Summer, 2024 and some of the world's most sophisticated financial institutions find themselves in an uncomfortable position. Blue Owl Capital, Ares Management, Goldman Sachs, BlackRock, Oaktree and Golub Capital - a who's who of the global private credit market - had collectively lent over $1.5 billion to Pluralsight, a US technology learning platform acquired by private equity firm Vista Equity Partners in 2021. The business had deteriorated. Vista, facing the prospect of a total write-off on its equity, executed a manoeuvre that sent shockwaves through the direct lending market: it transferred Pluralsight's intellectual property to a newly formed subsidiary and injected $50 million into that subsidiary - effectively giving itself a structurally senior claim on the company's most valuable assets, ahead of the lenders who thought they held first-lien security.
The lenders were, to put it mildly, not pleased. Creditors alleged the assets had been improperly valued. Vista maintained the process was arm's length. Months of fractious negotiation followed. The dispute became public. It was covered in the Financial Times. It reshaped documentation practices across an entire asset class - lenders now routinely demand so-called "Pluralsight protection" in new deal terms to prevent a repeat. Ultimately, the lenders took the keys to the company, wrote down the debt by $1.3 billion, and injected new capital. Vista’s equity was effectively wiped out.
Was this a good outcome for anyone? The lenders recovered something, but far less than par, after a process that consumed months, generated significant legal costs, and played out in full public view - in a market where confidentiality and ongoing relationships are supposed to be defining features. Vista's reputation in the direct lending community was materially damaged. Pluralsight's business, already struggling, had to navigate an ownership transition in the middle of an operational crisis. The dispute did not resolve the underlying problems so much as exhaust the parties into a settlement that could, in principle, have been reached much earlier.
This series argues that there is a better way.
Banking and finance disputes are among the most complex, most expensive, and most reputationally damaging of all commercial disputes. They involve intricate documentation, contested valuations, multi-party creditor structures, and technical questions that often require substantial expert evidence before a court can even begin to engage with the merits. They are also, almost by definition, disputes between parties who have or have had a commercial relationship - and who frequently need, or would benefit from, continuing one.
Yet the default assumption in financial markets is that disputes go to litigation, or at best to arbitration. Mediation - structured, confidential, party-controlled negotiation with a skilled neutral - remains underused. This is changing, but slowly, and not fast enough given the volume of disputes now entering the pipeline.
The reasons for the underuse are partly cultural (finance is an adversarial world; showing willingness to negotiate is sometimes perceived as weakness), partly structural (many financial contracts do not include mediation clauses, or include them only as a formality before the "real" dispute resolution process begins), and partly a matter of professional incentives (lawyers and banks both have reasons, not always aligned with their clients' interests, to prefer processes they know well).
But the scale of what is at stake - in costs, in time, in reputational damage, in destroyed relationships - makes the case for rethinking those defaults increasingly compelling.
Courts are good at many things. They are good at establishing facts, interpreting contracts, and imposing outcomes on parties who cannot agree. What they are not good at - and were never designed for - is resolving the kinds of disputes that characterise modern banking and finance.
Consider what a typical complex financial dispute actually involves. There are usually multiple parties with different and sometimes conflicting interests: senior lenders, junior lenders, equity sponsors, trustees, counterparties. There is typically a contested valuation at the heart of the dispute - of a business, a financial instrument, a portfolio of assets - that is genuinely uncertain and on which reasonable experts disagree. There are ongoing commercial relationships at stake. There are confidential business matters that neither party wants ventilated in open court. And there is almost always a time dimension: the longer the dispute runs, the more value is destroyed.
Litigation addresses almost none of these needs well. It is slow - complex financial cases routinely take three to five years from issue to judgment, and that is before appeals. It is expensive - legal costs in large financial disputes frequently run to tens of millions of pounds. It is binary - a court produces a winner and a loser, when the commercial reality is often that both parties have legitimate interests that a negotiated solution could accommodate. And it is public - judgments are published, proceedings are reported, and the reputational consequences of a financial dispute becoming public knowledge can dwarf the financial stakes of the dispute itself.
Arbitration solves some of these problems - principally confidentiality and technical expertise - but not all of them. It is still adversarial, still slow, still expensive, and still binary. And as the Ceylon Petroleum case illustrates, it can produce outcomes that are just as damaging and just as hard to predict as litigation.[1]
Sri Lanka's state oil company, facing a critical need to manage its exposure to volatile oil prices, entered into hedging contracts with Standard Chartered and several other international banks from early 2007. When oil prices crashed in 2008, CPC found itself severely out of the money and refused to pay, arguing - among other things - that it had never had the legal capacity to enter the transactions at all. Standard Chartered pursued its claim through the English Commercial Court and ultimately prevailed, recovering over $160 million. Citibank, in a closely related dispute arising from the same programme, took its claim to arbitration - and lost, with costs awarded against it. Same market shock, same broad commercial context, closely related legal issues — but sharply divergent outcomes. Neither resolution did much for the Sri Lankan government's relationship with the international banking community, or for the banks' ability to do future business in that market.
Private credit - direct lending by non-bank institutions - has grown from a niche strategy into a $2 trillion global asset class in little more than a decade. European and UK markets have grown in lockstep, with English law governing the vast majority of pan-European direct lending transactions. The asset class has attracted capital on the basis of several compelling propositions: higher yields than public credit markets, stronger covenants, closer borrower relationships, and - critically - the ability to resolve problems quickly and privately when borrowers run into difficulty.
That last proposition is now being tested. The rate shock of 2022–23 has worked its way through the system. Vintages of deals written at peak valuations, with leverage that assumed near-zero interest costs, are maturing into a more demanding environment. Covenant breaches, valuation disputes, and intercreditor tensions are multiplying. The pipeline of private credit disputes is building - and when those disputes escalate, the asset class's defining advantages start to work in reverse.
The Pluralsight situation illustrates the problem precisely. What should, in principle, have been a contained restructuring negotiation between a small group of sophisticated lenders and a well-advised private equity sponsor became a public confrontation that reshaped market practice, generated reputational damage on all sides, and produced an outcome - lenders taking the keys to a distressed technology business - that none of the parties particularly wanted. The confidential, relationship-based resolution that private credit promises was conspicuously absent.
This is not an isolated case. It is an early indicator of a structural challenge facing the asset class. As direct lending transactions get larger, lender groups get broader, and documentation gets more complex, the conditions for exactly this kind of dispute multiply. The market needs dispute resolution mechanisms that match its own characteristics: technical sophistication, confidentiality, multi-party capability, and speed.
Mediation offers all of these. A skilled mediator with genuine understanding of credit structures, valuation methodology and intercreditor dynamics can do something a court cannot: explore the real interests of each party, identify where value can be preserved or created, and help parties find solutions that a binary legal process will never reach. That might mean a restructuring framework that all creditors can support. It might mean an agreed valuation process that removes the need for litigation. It might simply mean getting parties into a room - or a series of rooms - early enough that the confrontation does not become the story.
Over the next seven pieces, this series examines the case for mediation across the main categories of banking and finance dispute: derivatives and structured products; banking and lending; asset management and investment; shareholder and joint venture disputes; corporate finance; trusts and wealth management; and the frontier questions raised by private credit and digital assets.
Each piece takes a real case - one that reached the courts, the press, or both - and asks what a mediated process could have offered instead – in other words an analytical counterfactual. (Mediation – bound as it is by confidentiality often shares with economics the lack of a concrete counterfactual). The aim is not to suggest that litigation is always wrong, or that mediation is always right. It is to make the case, concretely and with reference to how these markets actually work, that mediation deserves a serious place in the dispute resolution toolkit of everyone operating in banking and finance — not as a box-ticking exercise before the "real" process begins, but as a genuinely better answer to genuinely difficult problems.
The author is a mediator specialising in financial services disputes and a member of CEDR's UK panel. His earlier career included senior roles in banking and financial markets. The argument made here is an explicitly partisan one: that financial disputes are too important, too complex, and too consequential to be left to processes designed for a simpler world.