Settling for less?
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English Commercial Court enforces obligation to resolve disputes by friendly discussion prior to arbitration
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22 April 2014
Conventional commercial litigation is long, slow, and laborious and unfortunately the growth of alternative dispute resolution (ADR) methods has been no quicker.
Providers of ADR services are only gradually gaining ground and establishing mediation and arbitration services. According to Professor Karl Mackie, chief executive of the Centre for Dispute Resolution (CEDR): "It's not a sprint situation - developing systems like this takes time."
CEDR, which leads the field in offering mediation services for medium and large commercial disputes, is now registering 30 to 40 referrals a month, with between five and 10 cases being mediated a month.
The growth in demand for CEDR's services since the body's inception five years ago has been steady rather than exponential. But CEDR is taking on a fourth case manager and earlier this year moved to new premises to accommodate its growing business.
Mackie says: "The first objective is raising client awareness and making sure they press for the use of ADR. The second is to encourage lawyers to promote it as valuable in case management."
CEDR now has around 250 mediators on its books, with a growing number of corporate sponsors and users, including BT, Barclays Bank and Norwich Union. The Solicitors Indemnity Fund has also used CEDR's services.
Mediation schemes have been set up for the Department of Health, the Building Employers Confederation, the Computing Services and Software Association, and the Institute of Grocery Distribution. CEDR now claims to have been involved in over 1,000 cases with a value of over £1.5bn.
"The next phase is to try to build on this climate change and create much more action on the client side," says Mackie.
"A key element of building ADR is putting it into relationship contracts between suppliers and customers," he says.
IT and professional indemnity are now key areas of growth in ADR, and many insurers are keen to explore it - despite initial scepticism in their law firm panels, Mackie says.
Support for CEDR - and the other major commercial litigation mediation provider, the ADR Group - is also growing from within the court system.
Lord Woolf's Access to Justice report encouraged the use of ADR. Now the High Court and Commercial Practice
Direction require confirmation that parties to litigation have considered ADR, and the Patents County Court has announced an ADR pilot scheme offering fast-track mediation and arbitration services.
The stock of ADR is undoubtedly rising. But the question is whether it is actually providing the economical route to justice in the commercial field that its advocates claim.
A variety of legal figures have accused ADR - whether through mediation or arbitration - of having failed to deliver, and of being potentially more expensive than going to court.
Henry Brown, a leading proponent of ADR and a consultant at Penningtons, says his discussions with business leaders interested in ADR reveals an element of disappointment in the potential cost savings of mediation at the low end of the scale.
"Chambers of commerce enquire about low-cost mediation," he says. "But for medium-sized cases it takes time. Companies have to prepare cases for mediators, which involves spending management time. If it works, there is undoubtedly a saving. But if it doesn't, it adds costs to the eventual bill."
Mackie says: "We have dealt with cases weeks, months and years before they would otherwise have gone to court. The costs of ADR compared to its alternative are often peanuts."
At the lower end of the scale, he is aware of criticisms that ADR does not provide the savings over conventional litigation that some clients hope for.
But CEDR is keen not to be seen to ignore this end of the market, and offers a scaled-down service charged at £350 a day to both sides for low-value disputes. Most of CEDR's cases, however, come in a double peak of valuations in the £100,000 to £250,000 range, and then between £2m to £3m.
Mackie says that experience from the US suggests that there is plenty of room for further growth in ADR, assuming encouragement can be won from in-house lawyers and courts.
"The significant difference with the US is the degree of judicial direction in ADR over there. There are state and federal systems which do much more to encourage and mandate ADR systems and in-house lawyers press external lawyers into ADR."