Mediation

Mediation is a structured, voluntary negotiation process in which an independent, neutral mediator facilitates dialogue between disputing parties to help them reach a settlement, without having the authority to impose an outcome, making it a faster and lower-cost alternative to adjudication or arbitration.

What is Mediation?

In international procurement disputes, mediation is used when the parties want to preserve their commercial relationship or reach a settlement faster and more cheaply than formal arbitration allows. The mediator, usually an expert in construction, procurement, or commercial law, meets with the parties jointly and separately to understand each party's underlying interests, identify common ground, and propose or facilitate a negotiated resolution. Unlike a dispute-adjudication-board or arbitral tribunal, the mediator makes no binding determination: both parties must voluntarily agree to any settlement. If mediation fails, the parties retain all their rights to pursue adjudication or arbitration.

Mediation is not a standard tier in most FIDIC or MDB contract dispute resolution hierarchies, which typically move from engineer's determination to DAB and then to arbitration. However, it is increasingly included as an optional step before or alongside formal proceedings, encouraged by development bank guidance and by institutions such as the ICC (which offers its own mediation rules) and the LCIA. Some contracts explicitly provide for mediation as a pre-arbitration step; others allow it by agreement at any stage.

Why Mediation matters for bidders

Mediation is the most commercially pragmatic tool available when a dispute threatens a working relationship or when the cost and time of arbitration would outweigh the amount in dispute. A mediated settlement is reached by the parties themselves, so the outcome can be structured in ways that an arbitral award cannot: early payment, revised programme, scope adjustment, or commercial concession. Suppliers with disputes in the range of USD 500,000 to USD 5 million should seriously consider requesting mediation before committing to ICC or UNCITRAL arbitration, where costs can consume a significant fraction of the claim value. A settlement agreement reached in mediation is a commercial contract enforceable in the usual way.

FAQ

Is a mediator's decision binding?

No. The mediator has no authority to impose an outcome. Any settlement must be voluntarily agreed by both parties and is then recorded in a settlement agreement.

Does starting mediation prevent a party from later going to arbitration?

No, unless the contract specifies a mandatory cooling-off or mediation period before arbitration. Mediation is typically without prejudice to arbitration rights, and parties may exit at any time.

How long does mediation typically take?

International commercial mediation in procurement disputes is usually completed in one to three days of structured negotiation, making it far faster than arbitration. Pre-mediation preparation and scheduling may add two to four weeks.