Advisers engaged in mediation often confuse the alternatives a party has with possible options for resolution. An alternative to a negotiated agreement is an action a party can implement without the consent of the other.

Parties negotiate to try to secure an outcome that offers more value than their best alternative. The outcome obtained through negotiation needs to be sufficiently greater than the best alternative in order to justify the investment of time, cost and the effort involved.

Options, on the other hand, are possible agreements or parts of a possible agreement that the parties might be able to achieve. These include anything the parties may agree on that would help to satisfy their respective interests.

A trade is a basic form of an option. When parties engage in a trade, value is created by an exchange.

Negotiators should use options to create value during negotiations by maximising any shared interests they have identified or by utilising any differing interests. Options can address either specific issues that have been identified or general principles from the mediation.

The closer to trial that a mediation occurs, the more limited the parties’ options.  A mediation held close to trial will frequently be limited to the distribution of value: a zero-sum game whereby a dollar paid to one party means a dollar less to the other. For many disputes, such a mediation is a lost opportunity to develop options.

How to develop options

The right sequence is to develop then evaluate the options – and in doing so find possible, creative ways forward. Parties and their advisers tend to merge these two processes, resulting in them discounting many options before they have been developed and discussed. They do so because of preconceived notions about what the best outcome is. That is, a party approaches mediation on the basis they have already identified the best solution and their task at mediation is to convince the other party to accept it. It is a difficult but necessary task to encourage the parties with this mindset to explore options.

The most common form of negotiation style – compromising or haggling – is not conducive to the development of options. Collaborative negotiation is more likely to help the parties engage in win-win option development and evaluation, and is the preferred approach when dealing with negotiations that involve more than just the simplest distribution of value. Here are some ways to develop options:

• If the parties have an established relationship they can ratify parts of the status quo – identifying which elements of the current relationship they like and want to continue with. They can then explore which parts need to be changed;
• Referencing objective standards is a great way for the parties to develop options;
• Parties may develop options by discussion via subgroups or in an open forum, or may use more structured brainstorming procedures. For example, de Bono’s six thinking hats.
• Develop hypothetical settlement scenarios;
• The parties may look at settlement agreements negotiated from similar disputes, particularly within the same industry;
• The parties may identify issues that are linked and explore possible trade-offs;
• A negotiation stalemate may be broken if the parties can agree on a procedure for making decisions, to bring in outside experts or other resources to help broaden their perspectives on the dispute and the range of possible solutions.

The one day pre-trial mediation model is not helpful to the development and exploration of options. Developing options comes more naturally when the parties are not engaged in positional bargaining but have an open debate regarding their respective interests. Exploring options is to consider the art of what is possible before agreeing on any particular outcome.

Paul Sills is an Auckland barrister specialising in commercial and civil litigation. He is also an experienced mediator.