Talk international

Five years after the introduction of the Civil Procedure Rules (CPR), it is commonly accepted that the Civil Justice reforms helped to provide the necessary breakthrough for alternative dispute resolution (ADR) in England. The leading mediation service providers continue to report increases in the number of case referrals and ADR is now regarded as an integral part of the dispute resolution process. This is not surprising, given ADR’s high success rate and the potential for significant costs savings.

Nevertheless, there is a growing perception, not least within government and the judiciary, that more can and needs to be done to get cases out of court and onto the ADR track. So, are we on the way to compulsory mediation? At the ADR Group Annual Debate in October 2003, which pondered the question of whether the courts should do more to encourage the use of mediation, Mr Justice Lightman concluded that “the courts are gradually moving in the direction of requiring mediation in all cases unless grounds are shown why mediation is inappropriate…”. Recent decisions support this trend, such as Shirayama Shokusan Company Ltd & ors v Danovo Ltd [2003], where the court found and exercised its jurisdiction to order unwilling parties to mediate, Royal Bank of Canada Trust Corporation Ltd v Secretary of State for Defence [2003], and the oft cited Dunnett v Railtrack [2002], where the Court imposed cost sanctions for failure to mediate.

In the meantime, the Department of Constitutional Affairs is extending mediation and ADR pilot schemes to 40 courts across the country by the end of this month. The scheme, launched at the Central London Civil Justice Centre, might well be the pioneer of things to come. The scheme sees civil cases above the small claims level compulsorily referred to mediation for the first time. Refusal to mediate will be met with costs sanctions if, as is increasingly likely, the court dismisses the unwilling party’s objections. The jury is still out as to whether compulsion mediation across the board is a good thing, or whether it impairs what is by its very nature a consensual, touchy-feely process, but schemes such as this are likely to resolve the issue once and for all in favour of mediation in almost all cases.

In reality, it is unlikely that the Government’s reform agenda will take no for an answer, and going to court will soon truly become the last resort except where emergency relief, such as an injunction, is needed. Access to justice may well no longer mean immediate access to the courts. Some may argue that freedom of choice is being further eroded, and that for certain clients ADR is a waste of time and costs, but there remain too many litigators whose knee-jerk reaction to a dispute is to rush off to court without considering the alternatives.

Regardless of compulsion, the acceptance of ADR continues to grow. More and more industry sectors are recognising the benefits, including such diverse areas as healthcare, finance and insurance, which have traditionally been rather reluctant to embrace mediation wholeheartedly, at least in England.

Internationally, practitioners are observing a rapid increase in the use and acceptance of ADR to resolve disputes. Indeed, mediation, with its ultimate focus on commercial solutions rather than tactical questions of forum shopping and jurisdiction, choice of law and strict legal positions, is probably better placed than any other dispute resolution mechanism to break through national and cultural barriers and to produce settlements that are on a global scale. However, in many countries, mediation has not yet received the same level of acceptance as it has here. While there is no longer a significant ADR gap between the UK and countries such as the Netherlands and Germany, where mediation also forms an integral part of the judicial process, other EU member states, such as France, have a different outlook.

The imminent EU enlargement presents new opportunities and challenges for ADR. Local court systems in the new member states still sometimes struggle to cope with disputes arising from complex international commercial transactions, and there is therefore fertile ground for sowing the seeds of an ADR culture. A recent case shows how successful this can be. A Polish entity was in a tripartite dispute with English and US companies. Following an initial reaction of disbelief and rejection, the Polish party reluctantly agreed to attend a mediation. After a two-day mediation in the US resulted in settlement, the Polish entity converted and vowed to spread the mediation word. While nothing beats experience, the focus of the moment must be on training, education, and creating public awareness. Organisations such as ADR Group are busy behind the scenes training lawyers and judges in Central and Eastern Europe.

The European Commission has also taken an interest in ADR – at the moment limited to civil and commercial matters – and has completed a consultation process that is expected to result in a proposal for a draft directive by September. The Commission has published a preliminary draft text, the objective of which is to facilitate access to justice by promoting the use of mediation. It stands to reason that the Commission is keen to promote rules and common standards that will have EC-wide application, not least in light of other EC instruments in the field of civil justice, such as the Jurisdiction Regulation 44/2001. Paradoxically, however, mediation does not easily lend itself to much of the commission’s work, such as in antitrust cases where decisions must be published, fines are imposed, and offenders are, in effect, named and shamed as a deterrent.

There has been clear resistance here against EU intervention into the well established and smoothly running ADR industry. However, setting minimum standards is essential if trust in the process is to be maintained on a EC-wide basis. Examples of areas that will benefit from common standards and rules include the following: confidentiality of the mediation; the inability to use information and material disclosed during the mediation; the effect of mediation on ongoing proceedings; and the enforcement of settlement agreements. UK companies will no doubt be among the beneficiaries of this approach when they come to mediate their business disputes in an enlarged EU. In this context, it is perhaps surprising that the draft text leaves it to the member states to promote effective quality control mechanisms for mediation and training for mediators.

Both in England and the rest of Europe, there are plenty of ongoing developments. The onslaught against the litigation culture seems bound to continue. What will be the position in five years’ time? While nothing is certain, it is likely that the globalisation of ADR, just as much as the globalisation of litigation, will be complete.

Peter Fitzpatrick is a partner at the London office of Howrey Simon Arnold & White. He was assisted in this article by associate Gregor Kleinknecht