Mediation and arbitration is a growth area throughout the legal market – and London has become the leading centre for settling cross-border cases. Claire Smith reports.
The litigation market is experiencing a radical shake-up. "Those firms that are into mediation and arbitration work are well placed," says leading alternative dispute resolution (ADR) partner Stephen York of Hammond Suddards. "But those firms that are not in it are going to find themselves in trouble."
The Woolf reforms have turned the last 11 months into a steep learning curve for lawyers who have been pushed into recognising the role of mediation, while the booming number of cross-border transactions have made arbitration an even bigger buzz word than it was before.
York says that firms cannot afford to ignore it. "There has been a 50 per cent decline in the number of writs issued since Woolf, so logically there has been a 50 per cent decline in the number of chargeable hours in litigation work – that's bound to have a market effect," he says.
Few sectors of the legal market have been able to resist the rise of mediation, and it is making an impact on even the most reluctant.
Commercial mediator Tony Willis, a consultant with Clifford Chance, says: "Personal injury springs to mind. It makes up more than half the litigation in the courts of England and Wales and it is ideally suited to mediation. Most cases should be mediated.
"But that is one area where there's almost no mediation at all. The Forum of Insurance Lawyers and the Association of Personal Injury Lawyers need to readdress the whole issue. In Texas and California almost all PI cases are mediated."
Willis suggests that one of the reasons for the reluctance to mediate is that many lawyers fear that their workload will go down.
Intellectual property is another area that is not using ADR. Willis says: "Like PI lawyers, you hear IP lawyers say that it's not suited to their type of work. But there is no reason why not. There are IP cases that are not suitable because you need to have battles over millions and decisions over rights, but there is certainly room for more mediation."
However, ADR is booming in cross-border transactions, which international firms like Allen & Overy, Clifford Chance, Freshfields and Baker & McKenzie have taken advantage of.
At one point last year, Baker & McKenzie was handling arbitration cases around the world with a value of more than £6.25bn, with the biggest cases involving power projects in South America and south-east Asia.
Baker & McKenzie construction and projects partner Jeremy Winter, who is head of the firm's international arbitration group, says: "Arbitration is particularly suitable for cross-border contracts because neither side would be prepared to accept the other side's court. They will always say the other side has got home advantage.
"You can transport an arbitration award around the world and enforce it."
Winter believes the next boom area will be PFI projects worldwide. "We anticipate a growth of arbitration in private finance infrastructure projects. It will be a major growth area because that financing technique is the way things are being done these days," he says.
Judith Gill, an arbitrator in the litigation department at Allen & Overy, agrees that the boom in arbitration is due to more cross-border deals.
She says: "It's probably a natural development and coincides with the globalisation of business generally. Arbitration comes into its own in so many transnational and cross-border disputes."
When it comes to the resolution of multi-national disputes, London is increasingly billed as one of the best places to go.
Last month, Lord David Hacking of Littleton Chambers launched a report by British Invisibles aimed at promoting the capital's strengths in commercial dispute resolution to a worldwide audience.
He says London handles up to 5,000 international arbitrations and mediations a year, possibly 10 times the number done in New York.
York says: "London is becoming an international centre for resolving disputes. It is seen as a good place to mediate and arbitrate and has enjoyed a reputation for some time. I did an arbitration in South America recently between some Bolivians and a Californian company and London was seen as the best neutral place."
He believes English law is a big attraction for foreign companies and points to the newly opened arbitration premises which the London Court of International Arbitrations (LCIA) has launched in Breams Buildings as another bonus.
Gill says: "We are offering a neutral hearing which can be very attractive and that has led to the development of London into the arbitration centre that it is today. It's something that we hope will continue to develop."
But Willis says that despite the positive moves by the LCIA, London needs to be careful not to price itself out of the market.
"We are an expensive place to do any type of business. Costs in the US tend to be lower. Mediation costs less in the US per daily rate and we have to be cautious in London about the overall costs," he says.
But despite competition from New York, Paris and Singapore, there is no doubt that ADR is becoming the way to do things in London – so much so that the Lord Chancellor has started to look into it.
The end of February marked the closing date for submissions to a consultation paper from the Lord Chancellor's Department (LCD) that will look at the costs and benefits of mediation and arbitration and deal with issues like whether the sector should be regulated.
Lord Hacking says: "The Centre for Dispute Resolution (Cedr) has been responsible for spearheading the use of mediation through training programmes and the accreditation of mediators. The question is should there now be a means of regulating mediation, should the Government set up standards that are required of mediators?
"At the moment we have one body that is training, promoting and regulating mediation. This is not a criticism of Cedr, but there comes a time when a particular professional skill has developed and you have to divide out those roles. I don't know if that time has come."
York says independent regulation is not necessary. "Although I have heard comments about the style of a mediator I have never heard anyone say the mediator was inept or of poor quality," he says.
"I think the market will regulate itself. People will meet a mediator, appreciate them and then use them again. Those who may fall below a quality standard will not get more work."
Willis shares the view that there is no need for government involvement. He says: "There is certainly a need for the Government to ensure that there is proper training in place – but there's no problem at the moment provided people make plain what their qualifications are."
In its response to the LCD, Cedr firmly rejects the idea. It says: "We would caution the Government against drawing an inappropriate main conclusion, namely that what is needed is more training, agreed standards, or worst of all external regulation."
The Government will publish its findings in a couple of months, and it is likely to include suggestions on how more clients can be encouraged into the use of ADR.
David Shapiro, commercial mediator at SJ Berwin, says there is a lot of work around. "I think it's fair to say that in the commercial area you can pick up any kind of case," he says. "It's judge driven and it's driven by the new Civil Procedure Rules.
"Clients are very happy with the process but not enough of them know about it. Mediation will not take off in this country unless it's judge driven like the US."
York agrees that the Government needs to devote more resources to training judges on when they should send cases to mediation. He says that because judges are inconsistent it is very difficult to advise clients.
Willis is also apprehensive about where Woolf will leave the profession in a few years time and it remains to be seen whether the boom in mediation will carry on.
"The jury is still out, but at the moment I'm extremely positive. I hope we will continue to do so well," he says.
