The midway

The recent news that Blackstone Group LP and DLF have entered a negotiated restructuring of their shareholding in various joint venture companies is reason to cheer. The restructuring is an outcome of discussions arising from a divergence in approaches that the two investor companies had on the investments in these projects.

Why is this laudable? This is an instance of self-determination, where companies have resolved a difficult situation which could well have led to disputes in the business and in management.

Differences in priorities, interests and values often lead to differences in the day to day functioning of an arrangement, and in the case of a joint venture, to the running of the company. Joint venture agreements and investment agreements set the terms for the joint management or participation in the running of the company.

A voluntary process In capturing this, agreements provide for veto rights, board representation and quorum rights to each investing partner. Divergence in approach in the running of the company or other differences lead to deadlock in the functioning of the company.

An effective way of factoring in self-determination in resolving these differences is to make a provision for mediation in agreements. Mediation is a voluntary process by which a neutral person facilitates discussions on issues between persons having disputes or differences. A provision for mediation in an agreement ensures that a structured and definite process for discussions to resolve differences is undertaken by the concerned partners.

Once this process is initiated, the mediator (a neutral person appointed by the partners) takes on the onus of facilitating the discussions.

The mediator is responsible for the logistics of convening a meeting, as well as the responsibility of keeping the partners engaged in the discussion. Unless one of the partners wants to discontinue the mediation, the mediator takes the responsibility to sustain the discussions.

Benefits of mediation Dispiritedness or aggression during conversations on the part of one partner engenders a similar reaction. The mediator manages the mediation process and directs the discussions away from anger, outrage and positions to forward looking conversations on how the differences could be resolved.

Time limits for the mediation can be agreed on up front. If a solution is arrived at by the partners in this time, they will draw up an agreement recording these terms. If not, the other dispute resolution mechanisms such as arbitration, tribunals or the courts are still available to them.

It has been the experience of policy makers that when people are required to try mediation, the voluntariness and facilitative structure of this process engages them, and often results in a sincere attempt to resolve all issues in the mediation.

Disputes that can be resolved through mediation are not confined to joint venture or investment disputes. Practically all commercial disputes can be resolved through mediation. It is time for companies in India to engage in this autonomous process in resolving difficult situations and disputes. Chambers of commerce and associations must facilitate this effort.

The writer is co-founder of Foundation for Comprehensive Dispute Resolution, Chennai

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