Commercial disputes can often be a long and expensive process – but in some circumstances they can be resolved in a day through a mediation process known as ‘blind bidding’.
Blind bidding is a relatively new concept, but a simple one. It works when two parties in dispute have agreed that one should pay a settlement to the other, but the amount must be agreed.
An independent and completely neutral mediator is appointed, at a fixed price, and a date is set for the process to take place.
Some parameters are set – for example, whether any settlement should include VAT, or legal costs.
Then, usually by telephone or email, the parties make three “sealed bids” over the course of the day, each with the aim of reaching a settlement.
Importantly, the mediator does not pass judgement or offer advice – they are simply there to communicate the bids between the parties. They will not reveal any amounts that have been bid, but will simply report whether:
- The bids match – in which case the dispute is resolved
- There is an overlap within an agreed margin between the bids – in which case a settlement is agreed at the mid-point between the two
- There is a gap between the two bids – in which case the parties move on to the next round of bids, or end the process if there is a gap at the third round of bids
The hope is that by the end of the three rounds, the parties will have moved close enough together to be able to reach an agreement.
What happens if the parties don’t reach agreement?
Even if the two parties have not produced matching bids by the end of the day, the mediator will declare an end to the process, and all the information about bids made will be kept confidential.
However, in some circumstances – for example if there is a gap but it is narrow – the mediator may suggest that the parties reveal their final bids to reach an agreement openly. They are under no obligation to do so, but this can often be the final push that is needed to reach a settlement.
If agreement still cannot be reached, then the parties will decide on the next steps – which could be a full mediation process, or court action.
What are the advantages of blind bidding?
Blind bidding is not right for every party or every dispute, and both parties must go into the process with a positive mindset and a willingness to be realistic about the amount of any settlement.
However, the process can save both parties significant time and cost over traditional mediation – it takes place over a single day or part of a day, and the mediator charges a fixed fee, so the costs are known.
There is also a saving in that some of the elements of traditional mediation – such as time spent travelling, introductory conversations, breaks and so on – are avoided.
Importantly, both parties have confidentiality provisions and no admissions of liability are made, so if the process does fail then each is on an even footing if any future mediation or legal action takes place.
How does it work in practice?
Members of the Thrings’ litigation team are among the first to be involved in blind bidding processes and have seen positive outcomes for clients even where agreement was not reached within three bids.
For example, we acted for the claimant in a professional negligence case where it was said that the defendant, a firm of solicitors, had not undertaken a conveyancing process correctly, resulting in lost value on their property.
In this case, there was groundwork to do in agreeing the precise basis of any bids made – for example relating to VAT, costs and damages.
Although the two parties did not reach agreement during the process of the three bids, the mediator saw that the final bids were relatively close. Both parties agreed for the bids to be disclosed and they quickly settled at a mid-point between the two.
In a second example, relating to a disputed unpaid invoice, the blind bidding process again brought the two parties together to the point where they were able to settle after the three bids were made.
How can I initiate a blind bidding process?
As with any dispute, you will want to ensure that you take good advice before starting a blind bidding process, to ensure it is the most suitable route and that any risks are minimised. Your solicitor will also work with the other party’s lawyers to agree parameters for the blind bidding process to maximise the chance of success on the day.
The Thrings Commercial and Debt Recovery teams are experienced in all aspects of commercial disputes, mediation and litigation. You can get in touch with the team here.
