Bill Hewlett and Dave Packard, Steve Jobs and Steve Wozniak, Larry Page and Sergey Brin: so many of the brightest ideas that define our modern age started out as partnerships. And the power of two does not characterize just the computer age, but goes back in time. Friedrich Bayer and Johann Weskott, Henry Royce and Charles Rolls, Gottlieb Daimler and Wilhelm Maybach were the key partnerships of the industrial era that shaped our modern societies.
But imagine that all these innovators had spent their time in litigation against one another as soon as they had their first disagreement. We will never know how many great inventions or deals have remained unrealized because businesses fell apart when the partners failed to solve their minor disagreements amicably.
A slow process
Fallings out exist in every country and certainly in Lebanon where the danger of fraternal disputes is documented in the high number of failed enterprises and, very visibly, a number of long-abandoned skyscrapers.
A report by the International Finance Corporation (IFC) and World Bank says that enforcing a commercial contract in Lebanon – in other words, litigation – takes an average of 721 days, nearly twice as high as in Eastern Europe and over 50 days longer than the average for the Middle East and North Africa.
The cumbersomeness of settling business disputes in Lebanese courts is a turnoff for foreign investors and a huge burden on local companies, especially small and medium businesses which lack the resources to seek expensive arbitration, says Dala Ghandour, the coordinator of the one-year old Lebanese Mediation Center (LMC) at the Chamber of Commerce, Industry and Agriculture for Beirut and Mount Lebanon (CCIB).
The Lebanese Ministry of Justice last week signed an agreement that opens the door for informing judges about mediation. “This will be a great thing for making mediation more credible in Lebanon,” Ghandour says.
Established by collaboration between the CCIB and the Tripoli Bar Association with the IFC, the center has been developing its capacities to provide what in international lingo is called alternative dispute resolution (ADR). With operational priorities being confidentiality, impartiality, and mutuality of the mediation process, the LMC is offering its services as a solution for commercial disputes as an option that could help disputants from having to see each other in formal arbitration or court.
Wherever a business partnership, trade or commercial relationship is running into disagreements, the LMC can facilitate an attempt at mediation that both parties can walk away from at any time but that will be a great time and cost saver if concluded successfully with a contractual agreement between both parties, Ghandour says.
Fees for mediation of disputes at LMC currently are set in a range of 10 percent for a $5,000 case value to about 2.5 percent of case value when claims are over $60,000. In any event, mediation is far cheaper than litigation, with the IFC estimating that on average victorious parties in court expend 30.8 percent of the claim’s value on the process.
The IFC supports the establishing of mediation centers in order to make economies more efficient and attractive to investors. According to Carol Khouzami, the IFC’s ADR project manager in Lebanon, experiences with a mediation center in Morocco have been successful and Lebanon is one of three Arab countries where such an institution is being developed.
Two factors in Lebanon today make mediation look like an interesting proposition. The country, when compared with developed economies, has a high share of small and medium-sized businesses that are often established as partnerships within families and extended families or among friends. If such ventures go south, emotions have a great propensity to become intense and result in conflicts. Mediation aims to find ways to avoid the all-or-nothing outcome of court confrontations and meet the needs of the parties through non-conventional routes.
The second factor to make mediation attractive, especially at this point in time, is the slide of the Lebanese economy. Executive has reported these depressing trends enough, but it is well evidenced that slowdowns in business often translate into stresses on or the collapse of business relationships.
Lebanon may, however, not be easy terrain for a mediation model whose primary references for success are developed economies applying Anglo-Saxon models in settling commercial disputes. However, the timing seems very opportune to give ordered mediation a chance.