Finding its feet
10 September 2001
Being promoted as the new face of dispute resolution is alternative dispute resolution (ADR), a caring, sharing alternative to costly and destructive courtroom battles. All parties should save money and preserve their business relationships; and best of all, those darn lawyers' bills will be significantly reduced.
A definite winner, surely? The market certainly thought so. Before you could say, "300 years of litigation tradition and procedure", there was an ADR provider on every corner. In the five years prior to the Woolf reforms, the number of ADR providers could probably be counted in single digits; in the 18 months since, according to Michael Lind, head of case management at ADR Group, the number has mushroomed to around 60.
Oversupply of suppliers
Mediation is by far the most popular method of ADR. Each provider operates a panel of mediators from which it recommends an individual to mediate any given dispute that it is approached to resolve. While there is a great deal of overlap between the panels, with many mediators being listed with several different providers, the number of actual mediators has exploded too. The result: a lot of providers, hundreds of practising mediators, but a limited amount of mediation work.
"The supply-and-demand ratio is such that at the moment there are far too many mediators. I think Cedr [the Centre for Effective Dispute Resolution] has trained about 1,600 mediators and we've trained maybe 500, and there's just not enough cases coming through," says Lind. Cedr's own figures reflect this. It reported an increase of only five mediations during 2000/2001, up from 462 to 467.
Lind's view is echoed by Jim Percival, head of dispute resolution at UK nuclear company BNFL and himself a trained mediator. "A lot of people tried to get a slice of the market, but they're not necessarily well equipped to do that," he says. "They may get some of it, but in terms of long-term staying power, they haven't got the infrastructure, they haven't got the volume and they haven't got the brand or the other systems in place to compete with some of the more significant organisations."
|"We're certainly in favour of cooperation. We've made it quite clear that it's our policy to work with other providers where appropriate"|
Peter Ashdown-Barr, Intermediation
A period of consolidation seems inevitable and there are already rumours that one of the higher-profile providers is in trouble. "It would be a shame if the rumour is true," says Peter Ashdown-Barr, chief executive of Intermediation. "I don't think it would help the market in general if that signal were given."
Appropriately enough in an industry based on discussion and compromise, Intermediation has a policy of cooperation with other providers. "We're certainly in favour of it," says Ashdown-Barr. "We've made it quite clear that it's our policy to work with other providers where appropriate."
A case in point is the ADR clinic Intermediation has been asked to run for Lloyd's of London, in conjunction with another ADR provider, The City Disputes Panel.
The sheer number of ADR providers, plus the large number of individuals who have trained as mediators with an organisation such as Cedr or ADR Group, means that at first glance those looking to instruct a mediator face an overwhelming choice. It has led to calls for stricter regulation of the industry to ensure the quality and effectiveness of the mediators themselves, some of whom are clearly vastly experienced and respected, while others may have done little more that attend a Cedr training session 12 or 18 months ago.
Cedr chief executive Karl Mackie says: "This is a fairly typical stage of market development, in that there's an oversupply of suppliers." He believes that clients can make their own judgements based on recommendations and experience as to who are the reputable players. "Frankly, there just isn't enough money in mediation for it to be likely that any underperforming organisations would survive," he says.
David Shapiro, a consultant at SJ Berwin and a member of the Panel of Independent Mediators (Pim), also says that market forces will inevitably impact on the number of providers. "I believe that the market will sort this out," he says. "You've got guys running around saying, 'I'm a mediator. I've got certified by Cedr or ADR Group' or whoever, but what does that really mean? They may have no experience whatsoever."
When it comes to instructing individual mediators, the process can still be rather hit or miss. Quentin Smith, head of dispute resolution at Addleshaw Booth & Co and a qualified mediator, says: "We've had people suggested to us or actually promoted to us; we've given them a run out and they've failed in their performance and we've been really set back by it.
|"To my mind, you teeter on the brink of professional negligence if you're not addressing ADR or mediation as part of your battle plan when you start putting a case together"|
Quentin Smith, Addleshaw Booth & Co
"The ADR providers get feedback from the mediators and also from the clients. That's probably the best they can do at the moment because you can't put an independent observer in there. It's as variable as going before the right judge or getting a good barrister or the right expert. You do your research, you talk to people in the know and you try and get a recommendation or a steer."
A number of providers do operate their own regulation systems - mediators on Cedr's panel, for example, have to reregister every two years and demonstrate their continuing competence. Cedr also operates a tiered panel system through its Cedr Solve service. Mediators on its list are graded according to their level of experience, expertise and reputation, the top bracket being the 'executive mediators' - full-time, highly-regarded professional mediators, of which there are currently seven. The Law Society, too, is in the process of setting up its own accredited panel for lawyer-mediators.
"The Cedr's approach is an effective and structured way of ensuring that there's a quality control mechanism," says Percival at BNFL. "The mere fact that you've gone through a course and qualified as a mediator and had a bit of experience doesn't in itself mean that you're going to be as good as somebody who's got 5 or 10 years in the field."
These different approaches, however, are perhaps symptomatic of the fragmented structure of the ADR market. Admittedly, the leading providers have set up the Joint Mediation Forum to discuss issues of common interest. It has agreed some minimum Kite mark-style quality-control standards relevant to mediation providers, but these have not yet been published, nor has it set up a body to oversee the awarding of such marks. It has also already stated that it would not subsequently regulate the providers, despite a widespread belief that regulation would be beneficial. "I think regulation ties in with the idea that there should be some measure of quality, whether it's in terms of a CPD [continuing professional development] requirement or a registration requirement for practising mediators, so there's some maintenance of quality," says Percival.
Lind, too, believes that "regulation would be a tremendously beneficial development in mediation, because it's a very good process; but there's still the potential for people to have negative impressions about it."
The disappointing Cedr figures should not be taken too negatively, believes Shapiro. "It's crazy," he says. "The courts only introduced the CPR [civil procedure rules] 18 months or so ago. You don't change a culture overnight. This is a brand new culture to absorb. I think the strides made in ADR are already absolutely astounding. I don't know what everyone was expecting - a revolution? You don't change the pattern of 300 years of operating in a court in 18 months; that's lunacy."
If anything, the levelling off of ADR has given the sector breathing space to assess the progress so far and prepare for the future. "Initially, we were disappointed in the sense that we'd expected the surge post-Woolf to continue," says Mackie. "But in other ways, we're not really downhearted because I think this is now a time for the litigation market to draw breath and take stock of how to fit mediation into its practice. It's a time for reflection and regrouping before we move forward again. I don't see it at all as a stage of decline."
Judges are key
Most practitioners agree that a critical influence on where mediation and other forms of ADR go from here is the courts. Until the courts have a consistent policy on ADR, its growth will be hampered. "The key to all of this is the courts," says Shapiro. "Mediation will take off in this country when the judges push it. The more they push, the more mediation you'll get."
Along with former Clifford Chance partner Tony Allen and Philip Naughton QC, both colleagues at Pim, Shapiro set up the ADR courses to train the judiciary in mediation in 1998. "We had 10 sessions all over the country, 85 judges a session," says Shapiro. "Some of them picked it up right away, some weren't really interested and some were just lost in the stars.
"There'll be more and more mediations as more judges get comfortable with the process, understand it more and keep pushing the parties. Failing that, it will stagnate. The whole key is the judge."
In the meantime, litigation lawyers should be doing their own homework as to the mediation process and the benefits in terms of time, costs and business relationships that it can bring to clients, says Smith at Addleshaws. "I still find to my surprise that there are a lot of lawyers unfamiliar with the process," he continues. "To my mind, you teeter on the brink of professional negligence if you're not addressing ADR or mediation as part of your battle plan when you start putting a case together. You need to be aware of all the issues, and mediation must be an arrow in your quiver. You've really got to know when to use it; and if not, why not?"
|CEDR survey - commercial mediation statistics 2000/2001|
| Continuing growth in court-referred cases in 1999/2000: |
27 per cent of the mediations arranged by the Centre for Effective Dispute Resolution's (Cedr) dispute resolution and prevention service, Cedr Solve, were court-ordered, compared with 19 per cent the previous year and 8 per cent the year before that.
Cedr Solve arranged 467 commercial mediations in 2000/2001, five more than in 1999/2000.
This is in spite of the fact that more disputes are being resolved before any formal dispute resolution proceedings begin, as a result of the implementation of Lord Woolf's civil procedure reforms. Since the implementation of the new Civil Procedure Rules (CPR) in April 1999, there has been a reported 37 per cent drop in the number of claims issued in the Queen's Bench Division.
The construction industry remains Cedr Solve's largest user group at 14 per cent of all parties.
The figures show that more public sector organisations are turning to mediation for the resolution of their disputes, accounting for 8 per cent of users, compared with too few last year to categorise.
Professional negligence disputes are the largest dispute type at 17 per cent.
Areas that have seen growth include financial disputes (9 per cent from last year's 6 per cent), medical negligence and personal injury (PI) (5 per cent from 3 per cent) and shipping (4 per cent from 2 per cent).
The types of dispute mediated by Cedr in 1999/2000:
professional negligence (17 per cent); construction (14 per cent); financial (7 per cent); IT (6 per cent); clinical negligence/PI (5 per cent); employment (4 per cent); shipping (4 per cent); engineering (4 per cent); partnership (3 per cent); insurance (3 per cent); intellectual property (3 per cent); property (2 per cent); other (28 per cent).
Most two-party matters were settled in one day.
The average length of a mediation was 1.25 days, although most two-party matters are still settled within one day. Twenty-three per cent of the disputes mediated by Cedr had a case value in excess of £1m, and the total value of disputes was just over £1bn. Seventy per cent of mediations settle on the day or shortly after.
International mediations account for 13 per cent.
Thirteen per cent of mediations involved one or more parties from outside the UK, a similar number to last year's. Although London is still the preferred mediation venue for international disputes, with 98 per cent of them mediated in the capital, UK commercial disputes are increasingly being resolved outside London (63 per cent, compared with 57 per cent last year).
There were 108 additional cases referred through schemes.
In addition to the 467 commercial mediations, the number of mediations referred to Cedr Solve through various schemes increased by 18 per cent to 108. Cedr offers schemes to provide efficient and cost-effective dispute resolution for the Employment Service, National Council for Voluntary Organisations, Age Concern and the Independent Housing Ombudsman.
| Seven-party pension dispute resolved |
Amount in dispute: £6.6m
Time between referral and mediation: Two months
Length of mediation: Three days
Cost: £2,860 per party
When a shortfall of £7.3m was discovered in the funding position of a pension scheme, pension holders alleged that it was the result of the speculative and unsuitable acquisition of several properties without specialist advice. They claimed for damages from the loss of value considered 'inappropriate' for a pension fund against the fund trustees at that time, officers of the company, legal advisers and bankers - a total of six defendants. With £6.6m in dispute, the litigation continued for three years, with legal fees mounting on all sides. Several defendants decided that mediation offered a more effective resolution of this highly complex and expensive dispute. The Centre for Effective Dispute Resolution (Cedr) was approached to enter into discussions with the other parties to broker an agreement to mediate. The mediation was held within two months of the decision to mediate, and Cedr Solve worked with all parties to agree a team of two experienced mediators for a three-day mediation. Due to the complexity of the dispute and the number of parties involved, the co-mediators spent two days prior to the mediation preparing and contacting the parties for preliminary discussions. The parties were also asked to provide a brief summary of their proposal for an outcome to the dispute. As the mediators could not see all the parties at once, a visiting list was produced after an initial joint meeting, enabling the parties to be released, which reduced the tension and boredom of waiting. The first day was used primarily for exploration of the issues. On the second day, the co-mediators split up to work with parties simultaneously, and, by the end of day two, offers had been accepted in principle. The third day of the mediation was spent securing the agreement on the final two offers by telephone. The mediation successfully concluded three years of litigation and the likelihood of a lengthy and expensive trial.
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