Commercial disputes arise as an inevitable consequence of globalisation. Internationally, they have continued to grow in number as a direct result of increased cross-border activity. Those affected are resolving their disputes in all the major dispute resolution centres: London, New York, Singapore, Hong Kong, Paris. And so on.
For corporations who choose to seek redress through the courts or via arbitration, the process is invariably protracted and the costs often eye-watering. But for some, there can be another alternative: mediation, a form of alternative dispute resolution (ADR) that resolves disputes between two or more parties quickly and cost-effectively. It is now frequently seen as being part of the fabric in dispute resolution strategies.
Described as ‘a dynamic, structured, interactive process’, mediation involves an independent third party who assists in resolving conflict. It is a without prejudice process where the parties voluntarily endeavour to reach a solution that is both practical and consensual. Mediators are appointed as neutral facilitators of the process. Their role is to encourage the parties to engage with every aspect of a dispute in order to maximise the range of potential options for agreement.
Roughly half of professional mediators in the UK are qualified lawyers, although the ability to deploy specialised communication and negotiation skills is the primary skill that really matters. In deploying assorted techniques, the mediator’s aim is to help them reach an agreement or negotiate a settlement.
The mediation process is private and completely confidential, arguably even more so than some arbitrations. In style and substance, it is therefore very different from litigation: as a client-centred process where every participant is encouraged to participate, mediation is primarily designed to serve the needs and interests of the parties in dispute. To achieve this, professional mediators facilitate dialogue between them.
So how frequently is mediation being used to resolve disputes? According to The 2018 Mediation Audit published by The Centre for Effective Disputes Resolution (CEDR), it is increasingly commonplace. The 2018 Audit reveals just how much civil and commercial mediation in the UK has grown in recent years. Excluding small claims mediations, 12,000 commercial mediations were performed in 2017-18 – of which 7,500 were ad hoc referrals and 4,500 were from organised mediation schemes, like NHS Resolution and the Court of Appeal scheme.
That 12,000 mediations figure is 20% up on 2016 and double the number of 2010. The value of commercial claims mediated is pretty impressive too, reaching a sizeable £11.5 billion last year, which means that the average sum in dispute is just under £1m. But perhaps most remarkable is the settlement rate: 89%, which is comprised of 74% of disputes that settle on the day of mediation and another 15% within a few weeks thereafter.
No surprise that CEDR’s latest audit suggests that the number of mediators is growing in line with the number of disputes, even perhaps slightly above it. This suggests that more lawyers are looking to do mediations in addition to their courtroom work as the complexity and value of cases going to mediation has increased.
The advantages to the parties involved are self-evident – they want certainty in resolving their dispute combined with speed, efficiency and a manageable cost. As the process has become more widely understood by international businesses in all sectors, mediation is a preferred alternative to litigation and arbitration in many forms of dispute – employment, insurance, construction and professional negligence being the most common examples.
Mediation is not new. In various forms it has been around since the 1970s, but the process was really kick-started in the UK by the Woolf Reforms. It is now more than 25 years since Lord Woolf was first commissioned to write his Access to Justice reports, which concluded that civil justice was too slow, too complex, too expensive, and too inaccessible. In turn, these reports led to the Civil Procedure Rules (CPR), which came into force in England and Wales on 26 April 1999. All the procedures that they contain are now familiar to litigators: case management conferences, pre-action protocols, and Part 36 (offers to settle).
Lawyers regard the CPR as a success, having delivered a clearer structure to litigation, and making settlements easier to achieve. Since 1999, the CPR has been amended multiple times and there have been numerous additions have been made.
As part of their evolution, the CPR have since encouraged mediation: penalties and costs can be imposed on those who refuse to use it. As of April 2013, the Jackson Reforms created a new funding regime for court proceedings and introduced several other changes to litigation procedure, including further incentives to use mediation.
Before the Woolf Reforms mediation was fairly low in volume: it existed largely on the margins. Post Woolf, mediation has evolved from being a niche alternative to a mainstream part of the litigation process. Large litigation law firms in the UK firms now mediate as matter of routine. The rebranding of their litigation practices as dispute resolution departments is tribute to the growth of ADR of which mediation is a key part.
Mediation has also become a worldwide phenomenon as international mediation develops in multi-jurisdictional disputes with a cross border dimension. It has also grown in several jurisdictions because of the unaffordable fees associated with both litigation and arbitration.
However, it should be noted that because of language differences and variations in national legal standards and regulations mediation can mean different things in different countries, notably between Anglo-Saxon common law systems and civil law jurisdictions like France or Germany.
The mediation process is quick – typically between half a day and two or three days, although one day is the standard duration. Costs are also reasonable. For example, for a dispute valued between £15,000 and £50,000, the cost of mediation (via the online Ministry of Justice directory service of approved mediators) is £425+ VAT for 4 hours’ mediation.
So what makes a good mediator? Generally, law firms are best placed to advise clients on choosing the right mediator. In interviewing several of the highest ranked mediators in London, empathy and patience are the most frequently used words. It’s not just about the law, mediators need to be pragmatic, commercial and good at solving problems. Beyond that, these are the common themes that they suggest clients should look for mediators who:
- listen carefully and don’t interrupt
- appreciate exactly what the dispute is about
- understand the needs of the people involved
- can automatically be trusted and respected
- are both proactive and engaged
- deal with the complexity of the issues as well as the interpersonal dynamics
- have considerable resilience which matches with their energy
- keep calm in difficult situations but keep things moving at the same time
- are able to read other people and to engage with them
- have a strong personality but are sensitive to the personality of others.
For many of those who find themselves in dispute, mediation offers a viable and effective alternative to ever more expensive litigation that is pricing them out of the courtroom process.
Dominic Carman, journalist, writer and legal commentator.