The significance of mediation over litigation has been emphasized in various situations. The perks of mediation and other mechanisms of ADR makes way for private and flexible settlement of disputes. The sudden halt of the judicial system during this pandemic has approved grounds for the encouragement of ADR. It becomes worthy and essential that small startups resort to mediation when in dispute instead of getting involved in the stressful intricacies of litigation. Litigation takes years to resolve issues and leaves small ventures with disrupted and tarnished relations. The long and demanding proceedings drain the finance and motivation of the startups. On the other hand, mediation ensures that disputes are settled conveniently with better understanding of the whole situation and with cost-effective techniques. Mediation ensures the fundamental element of justice, a justice without delay. Here are few reasons why it is specifically beneficial for startups to go for mediation to resolve a dispute –

  1. Restores good relations- Mediation ensures healthy working relationships among the employees are preserved. It helps in clearing speculative misunderstandings and restores good faith between the founders and the employees. Mediation allows individuals to understand the difference between their dispute and their interests. It gives the parties involved a clearer view of their stance in the conflict and allows them to tackle potential solutions without judgement and prejudice. An intact team is the core of a startup and any kind of dispute should not break this foundation. Litigation has an underline of tarnished relations causing the startup a big blow.
  2. Private mechanism- Another prominent attribute of mediation is that it is private. Mediation allows the parties to resolve their dispute under confidential terms that must be explicitly specified in the mediation agreement. Often in workplace disputes it is essential that the conflicts between the employees is settled privately without affecting the overall reputation and business of the workplace. It protects valuable information from competitive market forces. Mediation ensures that the parties have control over the case and certainty over the outcome of the procedure. Startups cannot afford to have a bad public repute when they are trying to build a goodwill of their brand in the market. Litigation would lead to airing their dirty laundry i.e. their dispute in the market.
  3. Convenience- Mediation can be conveniently scheduled according to the mediator and the parties and averts the dispute from the rigidity of court intervention. Litigation drowns small startups with extensive costs and time consuming proceedings which would only lead to an escalated loss and ill will. It also ensures settlement through the means of technological advancement.
  4. Better communication- Mediation carefully moderates between the parties and addresses every clause of the dispute in a calm and understanding manner. The mediation process encourages better communication and checks all unrealistic expectations from the dispute. Mediation acts as a bridge to overcome all misconceptions between the parties and ensures in rebuilding formal bonds with an open mindset. It helps to clear the air and leads to favorable outcomes by increased staff loyalty and improved productivity. It is absolutely necessary for small startups to have healthy relations between them so that they can strive for desired objectives without turmoil.
  5. Flexibility- The procedure of mediation is flexible and simpler than litigation. The parties involved along with their respective lawyers and the mediator can discuss the details and negotiate in a comfortable setting according their convenient time and date. Mediation helps the parties to undertake various clauses of the case in a simpler manner to cater their understanding and helps them explore different options for resolution. Creative and flexible procedure as well as solutions will indeed help a startup to not be caught up in the rigidness of the court and follow the red tape.
  6. Non-binding- Mediation is not governed under the Civil Procedure Code 1908 (India.) The award for mediation is non-binding on the parties, it can either be agreed or rejected according to the free-will of the parties. The parties have the right to withdraw from the mediation proceeding at any given time. They’re not obliged by any superior authority unlike litigation. This gives the startup a sense of control which leads to better compliance than a court order.
  7. Impartial- The parties can choose the mediator according to their preference. The mediator can be chosen according to the suitability of the case, someone who has thorough knowledge on the substantive area of dispute and can strike an impartial balance between the parties. The mediator guides the parties on the case planning and clarifies issues without prejudice. The mediator is usually an experienced lawyer who councils the parties for early settlement. This attribute brings more faith to the dispute resolution mechanism choosen by the startups as it ensures that the person helping the process is one who knows about the subject matter
  8. Reduces stress- Courtroom proceedings usually consume mental and physical stress and promote depression and anxiety due to uncertain consequences. One of the major feature of mediation is that it reduces stress. Mediation makes way for the parties to maintain respect and dignity in the work environment and handle unforeseeable situations effectively.

Small startups lack the availability of prosperous sources. Mediation plays a significant role for dispute resolution to keep the startup intact. Mediation ensures that the founders can concentrate on the goals of the business rather than being caught up in disagreements turned into disputes due to lack of communication and/or bad mechanism around management. They can resolve their conflicts calmly with reduced costs and not get entangled with the drawbacks involved in litigation. It ensures that employees continue working together towards their desired objectives with sustainable resolutions.


Author Information

Hajra Fathima, 4-th year law student, M.S.Ramiah College of Law, Bangalore.

Intern with the ADR Wing if Prerna Foundation