Authority to settle at a mediation

Settlement authority means knowing who can commit each party and on what terms. Commercial mediation preparation should resolve that issue before negotiations reach an apparent agreement. CEDR discusses practical preparation for settlement. ^[1]

Map the approvals behind the negotiator For a company, identify required board, insurer, lender or shareholder approvals. An employee familiar with the dispute may have no authority to compromise it. Establish who can approve both the financial amount and obligations such as a release, guarantee or contract variation.

Record the internal mandate and a secure way to obtain further instructions. Availability matters: a decision-maker in another time zone should know when a response might be needed.

Match authority to the actual parties Confirm the legal names of everyone intended to be bound. One group company cannot be assumed to settle another's claims. If a representative signs, check the capacity in which they act and the applicable execution requirements.

Bring unresolved approval conditions into the settlement drafting rather than leaving them implicit. For disputes spanning several entities, use a company-by-company analysis before assuming one signature can end the entire matter.

Identify the legal person behind each negotiating role Create a short authority map naming the party whose rights are in dispute, the person attending and the capacity in which they participate. A director, employee, adviser and insurer representative may each have different responsibilities. Do not infer authority solely from seniority, familiarity with the history or an email signature. Ask the relevant adviser what approvals and execution arrangements apply. The map should make it possible to distinguish a person who can explain the facts from one who can commit the party to a settlement.

Where connected companies are involved, identify whose claim, asset or obligation each proposed term concerns. A settlement may require action from an entity that is not the principal claimant or defendant. Check whether that entity will participate and who can approve its involvement. Shared ownership does not make every group member interchangeable. Clarify these relationships early, because an apparent commercial solution can fail if the negotiator has authority for the disputed invoice but cannot promise the separate transfer or release needed to complete the deal.

Define the mandate across financial and practical terms Discuss the scope of the internal mandate with the people responsible for approval. Amount, timing, instalments, security and contingent obligations may require different consideration. Non-financial commitments can be equally significant: a reference, licence, contract variation or confidentiality provision may affect the business beyond the dispute. Record which matters the attendee can decide and which require further instructions. Keep that internal record appropriately restricted and avoid accidentally circulating it with material intended for the other party or a shared mediation bundle.

Identify assumptions on which the mandate depends. An approval may presume a particular tax treatment, the absence of a guarantee or receipt of specified documents. If the proposal changes those assumptions, the attendee needs to know when to seek renewed approval. A single maximum payment figure does not answer every question about the bargain. Ask for a practical explanation of the limits rather than a vague instruction to settle sensibly, which may leave the representative uncertain at the moment a decision is requested.

Arrange a reliable route for additional instructions Confirm who can be contacted during the meeting and how quickly they can consider a changed proposal. Share the expected timetable with decision-makers in other locations and account for foreseeable absences. Ensure the person available understands the relevant background and has access to advice where needed. A telephone number is not a complete escalation plan if the person answering cannot approve the issue or has not been told that a decision may be required.

Agree how a request for approval will be presented. Summarise the entire proposed package, material conditions and unresolved points, rather than asking only whether a headline amount is acceptable. Record the response accurately and identify any further condition attached to it. CEDR's settlement preparation material supports resolving practical authority issues before the session; the precise mandate remains a matter for the actual party and its governance arrangements. Avoid suggesting that attendance itself proves unlimited power to bind an organisation. ^[1]

Make unresolved approvals visible in the proposed agreement If a third party's consent is required, clarify whether it has been obtained and how that affects the status of negotiations. An insurer, lender or other stakeholder may need time and information beyond the mediation session. Ask the drafting adviser how to express any genuine condition and what can be agreed before it is satisfied. Do not leave the other side to assume approval is complete while the internal team treats the same proposal as merely provisional.

Before signature, compare the final draft with the approved package and confirm the signatory's capacity and applicable formalities. Material wording can change during drafting, so an earlier approval should not be treated as covering every later addition automatically. Keep the executed document, relevant approvals and implementation responsibilities in an organised record. This helps establish what was authorised and allows those performing the settlement to act from the agreed terms rather than an informal account of the final conversation in the mediation room.