We use cookies to make this site as useful as possible. Read our cookie policy or allow cookies.

Timing is everything

01 May 2014

Timing is everything – read more

Mediation and other forms of Alternative Dispute Resolution are innovative methods of resolving disputes, which can significantly reduce time, effort and money involved in going to court.

Alternative dispute resolution (ADR) in all its forms is hardly new; it has been fashionable in the US for several decades and has been common on this side of the Atlantic since at least the early 1990s. Indeed, the courts have actively promoted it since 1999, when Lord Woolf incorporated it into his Civil Procedure Rules. These require parties to consider ADR seriously, if not actually try it, before bringing a claim. As the court practice direction (Pre-Action Conduct) states: ‘starting proceedings should usually be a step of last resort...’ and ‘the court may require evidence that the parties considered some form of ADR...’

It is not true that ADR is, strictly speaking, an alternative to litigation. Often it works where there is a real threat of litigation or, more likely, where litigation is already underway and the parties have been obliged to formulate their case in concrete terms, disclose all their relevant documents, and perhaps work through the technical issues raised.

Usually it is only when this spade work has been done that the parties know the real strengths andweaknesses of their case and feel able to settle their dispute on an informed basis.

So how often is ADR actually used, and can it be used more? Recently Hogan Lovells’ London officetook a closer look at how often ADR is undertaken in the context of commercial disputes, and ourlawyers’ experience of it. We looked specifically at mediation where parties and their representativesmeet for (usually) one day, and with the help of a neutral go-between (the mediator), attempt to reach settlement in a structured way. Unlike a judge or arbitrator, the mediator does not have the power to impose a solution and does not usually suggest one. Their role is more that of a facilitator, with legal or relevant technical expertise and sometimes with both.

The results of the research are encouraging. First, the number of mediations that result in settlement is surprisingly high. If one includes mediations that settle on the day and ones where settlement is achieved shortly afterwards, then just over two thirds (68%) of all mediations that our London office has been involved in over the last two years were successful.

The importance of timing

Although some of the disputes in question would have settled anyway, timing is important: achievinga resolution sooner rather than later can significantly save money, time and effort. However, mediations that do not result in a settlement are not necessarily a waste of time. A ‘failed’ mediation can give valuable insight into the thinking of an opponent, their level of preparedness, and whether they are inclined to settle at all. If it becomes apparent that an opponent does not know his own case or is not inclined to settle a dispute on any terms (other than complete surrender), it can be extremely valuable when considering the best strategy to adopt for the remainder of a dispute.When it comes to legal proceedings, clients naturally want to know if they are in for the long haul, since the risks and the costs involved may be much more than in a dispute where settlement appears more likely than not. This is why, when we surveyed our senior dispute lawyers, 67% said their experience of mediation was positive, 22% that it was neutral or mixed, and only 11% that it was negative.

Another encouraging fact we picked up on was the variety of disputes that have been settled through mediation. Certainly in terms of the sum in dispute, the range is very broad – from £150,000 (or lower, in pro bono cases) to $9 billion. So it is certainly not true, that mediation works only in relatively low value disputes where the issues may be simpler and legal costs out of proportion to what is at stake, making settlement the overwhelming priority for all parties.

Of course, much depends on who is chosen to be the mediator. Some have strong personal skills,coaxing clients into thinking in new ways or simply knocking heads together. Others are better on the legal or technical side of things, and some have expertise in areas that are relevant to certain disputes.

A respectable proportion of the mediations we were involved in were organised with the help of a mediation institute. Mediation institutes can help choose a mediator, provide offices on what is perceived to be neutral territory, deal with fees  and other practical issues, and impose rules of engagement that absolve the parties from negotiating these between themselves. They also provide valuable training to mediators and any dispute resolution lawyers interested in the process.

Take up of ADR

Although mediation is a valuable tool, it is unlikely that its use will dramatically increase in commercial disputes, at least in the short to medium term. It is more likely that mediation will maintain its current, relatively high profile. As previously mentioned, when the sum in dispute is high, the costs of litigation may be high too, but it is not necessarily out of proportion to what is at stake. At the same time, the factual and technical issues in dispute can be very challenging, so parties frequently need to go some of the way down the road of formal legal proceedings if they are to get a grip on all the complexities of the case. Only then may it be possible to settle a dispute without fearing that one is giving or demanding too much.

Whatever the take up of ADR, the courts will continue to promote it, partly for the sake of litigants, but also because it frees up overstretched courts. In his recent review of civil costs, Lord Justice Jackson placed great emphasis on ADR as a means of ‘fomenting the early settlement of cases’. Given that mediation is never compulsory (in England and Wales at least), there was a limit to what the judge could do, but he did call for a campaign to raise awareness of ADR, and for the production of a handbook for practitioners, which has proved useful and influential. The Jackson ADR handbook makes clear that even a reluctant party has to consider the possibility of ADR seriously, particularly when it is proposed by their opponent or the court, because otherwise it may be penalised if and when the dispute reaches trial and the court makes an order regarding costs.

The main reasons for considering ADR are positive. If it leads to immediate or speedy settlement in two thirds of commercial cases, ADR has the potential to save considerable sums of money and valuable management time. It should therefore be given serious consideration by parties and their lawyers at every stage of legal proceedings. 

Neil Mirchandani is partner at law firm Hogan Lovells London office.

Have your say

comments powered by Disqus

Advertisements


ICSA: The Governance Institute
Saffron House, 6-10 Kirby Street, London EC1N 8TS, United Kingdom