledge and without the knowledge of the other. Another issue is whether you have some responsibility to unrepresented third parties to warn or protect them apart from the law. Are there or should there be some ethical obligations as a mediator?

Now let me raise this issue. Suppose that your day’s work has been enormously successful and you have succeeded in mediating an agreement where, had this matter proceeded onto litigation, each party would have spent at least $1 million. You have resolved it in one day, so the total saving has been $2 million. What would you think of the idea that, before the day started, you were to say to the parties, "there is an awful lot of money at stake here. If we get this settled, I would like my fee to be one percent of the amount you save. If we do not settle it, if you are not going to save any money, I am not going to ask you to pay me any money." What do you think of that?

 

Felix Addor (Berne, Switzerland)

If you start with contingency fees in mediation, then you will soon have destroyed mediation and it will become the same mess as you have in ordinary law suits. I would never do that.

 

Stephen Goldberg (Chicago, United States of America)

I have heard you say that that will destroy mediation. Why will it not make mediation immensely powerful?

 

Felix Addor (Berne, Switzerland)

No. The important thing is to find a solution, an efficient solution, a cheap solution, but with contingency fees you will start a market. Another will come and say that he will do it for 0.5%.

 

Stephen Goldberg (Chicago, United States of America)

But there is a market among mediators now, and lawyers. We all charge, well not all, some of us charge different prices than others.

 

Willy Manfroy (Kingsport, United States of America)

The mediator should not have a financial stake in the result of the mediation. I think he should be completely neutral. If he has a percentage, he is going to have a tendency of pushing things that are not necessarily correct because he is going to make more money on it. So it should be a fee that is set regardless of the result.

 

Margaret Shaw (New York, United States of America)

I think that what Professor Goldberg is suggesting is not a fee, that is, a percentage of the amount that is actually agreed to, but rather a percentage of the amount that the parties save in legal and other costs.

 

Peter Michaelson (Red Bank, United States of America)

You may find that in mediation the most efficient solution is not necessarily the cheapest one in terms of dollars. If, as a mediator, I were to take my fee in terms of a percentage, I could even subconsciously lead the parties to a solution that would maximize my return and not that of the parties. When I mediate a case, my fee is strictly based on hours and if the parties save a great deal, well God bless them, that is the purpose of it. If they reach a mutually efficient solution, as they see it win\win, which may involve a significant expenditure by virtue of say a licensing agreement or some type of other business interest which was not contemplated going into the mediation, where both are better off, that is in their bests interests and not in mine. I would like the parties to be free to explore all those interests and I would like to preserve my neutrality. I can do that if I am not tied to any contingent fee arrangement.

 

Stephen Goldberg (Chicago, United States of America)

So there seems to be a sense that this poses a risk of a conflict of interest, of setting the mediator up, the mediator’s interests as perhaps different from those of the parties, because the mediator will be searching so hard for a settlement.

 

John Toulmin (London, United Kingdom)

I was President of the European Bar in 1993 and we spent a great deal of time on contingency fees. We were told originally that the rule was that the wicked and venal Americans were in favour of contingency fees and that this was destroying the fabric of the legal profession. I discovered gradually that, similarly, within Europe, one way or another, it was not called contingency fees - in England it is now called success or enhanced fees, which you can charge. The Paris Bar has a similar system, I cannot remember what it is called, but I am glad to see the colleague on my right nodding. Gradually every country in Europe is producing a system where there is some benefit for success. In the case which is described here, where it depends not on the mediator but on the two parties reaching a consensual agreement, I cannot for the life of me think why you should not enter into such an agreement as a mediator.

 

Stephen Goldberg (Chicago, United States of America)

Thank you, John, it is nice to have some difference of opinion here.

 

Gustav Würstemann (Zurich, Switzerland)

I think that there is risk going that way, because the mediator has knowledge. If he wants to have a nice fee, he may stop, maybe, or he may, how shall I put it, make the settlement at a stage when he gets the best result for himself.

 

Karl Mackie (London, United Kingdom)

Just one line of argument I would like to put to you to challenge you as a mediator. Why do you think the mediators would be so influenced by these venal considerations, and yet lawyers charge hourly rates and presumably you assume they do not lengthen the case in order to attract their fees into a higher level? What’s the difference?

 

Gustav Würstemann (Zurich, Switzerland)

My fees are according to the sum of the billings. You are quite right.

 

Stephen Goldberg (Chicago, United States of America)

If mediators are not going to get paid according to success, they are going to get paid according to the hour or the day, which raises exactly the same issues. The pure self-interest of the mediator of today is to drag the mediation on forever. So can we avoid a conflict of interest no matter what?

 

Raymond Stewart (Falls Church, United States of America)

I think one issue is perception. You hear enough discussion here that mediation is supposed to be neutral and whether or not it is good or bad to have contingency fees, the perception would be that it is bad, that mediators may be influenced by their own fee and their own self-interest. So I think perception is as important a concept as the actual payment.

 

Stephen Goldberg (Chicago, United States of America)

Let me try another conflict of interest issue on you, since you are all so hard on the mediator. As mediators, believe it or not, we occasionally see a conflict of interest between lawyer and client. We occasionally see a lawyer either misguidedly or intentionally keeping a case going. We see we are trying to settle it and one of the lawyers is giving the client advice, ‘do not take that, do not take that,’ when it is clear, since we know something about the law, that the lawyer should not be giving that advice. Would anyone of you, sitting in the mediator’s chair, be tempted to say, ‘client, I would like to talk to you privately?’ What about that? I see you are shaking your head.

 

Sheika Haya Rashed Al Khalifa (Manama, Bahrain)

We can tell the client directly by one way or other. Usually we have cases sometimes like this in which the arbitrator or the judge try to direct the case in one way or other to avoid the misleading of the client by their lawyer.

 

Stephen Goldberg (Chicago, United States of America)

I have heard lots about your responsibility and so on, the mediator’s responsibility in not letting people get taken advantage of, but someone is going to get taken advantage of.

 

Willy Manfroy (Kingsport, United States of America)

As you were saying a little bit earlier, I think this is a time to have a caucus between the two principals and kick the lawyers out. Then you can maybe influence the way things are going.

 

Stephen Goldberg (Chicago, United States of America)

Kick both the lawyers out?

 

Willy Manfroy (Kingsport, United States of America)

Both lawyers out. Yes both. So that you are even on either side and you get the principals to talk.

 

Stephen Goldberg (Chicago, United States of America)

I think we shall have one more then...

 

Gino Lörcher (Cologne, Germany)

I think I would quite ingeniously raise the legal question in the meeting with counsel and say I am not sure I see your point in this matter and start a little discussion about the merits of the legal question.

 

Stephen Goldberg (Chicago, United States of America)

You know the flip side of this at times is that sometimes the client has a weak case, the lawyer knows it, the lawyer tries to persuade the client to settle and the client gets upset with the lawyer, saying ‘what do you mean I should settle. Aren’t you my champion?’ If you are the lawyer in that situation, can you see some way that you might use the mediator to help you, to help resolve the matter in a way that would serve the clients best interests. Anyone see what you might do?

 

Ikbal Al Fallouji (Geneva, Switzerland)

The most determining criterion is the conscience of the mediator. All these questions are asked in an abstract manner, but it all depends on the country, of course, on the ethical system and on values. But if we seek a common denominator, I would say that the solution is to be found in the conscience. If the mediator finds that his conscience obliges him to tell the truth, which is not necessarily the objective truth, then he must do his duty. But it is not on this basis that he is right and the counsel is wrong.

 

Stephen Goldberg (Chicago, United States of America)

You are right, but we have passed to another question, I believe. The question of what the lawyer can do. How can the lawyer use the mediator in this situation, the situation I most recently described?

 

Maurice Choquard (Zurich, Switzerland)

It seems to me that all these issues are based upon a confusion. The problem is, in fact, the neutrality of the mediator. If it means to be colourless, without power, without action, we do not need to have a mediator. We have a mediator to take actions, to think by himself, to resist influence and to be paid according to his services. Back to the fee issue - I do not understand the issue. It is only a question of calculation. The important thing is that both parties will pay equally the mediator. Whether it is a percentage of the result or the money saved or by the hour or the week or for free, the important thing is that all parties agree and there is an equality of payment. With the so-called moral issue, whether I should go into a room with one party or the other to tell this or tell that, well it is my role to make the best judgment for reaching the goal and everything that serves the goal of finding a solution is good.

 

Stephen Goldberg (Chicago, United States of America)

There might not be universal agreement with that. We need to hear from Professor Karl Mackie on a related issue, which I will let him describe.

 

Karl Mackie (London, United Kingdom)

Immunity is the issue that I want to describe, but I must actually just finish that session with a little story about the only case I know in the United Kingdom where a lawyer acted as mediator on a contingency fee basis. I was involved in the case, and I hasten to say, not as mediator, but as advisor to the parties in designing a procedure in a very complex dispute. The parties discussed how they would pay the mediator. They decided to reduce his professional rates by one third and, at the end of the process, if it was settled, they would offer him a major lump sum as an incentive. They discussed the merits as you have been doing. But then he said ‘well, how do I know that you will deliberately not settle this case in order to avoid paying me my fees.’ So the final agreement reached was, with a little bit of mediation from me, that if the case settled within three months of the mediation then he would get his lump sum payment. But the case did not settle within three months, so I am still suspicious of the lawyers in that case.

Immunity, very briefly, is, like ethics, still an emerging field and a lot of this area is really just developing as a matter of law and procedure. I just want to highlight the main headings within immunity. First of all, how does a particular society understand mediation or have an influence in the responsibilities and liabilities of the mediator? Secondly, in the absence of contract, what would the general law in that jurisdiction say about the responsibilities of a mediator or, in effect, an inter-meddler or good Samaritan or however else you want to describe the role of the mediator? Thirdly, can you limit the responsibilities of the mediator by private law, by contract? The mediation standard agreement, for instance, has a special paragraph saying ‘mediators will not be liable for anything in connection with this mediation apart from dishonesty or willful misconduct.’ Lastly, you have to look at whether there are any particular statutory provisions relevant to immunity. In some jurisdictions now, there are statutory provisions which do give mediators a similar immunity to judicial individuals or arbitrators and that may occur also in some jurisdictions where the courts do not recognize that mediation is a quite separate process from arbitration. The last thing to say for those of you who are practicing or intending to practice as mediators is that, to some extent, you may be able to cover for some of these problems by taking out professional insurance cover, of course, and you should do so if relevant in your jurisdiction.

When a mediator would actually be liable is a good question. Probably the most common areas are first of all, breach of confidentiality. If, in a private session with one party, you promised you would not reveal a sensitive piece of information and you do so to the other side, then clearly there may be some action they might be able to bring against you under the contract to mediate. I have to say, having dealt with a recent multi-party international case, I was being scrupulously careful about confidentiality. I discovered all the clients were on the telephone to each other every night, telling each other what went on in their caucus, so that it threw the whole confidentiality issue into some business relief perspective.

The second kind of area, and I think there is at least one case in the United States of America, is where the mediator is alleged to have applied undue pressure on one party to get a settlement. That may occur, for instance, in a family case or a case involving someone who is not legally represented.

The last area is evaluative mediation. Supposing the mediator is alleged to have given advice. Are they liable under the general law? In fact, there have been two recent Australian cases where mediators have been held liable for giving advice in the course of mediation. One of them was quite a simple matter. At the end of the mediation they were drafting a settlement agreement and one of the parties said, quite casually, to the mediator ‘does stamp duty apply to this agreement.’ The mediator quite casually said, ‘no,’ but he was wrong. That is how easy it is to give advice in the process of mediation. Just when the relief of having reached that point of settlement was being enjoyed, casual advice was given. The mediator was taken to court. I do not know if that is on appeal yet, but it is an indication of how this field of law will certainly develop over time. In general, I think it is very hard to prove causation and damages if you think about the process of mediation. A mediator is really a shadow of the parties’ negotiations rather than, in a sense, a separate instrument. So that really in most mediations, in terms of ethics and immunity, it is the parties’ responsibility and the parties who own what is happening in the mediation. Only in rare occasions would or should the mediator be brought into or before a court.

 

Tang Houzhi (Beijing, China)

I would like to make two proposals. Number one. You are a lawyer. You are appointed as mediator by the parties. Remember that you are appointed by the parties as a conciliator or mediator and that you are not appointed by your clients as a lawyer. Where you are appointed by the parties as a conciliator or mediator, you must not forget that you are a lawyer for a moment. This is the first proposal, otherwise you will make things confused. The second proposal, in case you are a lawyer, you are employed by your client as attorney, or agent, conciliation agent or arbitration agent. Please, remember that you are appointed by your client. You are not appointed by the parties. You are appointed as a lawyer, not as a mediator or conciliator, so you know the job of a conciliator is different from the job of a lawyer. Do not confuse the role of the conciliator and the role of a lawyer, whether in the process of conciliation or arbitration.

 

Ikbal Al Fallouji (Geneva, Switzerland)

I received instructions from a client who asked me to commence an arbitration against someone in Japan. I wrote a letter to the Japanese party and he replied: "I accept that you be the mediator who will find the mediator for us." Do you think that I refused? I accepted with pleasure, and I am very happy with the result.

 

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