KMU Magazin No. 3, March 2025 Why business mediation makes sense

Business mediation is an alternative to state arbitration proceedings. However, conflicting parties have rarely used this alternative option to date. This article shows why this form of conflict resolution can be worthwhile for companies.

In the 03/2024 issue of KMU-Magazin, we reported on the principle of “mediation before litigation,” which has a long tradition in Switzerland. In comparison, mediation is a relatively new method of conflict resolution in Switzerland. While mediation in family law matters developed as early as the 1980s, commercial mediation only slowly emerged in the 1990s.

Since January 1, 2011, mediation has been explicitly enshrined in the Swiss Civil Procedure Code as an alternative to state arbitration proceedings. Nevertheless, mediation is relatively uncommon in Swiss business. This raises the question: Is business mediation an unnecessary detour, or should parties to a conflict in the business world also try everything possible to avoid court proceedings?

What it is about

The Swiss Chamber for Business Mediation (SKWM), founded in 1997, defines business mediation as “a process for resolving disputes in business between two or more parties. The mediator guides the process and helps the parties find a mutually acceptable solution to their dispute.”

Business mediation primarily deals with conflicts between business partners. These can arise externally in business-to-business relationships (e.g., contractual disputes between suppliers and customers) or internally within a company (e.g., between shareholders). Conflicts between companies and authorities or other organizations such as environmental associations are also conceivable.

Ultimately, business mediation, like state arbitration before a justice of the peace, is about resolving a conflict amicably with the help of a neutral third party. So why is mediation necessary if mandatory arbitration precedes state court proceedings anyway, or if the parties have already tried unsuccessfully to find a solution themselves? In addition, the parties' lawyers have often already negotiated and also failed to reach a result. In the eyes of many, mediation therefore only costs money and time without creating any added value.

Relatively low costs

The objections to mediation listed above cannot be dismissed out of hand, but they are nevertheless too simplistic. It is true that business mediation costs additional time and money. The mediator works on a mandate basis and is compensated for their services by the parties to the conflict. In some cases, external legal representatives may also be involved in the mediation negotiations. Furthermore, there are internal personnel costs for those participating in the mediation.

However, these costs are marginal compared to the expense of court or arbitration proceedings, which often last for years. From a cost perspective, therefore, mediation is always to be welcomed. In addition, mediation itself promotes understanding of the conflict, meaning that the hours invested are not wasted, even if no agreement is reached. The time lost is also negligible compared to formal proceedings before a court or arbitration tribunal. Mediation does not take months, but only a few days or, if several sessions are required, a few weeks at most.

The role of the mediator

Can the mediator do more than the lawyers? No, the mediator cannot do more than the party representatives, but his role is different. Ultimately, every lawyer represents the interests of his party. In settlement negotiations, he always thinks about the trial and wants to keep all options open for his party. This means that not all alternative solutions can be put on the table and discussed. The fear that certain information communicated during the process could backfire is too great.

The role of the mediator differs fundamentally from that of a party representative. The mediator views the conflict as a neutral third party. He works to find an amicable solution to the conflict, taking into account the interests of all parties. He supports all parties in the negotiations and, ideally, paves the way for an amicable settlement of the conflict. The focus is not primarily on the legal level, but on the business and emotional levels. Ultimately, it is people who decide on proposed settlements, even in companies.

Can the mediator do more than the state justice of the peace? No, the mediator cannot do more than the justice of the peace, but he has more time and information. He can deal with the conflict in greater depth and seek innovative solutions in consultation with the parties. Ultimately, however, it is up to the parties to resolve their conflict. Like the justice of the peace, the mediator has no decision-making authority.

How mediation works

The mediation process can be tailored to the parties' needs. The key points for conducting and organizing the mediation, such as the number, location, and time of the sessions, the participants, possible written submissions, etc., are determined at the beginning of the mediation. It is also important to define when the mediation is considered to be over.

The mediator helps the parties to break down their conflict into relevant core issues. The focus is on the current and future interests of all parties. Once these interests have been evaluated and the burning issues identified, the way is clear for creative solutions that do not necessarily have to correspond to the legal situation.

It goes without saying that confidentiality is a central pillar of mediation. It applies both to the mediation itself and to its content. Statements or proposals made during mediation may not be used in subsequent court or arbitration proceedings under any circumstances. To ensure that the parties really explore all possibilities in mediation, it is helpful if the mediator is allowed to hold individual meetings with the parties (known as shuttle mediation). Although the mediator is not permitted to disclose the content of individual discussions to the other party, this allows them to identify possible solutions that would otherwise not come to light.

When does mediation end

Ideally, mediation leads to a settlement agreement, the key points of which are set out in writing. The parties can then draw up the detailed content of the settlement agreement together with their legal representatives.

It is important to provide mechanisms that help all parties to adhere to the settlement agreement. This is because, unlike a court judgment, the settlement agreement is not directly enforceable. If one party refuses to fulfill its obligations under a settlement agreement, this constitutes a breach of contract. In the worst case, this breach of contract must be enforced in court.

However, these court proceedings no longer concern the original dispute, but solely the settlement agreement and its consequences.

It is also conceivable that mediation will fail because no agreement can be reached or because one party ultimately refuses to participate. This outcome is also usually recorded in writing, and the parties can have their dispute decided by a court or arbitration tribunal.

Conclusion

Mediation is never superfluous, provided that all parties involved are willing to seriously address the conflict or its resolution. It is therefore advisable not to allow a conflict to escalate to the extreme, but to start mediation at an early stage. In this case, there is a good chance that, with the help of a neutral person, a change of perspective can be achieved and the dispute can be settled amicably. This not only saves time and money, but also promotes mutual trust in the business partner. An ideal basis, therefore, for continuing to do business successfully.