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The Jersey Law Review - June 2003

MEDIATION – RECOGNISING ITS POTENTIAL FOR STREAMLINING DISPUTE RESOLUTION

Charles Dodson

Enhancing dispute resolution by negotiation

1       Negotiation is by far the most common way of resolving disputes.  The vast majority of litigation is settled by negotiation, not a trial.  In many cases negotiation is, and will continue to be, the quickest, cheapest and most effective way of settling a dispute.

2       Mediation is the medicine for sick negotiation – negotiation that has become deadlocked, or is making such slow progress that the related litigation costs and disruption are mounting up.  It is then that mediation can make the difference.  The challenge for mediation is to enable the 95% of litigation that settles to happen at a much earlier stage than is usually the case – and in some cases to prevent litigation happening at all.

3       Mediation is classified as a form of Alternative Dispute Resolution (“ADR”)[1] and its growth, in a number of common law jurisdictions in particular, owes much to a desire to avoid the expense, uncertainty and delay that is a feature of much litigation.  Yet mediation is often not an “alternative” to litigation. Often it will run in parallel with litigation (or arbitration), which will still be the essential longstop process.  The two are not mutually exclusive.

4       The most straightforward explanation of mediation is that it is settlement negotiations with the assistance of a neutral third party.  It is by far the most common form of ADR.

5       There is a trend in English law to recognize mediation as a valid and important method of resolving disputes, in the same way as arbitration is so recognized.  Since about the mid-nineties the judicial system in England, by way of new court procedure rules, and more recently court decisions, has been actively encouraging and even requiring parties in litigation to use mediation.  This is being done without depriving the litigant of his ultimate right to a trial.  Some examples of how this is being achieved are discussed later in this article. These developments track or mirror developments in a number of countries including Australia, New Zealand and the United States.

Distinguishing features of mediation

6       The main features of mediation which distinguish it from litigation and conventional arbitration are -

(i)      it is a consensual, not an adjudicative, process – no judge or arbitrator imposes the settlement on the parties.  There is none of the unpredictability of outcome that is an inherent feature of relying on a third party to impose a binding solution.  Only if both parties are willing to accept a particular solution does it become binding.  In about 70% of mediations the parties are willing to accept and to be bound by the solution they have devised;

(ii)      the time and cost of resolving the dispute are likely to be significantly less than if litigation takes its normal course;

(iii)     it focuses on the current and future problem that the dispute poses for both parties, rather than on who is to blame for what has happened in the past.  This tends to move the emphasis away from strict legal rights (which are rarely cut and dried) to commercial interests. A good mediator will do his/her utmost to move the parties away from debating the legal strengths of their respective cases to what the parties want to achieve from a business or personal standpoint;

(iv)     there are many and various options for solving the problem open to the parties.  The options open to a judge (or arbitrator) when delivering a judgment are very limited and essentially involve one party winning, and the other losing;

(v)      it is a flexible and adaptable process.  Mediations tend to be run by reference to model procedures rather than rules.  Both the preparatory stage and the conduct of the mediation can, and often are, adapted (on an ad hoc basis) to suit the needs of the parties.  This is one of the reasons why mediation is being increasingly used for complex multi-party disputes (see below).

7       All of these features distinguish not only mediation, but also negotiation, from litigation (and arbitration).  Like arbitration, mediation and negotiation are private and confidential.

8       The features of mediation which distinguish it from negotiation are generally less obvious but nonetheless significant. They include -

(i)      the fact that mediation is a distinct process, at least compared to negotiation.  This can in some cases make a proposal of mediation psychologically easier to make than an opening settlement negotiation proposal, which is sometimes regarded as a sign of weakness.  The ADR provisions of the English Court Procedure Rules and the increasing use of ADR clauses in contracts both negate the psychological hurdle of the opening settlement proposal.

(ii)      the creation of the best possible negotiation scenario – a mediation should bring together relatively senior people

·         who should both have a degree of objectivity by virtue of not having been directly involved in the dispute and have the necessary authority to agree a settlement

·         in the same place (ideally neutral)

·         at the same time

·         with the same objective - settling the dispute.

The combined effect of all these factors – most, if not all of which, are rarely evident in a typical negotiation - is often to give the mediation similar dynamics to those of a court settlement negotiation, but hopefully at a much earlier stage;

(iii)     the involvement of an independent neutral person – the mediator - in the process.  This is the one obvious and crucial feature differentiating mediation from negotiation.  The mediator, by virtue of his neutral position, is better able to:

·         focus the parties on the problem rather than the dispute, on their commercial and/or personal interests rather than their strict legal rights, and on the future rather than the past – i.e. on the key features that distinguish mediation, as explained above;

·         enable the parties to see their own and the other party’s case objectively and realistically – which is notoriously difficult to do when horns are locked in litigation;

·         remind the parties of  the alternatives to settlement (usually unpalatable and expensive);

·         keep momentum in the negotiations, particularly by diverting the parties from wild goose chases and useless tangents.  Mediation is sometimes referred to as “structured negotiation”;

·         dissipate the emotional elements that so often lie below the surface of many disputes, even commercial disputes; and

·         facilitate communication by avoiding the need for face-to-face eyeballing; for example, making the opening offer, or giving an apology, can often be more easily done through a mediator.

Getting a dispute to mediation

9       One of the frequently asked questions is “What cases are suitable for mediation?”  On the basis that over 95% of cases are settled by negotiation before trial, over 95% of cases are potentially suitable for mediation.  The real issue is “When is a case suitable for mediation?” A simple test is:

Is there enough information to negotiate? If “Yes”- are the negotiations making progress?  If “No” - try mediation.

10     This still leaves the issue of what is “enough information”.  There is no clearcut answer, but the pitfall to avoid is thinking that there will only be enough information when the disclosure (formerly discovery) process in litigation is complete.

11     Cases where interlocutory orders are deemed necessary to protect assets are sometimes cited as examples of cases unsuitable for mediation.  On one level that is correct, but experience shows that many such cases are settled – often aided by the existence of the injunction; mediation can be, and is sometimes used after the injunction stage.

12     The problem in getting a dispute to mediation is that “it takes two to tango”.  One party may have decided that the time is right but persuading the other party (or parties) may often be very difficult if not impossible.  Despite the significant increase in commercial dispute resolution in recent years, still relatively few of the cases commenced in court are resolved by mediation.  If that hurdle can be overcome, the odds of a settlement are high.  The more proactive the role of the courts in relation to ADR, the greater the scope for lowering this hurdle.

Setting up, and preparing for, a mediation

13     Assuming that the persuasion has been effective, and the greatest hurdle to settling the dispute by mediation has therefore been surmounted, what has to be done prior to the mediation itself?  Unlike going to trial, there are no hard and fast rules governing the preparation for, or conduct of, a mediation. A mediation of a commercial dispute tends to follow a typical pattern and often a model procedure will be adopted but this can be varied to suit the particular circumstances of the dispute or the particular requirements of the parties.  Usually the following will be involved -

(i)               deciding whether to use an ADR body to help in setting up and running the process;

(ii)               sorting out the administrative aspects, such as where, when and for how long should the mediation take place, who will attend it and what form of mediation procedure and agreement will be adopted;

(iii)              appointing a mediator; and

(iv)              preparing the written case summary and supporting documents.

Using an ADR body

14     The basic options open to the parties are either to set up the arrangements themselves, with or without the assistance of the mediator (often described as a “self administered” mediation) or to use an independent ADR body (such as CEDR or the ADR Group in England).  In a jurisdiction where mediation is a relatively new concept, the case for involving an ADR body is strong.

Dealing with the administrative aspects

15     If an ADR body is being used, most of the administrative aspects will be handled by it. These will include -

(i)      when the mediation will take place and how much time should be set aside for it.  Parkinson’s Law tends to apply to a mediation in that it is likely to run for the full time allocated.  Usually a day, even if a long day, is sufficient.  Even complex multi-party disputes rarely need to have more than three days set aside.  If the parties are agreed on going to mediation, it rarely needs more than three or four weeks to set it up, and where the parties are in a hurry it can be done in days;

(ii)      where the mediation will take place – ideally the venue should be a neutral place but if the parties are willing to use the facilities of one of the parties, this will save costs.  There should be a room for each of the parties and one room large enough for the mediator and all the parties;

(iii)     who will be there on the day – it is important that there is no element of surprise as to who will be attending.  It is particularly important that the lead representative of each party has sufficient authority to settle the dispute on the day without having to refer to anybody else.  Solicitors are usually present with their clients (see below).  Experts are sometimes also present but if they do not appreciate the nature of mediation, there is a danger they will side track the negotiations; the smaller the team the better;

(iv)     what documents should be produced – typically each party will produce a written summary of its case with the key supporting documents.  The overriding approach should be that these are kept succinct and short and where possible the parties should agree a joint bundle of the documents.  Serious consideration should be given to specifically agreeing the maximum length/volume of these documents, which are usually exchanged simultaneously and supplied to the mediator some time before the mediation;

(v)      how the cost of the mediation will be borne – the most common approach to costs is for the mediation fees (including the mediator’s fees) to be shared equally by the parties and for each party to bear its own costs of preparing for, and participating in, the mediation.

16     All these arrangements are usually tied up in a simple mediation agreement the other purpose of which is to address some procedural aspects.  This is usually done by incorporating the model procedure (or rules) of an ADR body.  These typically will include provisions as to the confidentiality and without prejudice nature of the mediation.[2]

Appointing a mediator

17     Being a mediator requires quite distinct, subtle skills based on a sound training.  A CEDR accredited mediator, for example, will have been on a five day intensive course and have attended two mediations as a “pupil” before his/her first appointment as a mediator. The “great and the good”, such as a retired judges or QC’s, will rarely make good mediators unless they have been trained and accredited as mediators.  It is more important that the mediator has been properly trained than that he/she knows about the subject matter of the dispute in question.

18     There is a risk in becoming too concerned as to who should be appointed as mediator given that the mediator, unlike an arbitrator, cannot make any binding decision – what really matters is that the mediator has been trained and, ideally, has a mediation track record.

Putting together the mediation documentation

19     The usual documentation for a mediation consists of a short case summary (or “submission”) and a set of key supporting documents, preferably a joint set agreed between the parties.  The primary purpose of the summary is to explain as succinctly and persuasively as possible the party’s position and its objective in the mediation.  Its case in related litigation (if any) will already be familiar to the other side from the court documentation. The secondary purpose is to explain the dispute, and the party’s position in it, to the mediator.

20     The documentation is usually exchanged between the parties and supplied to the mediator anything between a week or two or a few days before the mediation.  If an ADR body is involved this will be done through that body.

Making the final preparations

21     It is essential that the lead negotiator has sufficient authority to settle the dispute without recourse to others.  Ideally that person should be the one that makes the opening presentation although sometimes the lawyer, if present at the mediation, will do this.  Whoever does it should spend some time to preparing it – it can play an important part in the process (see below).  It is worth the team who will be at the mediation discussing its strategy and approach before the day.

Participating in the mediation

22     A typical mediation will take the form of -

(i)      a joint opening session chaired by the mediator, at which each of the parties will make its opening presentation.  This may be followed by each party seeking further clarification of points, which may lead to initial discussions.  The presentation should be addressed to the other party(ies) rather than the mediator.  It may be the first and last time at which each party can get the full force of its case across directly to the key person (the lead negotiator) on the other side of the dispute; it is a crucial opportunity to give that person an objective view of its case and to impress upon him/her a genuine desire to sort out the problem.  It should be remembered that the whole process is “without prejudice” – in other words anything said cannot be used subsequently in, for example, court proceedings and this should encourage a degree of openness which should facilitate discussions;

(ii)      private sessions: as soon as the opening session has gone as far as it usefully can, the mediator is likely to ask to see the parties in private session (or “caucus”).  It is important to appreciate and to take advantage of the fact that these meetings are entirely confidential and that anything said at them will only be passed on to the other party with specific authority;

23     The initial purpose of these sessions is to enable the mediator to gain a better understanding of the people involved and each party’s position including any hidden agendas or underlying issues not apparent from the written summaries and opening presentations.  Trust in the mediator and a degree of frankness is likely to assist in the progress of the mediation. Gaining an overview of both parties’ interests and concerns will often enable the mediator to steer the parties towards fruitful negotiations.

24     The mediator is likely to spend some time in shuttle diplomacy and this will develop into the negotiating stage.  The interposing of a neutral third party in the form of the mediator can overcome the reluctance, often encountered in typical negotiations, of making settlement proposals face to face.

(iii)     reconvened joint session: if the mediator thinks that negotiations have got to a stage where they are likely to make more progress face to face, he/she may bring some or all of each of the parties’ teams together.  Sometimes “reducing the crowd” and, for example, bringing just the lead representatives together without their lawyers, can be productive;

(iv)     settlement agreement: if the parties reach agreement, the mediator will, wherever feasible, insist that it is written out and signed there and then.  It is only then that it becomes binding.

The law and the courts

25     Mediation, as arbitration, is essentially a private, as opposed to a state-run dispute resolution process.  It can, and has operated without any statutory recognition – other than recognition that any settlement agreement is a contract capable of enforcement in the same way as any other contract.  A persuasive case can, however, be made for at least a degree of recognition of, and support for, mediation by the state through its judicial system. Recent developments in England have taken that state support beyond the judicial system, in that the UK Government announced in March 2001 “a major new initiative” in publishing a pledge committing Government departments to settle cases in which they are involved by ADR techniques whenever the other side agrees to it.[3]

26     Judicial support has taken the form of -

(i)      CPR - provisions in the Court Procedure Rules enabling judges to adjourn cases on their own initiative, or at the request of one or more parties, for a limited period (usually one month) for the parties to try to settle the case by ADR;[4]

(ii)      costs sanctions – a number of decisions in recent years have penalized parties in the form of costs awards for unreasonable refusal to try ADR/mediation.[5] These decisions have been backed by words of strong support for ADR – such as Lord Woolf in the Cowl case (see footnote 4) stating that “Today sufficient should be known about ADR to make failure to adopt it.. indefensible.”  In Hurst v Leeming Lightman J commented “What appears to be incapable of mediation before the mediation process begins often proves capable of satisfactory resolution later”;

(iii)     enforcing ADR clauses in contracts – in enforcing a mediation clause Colman J recently stated “For the courts to decline to enforce contractual reference to ADR .. would be to fly in the face of public policy as expressed in the CPR and as reflected in the judgment .. in Dunnett v Railtrack.”[6]

Lawyers

27     Mediation should be a disputant led process – in contrast to litigation which is a lawyer led process.  It gives real control of solving the problem (which is what litigation is to the disputant) to those who are paying the bills. Mediations can, and do, happen without the involvement of lawyers.

28     It does not however follow that lawyers cannot play an important role in the process.  In the majority of mediations of disputes in which litigation (or arbitration) has been commenced, the lawyers will, for example -

(i)               advise on when mediation should be tried;

(ii)               assist in the preparations, particularly with the documentation;

(iii)              play a vital support role in the negotiations; and

(iv)              ensure the legal effectiveness of any settlement, including in particular drafting the settlement agreement.

29     A clear understanding of the dynamics of mediation on the part of the lawyer is essential.  If the lawyer does not appreciate that his/her role involves a quite different mindset from that needed for litigation, that involvement may be positively detrimental.  Any lawyer involved in dispute resolution should be able to demonstrate more than just lip-service to ADR.

30     One of the attractions of mediation for the disputant is that it should be a significantly more cost effective method of dispute resolution than litigation.  That advantage, however, will to some extent be lost if the preparatory work for the mediation is “over lawyered”. Lengthy case submissions and voluminous documentation are likely to be less effective and inevitably more costly than the short sharp approach suggested above.

Multi-party and cross-border disputes

31     The fact that an increasing volume of multi-party and/or cross-border disputes (often involving multi-million pound sums) are being referred to, and successfully resolved by, mediation adds weight to the view that flexibility and neutrality in mediation make these types of dispute particularly suited for mediation. Jurisdictions such as Jersey, with their international business connections and respected legal systems, have much to gain by adopting mediation and giving it legal recognition and support.[7]  Mediation is increasingly being seen as an essential element of doing business in the global marketplace, and failing to embrace it enthusiastically risks losing business in that marketplace.

Giving control of dispute resolution to the disputant

32     Mediation is not a dispute resolution panacea.  Nonetheless its focus on the future and not on the past, on commercial interests rather than strict legal rights, and on preserving rather than damaging relationships, should make it an attractive option in many disputes.  Experience in a number of jurisdictions demonstrates that it can free up the court system to deal more effectively with its caseload and that it can generally streamline dispute resolution in society.  Formal recognition by, and support from, the legal system is likely greatly to assist mediation to achieve that potential.

Charles Dodson was a partner in Lovell White Durrant until 1998.  He has been an enthusiastic advocate of ADR, since the mid - 1980’s and became a CEDR accredited mediator in 1996.

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