Dr Jörg Risse, partner at Baker McKenzie in Frankfurt/Main and honorary professor at the University of Mannheim, provides an insight into his work as a business mediator. It becomes clear what a complexity and paradox, even an imposition, mediation is for everyone involved.

Chapter marks:

• 00:01:173 example cases
• 00:05:00 Work assignment for the business mediator
• 00:09:00 Representatives in mediation with organisations
• 00:12:50 Dealing with partisan lawyers
• 00:15:30 Taking responsibility and shying away from responsibility
• 00:19:00 Suggestions by the mediator?
• 00:22:18 Mediation is an imposition
• 00:25:00 The paradox of conflict in mediation
• 00:28:43 Business Mediation 2nd edition – When?
• 00:29:45 Jörg Risse's personal path to mediation

Transcript:

[00:00:00] Sascha Weigel: Welcome, you are listening to „Gut durch die Zeit“ the podcast by Inkovema from Leipzig. I'm Sascha Weigel and I'd like to welcome you to a new episode.

[00:00:12] What characterises business mediation? Which conflict constellations are typical? What interests and needs regularly come up? Is it just about the nasty money or, since money is a „medium of trust“, is it ultimately also about trust? What role does the risk of litigation play in commercial mediation? And how do business mediators actually work?

[00:00:35] I discuss these and other questions with Jörg Risse, one of the best-known business mediators in Germany. He is a partner at the law firm Baker McKenzie in Frankfurt and an honorary professor at the University of Mannheim. His main areas of specialisation are arbitration proceedings and mediation, in addition to party representation. A warm welcome: Jörg Risse.

Jörg Risse: Hello Mr Weigel, I'm delighted that it's working today.

Sascha Weigel: Yes, I'm glad to hear that too, but why don't you start by giving us an insight into your mediation work? [If a mediation case were to come to you today or this week, what would it typically or most likely be?

[00:01:17] Jörg Risse: So perhaps it will be quite illustrative for you if I briefly outline three mediation cases that I have had on my desk here as a mediator in the last 4-5 months.

There was once a dispute arising from the acquisition of a company: an American group had bought a company from an Italian family company, was then disappointed with what it had bought and accused the Italian family company of having made incorrect representations: It had made inaccurate representations. The American company even felt cheated and then asserted claims against the Italian seller and before the parties fought it out in court, they considered whether they could settle the matter amicably in mediation. This then took place in Paris and I supervised it there.

In another case, it was about a power plant construction in the Ruhr area, where the contractor had made claims, i.e. the works company, and said: „Man, the construction will be much, much more expensive because the authorisation from the authorities has changed and we now basically have to build a completely different power plant.“ And the client said: „Price is price. We agreed on a fixed price, it's all your risk. I won't pay‘ another euro.“ However, as they were now worried that this dispute would delay the construction of the power plant, they thought about taking this dispute to mediation after all.

A third dispute that I handled was a product liability case concerning a product that you can buy in a DIY store. This product did not work properly and caused consequential damage. The parties had been arguing for 6-7 years in the German courts – with extensive expert opinions obtained. In the end, they were still in the first instance, after six or seven years, Mr Weigel, and then they thought to themselves that things couldn't go on like this and then came to me and took it to commercial mediation.

This may give you an overview of the cases I deal with.

Sascha Weigel: So it is clear that these are economically very significant cases, that the parties had already argued quite deeply „ and all three sounded like the decision to conduct mediation had already been made before the parties came to you, so to speak.

[00:03:43] Jörg Risse: That is correct. Yes, both are correct. The disputes I handle are „large-volume“, there is always a lot of money involved and the parties actually come to me after they have already agreed bilaterally on mediation. Unfortunately, it is still relatively rare for there to be a mediation clause in the original contract. In my practice, it is usually the case that the parties are either frustrated by a court case that has already taken place or that they suspect that a court case or arbitration proceedings will be unsatisfactory and then they say: yes, let's try mediation first. That is actually the basic constellation I have to deal with.

Sascha Weigel: And would you say, from what I know from colleagues, it is rather unusual that the parties already know that they want to do mediation, that this is typical for your practice. So the parties are knowledgeable, they don't have to convince anyone what mediation is or that it would be a good idea, but they come to you and say we want to do mediation and we want to get you to do it now.

[00:04:58] Jörg Risse: So the parties are always knowledgeable. You have to realise that in the disputes that I handle, almost without exception, or I can actually say without exception, law firms are active on both sides. Most of them are also experienced in major commercial disputes and they advise their parties, their clients, and say: "Gosh, we would like to earn money through a five-year arbitration process or an eight-year civil process, but we would like to keep you as a long-term client. We believe that this part lends itself to mediation. The law firms are often clever enough to pick up the phone and get in touch with each other and then agree bilaterally that they want to mediate. However, this information about the mediation does not come from me, but is usually passed on to the parties by the law firms involved. Of course, that doesn't mean that I don't inform the parties again to make sure that they are properly informed about what I can do and what I can't do for them.

[00:06:04] Sascha Weigel: And what does it actually look like in the contract negotiations, if I now use the classic keywords for mediators – professional advice, being allowed to make suggestions, evaluating ideas for solutions, is it typical for you that you are then also commissioned by your potential mediants or do you say: That's not what I offer as a mediator, so what style of mediator do you use? Or are you flexible and say: Yes, professional advice is definitely necessary for one person, despite the fact that they may be represented by lawyers, and I deliberately keep a low profile with the other person. Those are the key words.

Jörg Risse: So specialist advice is not necessary. That has to be said clearly, because they receive very good professional advice from their law firms. At the same time, Mr Weigel, I am usually called in because the lawyers, not the parties, because the lawyers know me from a different context and because they know: Okay, he knows how a company acquisition usually works, he can re-read a balance sheet together with the parties, he also knows what a power plant contract looks like. In other words, he has the necessary, from the lawyers' point of view, specialist knowledge and expertise and that is the reason why I am commissioned. However, I do not yet clarify with the parties and their lawyers in the engagement meeting which specific methods I will use to bring the dispute to a solution, for that I first need to know the dispute, don't I?

Sascha Weigel: And are you in dialogue with the actual parties to the conflict right from the start or are initial discussions with the party representatives and representatives taking place?

Jörg Risse: So I attach great importance to the parties being present at the meetings at a high level right from the start and that also means that they are present at a correspondingly high level, especially in the telephone conferences and so on, because in the end I need the parties, Mr Weigel, to say either ‚yes‘ or ‚no‘ to a settlement. The lawyers do not do that. This means that the parties have to have confidence in the mediation process, in the mediation procedure, in order to make an informed decision in favour of or against the settlement package at the end. In other words, they cannot delegate this to the lawyers. However, I have a problem in commercial mediation that does not occur to the same extent in many other mediations. The parties in my mediations are almost always legal entities, i.e. mostly public limited companies, sometimes also limited liability companies. They can't speak, so I can't make them happy. Of course, they are always represented by authorised signatories, board members, managing directors and you always have what you call the principal-agent problem. Sometimes the board of directors has a different agenda than the public limited company that is actually a party to the dispute, e.g. it is concerned about its bonus. Are you allowed to take that into account as a mediator? Or do you have to say: No, the interests of the board of directors are not congruent with those of the public limited company and that is left out, which makes it a bit more complicated.

[00:09:37] Sascha Weigel: Yes, I understand. How do you go about it? Also to ensure that you ultimately conduct the negotiations with someone there, i.e. a third party, who can then make the final decision and not, well, I have to discuss and clarify this again with ‚Dem and Den‘ first.

Jörg Risse: That's a very good question. It's a problem that comes up again and again. So I do this by addressing the problem very openly and very directly and yet very harshly. I also tell them that I can't expect the entire board of the public limited company to sit in front of me in every dispute, but I tell the lawyers and the parties that I expect someone from the company to be there who has the authority and the competence to say yes to the settlement package. I understand that he has to go back to the committees, for example to the Management Board or the Supervisory Board, but I expect him to look me in the eye and say: „Mr Risse, if I say that the settlement is good, then the Management Board and the Supervisory Board will accept it.“ That, Mr Weigel, is all you can expect. You can't expect the entire management to come to mediation or the entire Management Board. That doesn't work and it also doesn't work for someone to send a representative with a blank cheque who says that regardless of whether you agree on 10, 20 or 30 million, you can sign immediately at the mediation meeting. You have to look reality in the eye, that doesn't work in business mediation.

Sascha Weigel: And, but I understand you correctly, you prefer to take an offensive approach to the topic and not proceed step by step and hope that it will somehow materialise in the end, but rather clearly state and also demand with an expectation that makes it clear.

[00:11:28] Jörg Risse: That's exactly the case, Mr Weigel. I learnt the hard way once 15 years ago or so, when after a very complex and, in my view, successful mediation process, the company's Supervisory Board suddenly refused to approve the negotiated settlement package. I was so annoyed, to be honest, that I said it wouldn't happen to me again. I'm always very open about it now and it's even often in my mediation agreement that I say the parties will ensure that an „authorised representative“ takes part in all mediation meetings and telephone calls. And if they don't want that, then I'll just put in at least one who has a high „probability of enforcement“ and who will convince the committees that a settlement negotiated in mediation is a good one.

[00:12:23] Sascha Weigel: I would like to make one more point on the subject of legal representation and party representatives in mediation before I come back to the subject of responsibility. As a lawyer, you are used to working with lawyers and many mediator colleagues have their difficulties when lawyers are in the room and involved in the mediation. What is it like for you, does it make your work easier that the party representatives are also involved in the mediation or does it rather hinder you?

[00:13:03] Jörg Risse: So I certainly, for me it's part of my daily working life that I communicate with lawyers, I speak the same language, of course, and I certainly have a certain amount of trust with the lawyers. But I also make sure that I tell the lawyers in commercial mediations that I expect them to hold back at first. Above all, I want the parties and, yes, ultimately those responsible for business operations to act and speak in the mediation. I agree this with the lawyers, they sit in the second row at first and then I always really „ swap chairs“, Mr Weigel. I say: „So, now we have a phase where it's really about the law and legal aspects. Do me a favour, I'd like to sit a little closer to the lawyers now, why don't you swap chairs? That's also important that you do that, because if the lawyers don't tell their parties afterwards: „The settlement is good,“ then they won't conclude the settlement. This means that you also have to show the lawyers appreciation and involve them in the process and convey to them that it is important that you are there, it is important that you tell your clients afterwards that it is good or bad. And you can't do that if you sit them in the quiet corner of the room.

[00:14:22] Sascha Weigel: That's right, I imagine an effective situation when suddenly, more or less suddenly, the lawyers have to move to the front and the clients move to the second row, they then have a different view of the legal discussion.

Jörg Risse: That's how it is.

[00:14:40] Sascha Weigel: So I've now understood that they swap places correctly.

Jörg Risse: They really swap places with me. Exactly.

[00:14:47] Sascha Weigel: Then I come back to the issue of responsibility, and you hinted at this earlier, right, that sometimes personal interests are not always congruent with the interests of the organisation. Sometimes there are’perhaps inaccuracies. That reminded me of an answer you wrote in one of our RoundUp posts last year, that one of the stumbling blocks of mediation is that parties sometimes shy away from taking responsibility and therefore mediation is rarely used as a conflict resolution process. Can you remember that, so can you expand on it a bit, because contrary to popular opinion, mediators say that the parties want to keep responsibility for everything and have to hand it over to the court. But that doesn't really fit, does it? There’s more to say about that.

[00:15:49] Jörg Risse: Unfortunately, I have to say that this is not the case in my practice. In my practice, the parties find it very difficult to take on this responsibility in mediation to reach a settlement. Let's take an example: imagine a project manager on a power plant project who is now faced with a claim for additional costs of 10 million euros. If this project manager signs the cheque and says: Okay. Yes, the construction company will get an additional 10 million euros, then this project manager is actually responsible. His career now depends on the fact that he is the one who voluntarily paid 10 million euros more. Perhaps his bonus also depends on it. Perhaps civil liability also depends on it, i.e. it is the case that board members are increasingly being held liable if they make economically damaging decisions, as lawyers know the „business-judgement-rule“The legal experts are familiar with the “business judgement rule, i.e. they have a certain amount of discretion, but if they make decisions that they cannot ultimately justify in a reasonable manner, they are personally liable and in this situation, in my experience, many decision-makers in companies prefer to delegate this decision to a judge or arbitrator, especially in crisis situations and major conflicts. Afterwards, you can complain a lot about them and above all, Mr Weigel, you can then say: „Yes, what more can I do? I commissioned the major law firm Müller und Meier to look after our interests, we spent five years conducting arbitration proceedings or court proceedings for an insane amount of money. As a manager, that was all I could do. Now we've lost, but it's not my fault. “ And on top of that, – to stay with my example of the project manager – after three or four years, the five projects have moved on. Nobody remembers who caused these additional costs. But if you carry out a mediation immediately during the project or immediately after the project has been completed, where you then have to decide very quickly whether or not to pay another million, then you take personal responsibility for this and, in my opinion, Mr Weigel, many parties don't want that. Have you had any other experiences, Mr Weigel?

[00:18:04] Sascha Weigel: No. No, that also applies to my experience in organisations. Especially in administrative organisations, where the notes in personnel files and the like determine careers. It is precisely in organisations that the idea, this ‚original idea‘, if I want to call it that, of mediation does not bear fruit at all. And this disappointment that sometimes arises in the mediation scene, in view of all the social conflicts, that so little mediation is used, also has to do with the fact that people are simply really missing the point. I then ask myself: What does this mean for mediation? Mediation seems to be the perfect process for such large-scale projects or difficult corporate and organisational conflicts, because it is precisely in these organisations that responsibility is connoted in a completely different way, so what would mediators have to do in their approach to offer a good process?

[00:19:23] Jörg Risse: So what you can do as a mediator, but then you are treading on thin ice if you do that, is that you actually work with proposals, including substantive proposals, in mediation. This is something that is still highly controversial in the mediation scene, whether you should do this, but what you do, Mr Weigel, when you make a substantive proposal, is that you accept part of the responsibility and you make it easier for the decision-makers to say, that was Mr Risse's proposal, he may not be right, but at least he is reasonably well known in the scene, who knows whether we will get something better from the judge than this proposal, which is why we have „grudgingly“ agreed to it. In other words, you make it a little easier for the parties to take on this decision, this assumption of responsibility, if you accept part of it. You simply have to be aware of this and take it into consideration and therefore not reject from the outset that you are not prepared to make a proposal. I am also prepared, Mr Weigel, to write a long letter to the parties after the mediation on how we arrived at this agreement package. In other words, if the parties want me to, I will recapitulate the considerations we have all made in an eight-page letter. In other words, to make it easy for the parties. To say: „Look here, the mediator has summarised again why we have agreed on 4.1 million. This is the package and these are the considerations behind it. “ You have to make it a bit easier for the parties. How do you do it?

[00:21:09] Sascha Weigel: As a lawyer, I also find it easy to deal with this topic. But I also get, well you will, you simply get this expectation clearly formulated that you also take a look at the legal framework and that you are also considered an expert in conflict resolution who also brings expert knowledge, so I also find it easy as a lawyer because I simply have liability insurance under professional law and these are exactly the kind of cases. Many colleagues don't feel the same way and that's why I think this discussion is still in its original state, where it's about leaving the mediator's paradise or not.

The second point, which I have also learnt in practice and which I approach proactively, is that it is not a win-win situation. So not now, maybe at the end, but at the beginning, as a colleague of ours said, mediation is also a „pay-pay situation“. So sitting down at a table with someone who you currently distrust and who you don't want to sit here at a table at all and can imagine everything else, that takes a lot. So I'd rather emphasise that mediation is a real imposition.

Jörg Risse: Yes, yes.

Sascha Weigel: I think the offer that mediators make is a certain impertinence.

Jörg Risse: So that — is not the case and I always find it so strange when you see the mediators who come out of some training programmes believing that they are now the great peacemakers and can jet around the world as saviours, they will be bitterly disappointed. So getting through a mediation process like this, even as a mediator, in a conflict-laden situation, is exhausting, it's hard work and even at the end of the mediation, Mr Weigel, the parties rarely lie in each other's arms beaming with happiness and praising the mediator to the skies. That's rarely the case, and I totally agree with you. My pitch to the parties, Mr Weigel, is always, look: statistically speaking, 60 % of all disputes in the order of over a million, and I think it's the same for the smaller ones, are settled. And do you know when they are settled? In five years at the Higher Regional Court. But the facts will not have changed by then. You can come to an agreement with me in a week or two days. And then you save yourself five years of discussions in your company, five years of quarterly reports to the supervisory board, five years of monthly invoices from law firms. You can win that with me, but I won't promise it, and I won't do it. Sometimes it works out in the end, but it's usually a grudgingly accepted compromise.

[00:24:13] Sascha Weigel: Yes, completely d’accord. It is reminiscent of this paradox that these five years, but then there is no lived suffering in the organisational area to which one can refer, now do some mediation, but it remains such an untold story and only those who know that it will take five years and will cost us that and I am not prepared to accept that, will say yes to mediation. A bit like with these measures against the coronavirus, you have this paradox that the suffering is not seen.

Jörg Risse: That's how it is. That's exactly how it is.

Sascha Weigel: For me, the key ultimately lies in understanding that mediation is not a mass procedure and the idea that society's conflicts can always and everywhere be solved/resolved immediately. It's not about that, it's about meaningful processes. It is about a deeply strategic approach. So you only use mediation if you can foresee that things will get worse than they already are. And most of the conflict parties can't imagine that things could get any worse.

[00:25:31] Jörg Risse: That is at least difficult, yes. I always try to achieve this through stories, through storytelling, by simply telling the parties, if they have come to me at all, stories from my life as a lawyer or mediator, how bad it has sometimes been, indeed how disappointed the parties have been after five years. But I use very concrete, only slightly distorted stories to really bring them as close as possible to the suffering that they are otherwise facing, but it is difficult because the parties are often deeply convinced of their legal position. Advised by, as I said, good law firms. Communicating this to them can also go wrong and it hurts a lot when it goes wrong, both during the five years of court proceedings and at the end, when the judgement has been passed, it hurts a lot. Like you, I can see that it's incredibly difficult to convey.

[00:26:31] Sascha Weigel: It's not quite so common for me that the parties are already represented by a lawyer. I tend to deal with this more in the context of labour law, but there is this idea of entitlement on all sides and that hinders the willingness to settle. This may perhaps be different in other fields of mediation, such as ‚family‘ or ‚neighbourhood‘, where mediation takes on a different approach, but here in business and working life, I think you can generalise that it is not an all-purpose instrument and that it requires a certain willingness on the part of the mediating parties to make an investment, so to speak, and sit down to it.

[00:27:26] Jörg Risse: Absolutely, what I always try to do to make this clear to the parties, perhaps you do that too Mr Weigel, I often have the law firms write down on an index card what percentage certainty they think they will win. Then I have both law firms write it down and then I don't look at the cards but say: “ I bet that if you add the two numbers together it's more than 100 and I bet it's more than 130. “ And then I turn them over and show them to the parties and it's almost always more than 130. Then I say: „One of you, from the lawyers here, is wrong, you only have 100% to distribute, one is wrong and I tell you my experience is both are wrong.“ These are often key elements where you can see in the eyes of the parties, not in the eyes of the lawyers, the lawyers also think Mr Risse's sleight of hand, sometimes you see ‚oops, how can that be?‘ in the eyes of the parties.

[00:28:28] Sascha Weigel: Dozens of studies have already proven this „over-positive“ assessment of process risks.

Jörg Risse: Absolutely. This over-confidence effect has been known in psychology for a long time.

[00:28:43] Sascha Weigel: That brings me directly to the question I've been waiting several years for. You published your book „Wirtschaftsmediationen“ in 2003 and that was almost 20 years ago and it has been announced for about 2 years now. Do you want to complete the 20 years? Or …

Jörg Risse: No, I promise I won't fill them up. So the corona crisis has few good effects, but one of the few good effects is that I have more time. I've had more time now and I also have a bit more time than usual at the moment, I don't have to travel the world like I usually have to, unfortunately. So I'm very confident that I'll have sent the manuscript to Beck-Verlag by the end of the year. I'm halfway through and I'll manage the other half too.

[00:29:37] Sascha Weigel: So I'm curious about the innovations that 20 years of mediation have brought with them, which is why I'm still interested for the moment: How did you actually come to mediation? You are a banker, have trained as a lawyer, are a lawyer in a large law firm and then you „still“ deal with mediation.

[00:30:07] Jörg Risse: The story behind this is as follows: I had actually studied law in Heidelberg and Lausanne, then did my doctorate at the university and then won a scholarship in the USA for a Master's programme, Mr Weigel, and I had no more desire for law, none at all. I had studied law so hard. I also thought about leaving the legal field altogether and when I went over to the USA, I decided that for this Master's programme I would take courses that had as little to do with law as possible. And when I arrived at Berkeley, where I studied, I saw that they offered a lot of courses in the area of soft skills and I honestly said to myself at the time that soft skills were the least time-consuming part of the programme, so I enrolled in a relatively large number of courses and focused on soft skills. With rhetoric, with negotiation and what was also offered there in 1996/97 was mediation and I have to say, it wasn't ’soft‘ but really really hard work, but it really fascinated me, I found it intellectually incredibly exciting that you can solve conflicts in a different way than through subsumption and relational techniques like we lawyers do, and that really kicked me intellectually„I think my children would say, and it never let go of me afterwards. When I was back in Germany, I thought: „Gee, you take care of it a bit and try to move it forward a bit“ and it has stayed with me for the last 20 years.

[00:31:53] Sascha Weigel: I can well understand that, so for me it was also the last years of law that led to the decision to deal with conflicts differently again, even though and despite the fact that my studies and training were a lot of fun and really enjoyable. So I can say that too.

Jörg Risse: I always have to realise this about myself, I try to be a bit mindful of myself, many mediators run the „mediation business“ from an attitude, it's still one of the big words of the „mediation scene“ that you have to have an inner attitude. Well, Mr Weigel, I'm a bit out of my element, so for me it's really not an attitude but more of an intellectual curiosity in the process. So I conduct mediation proceedings relatively soberly and make use of a ‚toolbox‘ that I have learnt over many years or also learnt at Berkeley. But my driving force is intellectual curiosity and less of an attitude and philanthropy, even if that sounds very cold-hearted when I say it.

[00:33:07] Sascha Weigel: I can more than understand it and would also say that we should postpone in-depth discussions on the topic to the podcast, which is also made for mediators, and perhaps we will go step by step to add something to the attitude there. That is just as much a part of mediation as doing good mediation. So the concept of attitude, I also have my own attitude towards it, let me put it this way. Mr Risse, that was very interesting and a lot of fun.

Jörg Risse: With pleasure, me too.

[00:33:46] Sascha Weigel: Thank you very much and if you dear listeners don't want to miss any more episodes, just subscribe to this podcast and don't forget to let your friends and colleagues know. For now, I'd like to thank you for joining me again and stay tuned until the next episode of Inkovema – Gut durch die Zeit, der Podcast für Mediation, Konflikt-Coaching und Organisationsberatung, ihr Sascha Weigel, kommen Sie gut durch die Zeit, auf Wiedersehen. Thank you very much, Mr Risse.

further links:

• Baker McKenzie: https://www.bakermckenzie.com/en/people/r/risse-joerg
• Beck-Shop: Risse, Jörg. Business mediation, 2nd edition, Munich 2021 (probably, but promised)