Commercial disputes are often a lengthy and expensive process, but in some circumstances a dispute can be resolved within a few hours through a blind bid mediation process known as ‘blind bidding’.
Blind bidding is a simple concept, but it only really works where both parties have a desire to conclude and resolve the dispute and it is possible to resolve the dispute by way of a financial payment.
The Process for blind bid mediation
To begin with, the parties agree to appoint an independent and completely neutral mediator. There are a number of mediators that specialise is this particular form of mediation and offer a fixed price (usually in the region of £300-£600 plus VAT per party). Once the mediator is agreed and appointed, a date is then set for the mediation to take place.
The parties may then be invited by the mediator to agree and set down the “bidding rules” for the mediation. These rules could, for instance, deal with the treatment of VAT in respect of the bids being made, whether the bids are inclusive of legal costs, what happens if there is overlap with the bids, and whether the mediator may reveal the bids if, for example, the parties’ bids are within an agreed parameter (i.e. 10-20%).
The process begins with the parties making their first sealed bids, usually by email or telephone to the mediator. The other party would not see the sealed bid. The mediator would then provide feedback to the parties on the bids to confirm, for instance, whether a bidding rule had been triggered or whether the parties were close. The mediator would then invite the parties to make their second and then third bids over the course of the mediation with the aim that each bid would bring the parties closer to reaching a settlement.
The role of the mediator is not to advise on any bid made by the parties, but rather to communicate whether the bids had triggered a bidding rule or to invite the parties to make their second or third bid. The mediator shall not reveal the amount of the bid (unless the parties had previously agreed and instructed the mediator to do so), but will simply communicate to the other party whether:
- The bids match – therefore resolving the dispute.
- There is an overlap within an agreed margin between the bids – if this is the case then it is a usual bidding rule that the parties automatically settle at the midpoint between the two bids.
- There is a difference between the two bids – in which case the parties will move onto the next round of bidding. If there is still a gap after the third round of bidding, then the mediation process will end and be unsuccessful.
If a settlement cannot be specifically agreed through the three formal bids, then there is the possibility that as the parties will be much closer in terms of a settlement figure that they can negotiate between themselves to reach an agreement. For this reason, it may be beneficial for the parties to agree that the mediator may reveal the third bid. That way each party knows where the other stands and how far (or close) they are apart. This may facilitate further negotiation between the parties after the mediation has concluded.
What is the advantage of choosing blind bid mediation?
Litigation can be an extremely stressful, time consuming, and costly process and, whilst it is not appropriate for every dispute, blind bidding provides an opportunity to resolve a dispute quickly and at a minimal cost.
Significant time and costs can be saved using this process, compared to traditional mediation, as it usually takes place over a few hours (if not less) and the mediator’s cost is fixed and the cost reflects the fact the mediation only takes place over a few hours.
With the courts moving ever closer to compelling litigating parties to engage and participate in mediation, blind bid mediation offers an alternative to the traditional mediation route and offers the parties the ability to engage and participate in mediation at often a fraction of the cost of a traditional mediation.
However, blind bid mediation is not suitable and appropriate for every dispute and there is certainly still a place for the traditional mediation route where a trained mediator is able to interact and facilitate discussion and negotiation between parties in dispute.
A new concept
This is still a relatively new concept so it will take time to see whether blind bidding will have more or less success than traditional mediations.
As with any dispute, it is beneficial to take legal advice prior to starting any mediation process to ensure you are choosing the appropriate route and minimising any risks involved.
For advice on mediation, you can contact our Commercial Dispute Resolution team.
This article was written by Christopher Jackson, paralegal, Toby Claridge, partner, and Richard Slater, partner, in the Commercial Dispute Resolution team.