Renegotiation – An Art Not A Science

Chances are, that as a result of COVID-19, you are either going to have to seek to renegotiate your agreements with another party or deal with parties wishing to do so with you. Ian Timlin, from Conexus Law, a specialist advisory firm that provides end to end legal services for clients in the built environment and the digital world, has been a CEDR (The Centre for Effective Dispute Resolution) accredited mediator since 2000. Here are some of his top tips.

There are generally two recognised strategies for negotiating:

  1. Positional bargaining: Parties take their best negotiating position, seek to justify it, haggle over it, make concessions and settle somewhere in the bargaining range.

  1. Principled negotiation: Parties negotiate on the basis of principles, trying to separate people from the problem, focussing on the parties’ needs not wants and trying to problem solve.

 

Manage Expectations

Whichever way you intend to negotiate, these are some important factors to be considered in any renegotiation.  You should try and focus on the realities of the “new normal” which are not necessarily what your expectations were when you entered into the original agreement. Sometimes it is hard to accept that lost revenue is lost revenue but you may now need to move forward. Try and clarify the benefit and value of a renegotiation both to you and the other party. Put yourself in the other side’s position (What is driving them? Are they telling the truth?) and ask the other side to do the same in respect of your position if that might help you. Clarify the issues. What do the parties need from any renegotiation rather than want from it? Are there any hidden agendas? Is there a need to save face and how can that be achieved?

 

Use Emotion (carefully)

Emotion can be useful to show your strength of feeling about an issue or point but do not let it take over as failure and recriminations can create high emotions. To get anything renegotiated, you are likely going to have to establish some rapport (build some relationship) with the other party. With that in mind you might need to consider changing the people in your organisation dealing with the renegotiation?

 

BATNA and WATNA

Before you start, decide what is your best and worst alternatives to a negotiated settlement. Often referred to as your BATNA and WATNA respectively, sit down and work them out for yourself and for the other party, and see if that changes your thinking or the balance of any leverage.

 

Be Pragmatic

Can some form of contingent renegotiation take place? For example, can you accept a lower price for your product for a short period of time with any short term reduction being removed or repaid when future financial conditions are met or improve?  This has worked for a number of landlords who agreed to defer the March 2020 quarter’s rent but added it to the rent to be paid on the March 2021 quarter. Remember, do not be afraid to ask for financial information from the other party if they effectively want a concession from you.

 

Mediation

If positional bargaining has failed, parties often move to using mediation as a process to try to assist the resolution of their renegotiation or dispute. Mediation is a form of principled negotiation. It is voluntary, private and non-binding until the parties distil any renegotiation/settlement to a new written agreement. In short, mediation is most often the appointment of a qualified professional third-party mediator who shuttles between the parties, undertaking confidential discussions with the parties, with a view to brokering a renegotiation/settlement between them.

In the past, mediation has usually been undertaken across three rooms at a neutral venue. It has now moved online and they are taking place by live screen video or telephone conference. In particular, Zoom is being used as it offers the facility of secure separate breakout rooms for separate parties.

 

And Finally

If you cannot achieve what you need through the above, it could still be possible through Court or arbitration proceedings.

 

 

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