Commercial mediation is on the rise and being pushed hard to keep cases out of our congested courtrooms.
The low downWith a first-day settlement rate of 72%, commercial mediation has been showing an effective way forward in disputes for a generation or more. Mediating has saved business an estimated £40bn since 1990. Senior judges and government ministers seemingly form an orderly line to extol its benefits. Mediation is quicker and cheaper than court and gives the parties a shot at maintaining a working relationship. But this track record of success has raised the prospect of something many mediators fear – compulsory mediation. They argue that commercial mediation works precisely because it is voluntary.
A parlour game among experienced mediators is to speculate on whether there is any disagreement, however unlikely, that could not be mediated. Commercial mediation covers anything from contractual, partnership and shareholder conflicts to disputes over negligence, property, wills, and even funerals. ‘We regard commercial mediation as mediation of any case that could end up in civil court that is not related to custody and divorce,’ explains Andy Rogers, a practising mediator and executive team member at the Centre for Effective Dispute Resolution (CEDR).
According to Charlotte Steinfeld, head of the mediation group at London-based barristers’ chambers 10KBW, commercial mediation is ‘often most effective in disputes where there have been ongoing personal or commercial relationships [or both]’.
As the UK’s leading independent commercial mediation provider, CEDR has been tracking this market in England and Wales since 2003, when there were fewer than 2,000 commercial mediations a year. This number had risen to 16,500 in the year to 31 March 2020, according to CEDR’s latest biennial audit. That was itself a 38% increase on 12,000 in 2018.
The survey, published in May, was based on more than 360 responses from UK-based mediators.
Mediation’s overall success rate increased and remained very high with 93% of all cases settled either on the first day of mediation (72%) or shortly afterwards (21%). The average number of hours spent on a typical mediation decreased – from 16.3 hours in 2018 to 14.6 last year.
According to CEDR, businesses and individuals save £4.6bn annually by using mediation. A total of £40bn has been saved since 1990, when commercial mediation was launched.
‘The evidence tells us that mediation is a growing market,’ says Henrietta Jackson-Stops, chair of the government liaison working group at the Civil Mediation Council (CMC), a charity which promotes the use of mediation and other forms of alternative dispute resolution (ADR).
‘Mediation is faster than other dispute resolution processes, cheaper and allows for better outcomes,’ she says. ‘It also allows parties the opportunity to rebuild commercial relationships, instead of destroying them through a drawn-out adversarial process.’ Hence why for ‘serial litigants’ such as constructors and insurers ‘the question is not about whether to mediate, but when to mediate and the choice of mediator’. Jackson-Stops believes that there are ‘few disputes where mediation is not effective’.
But what has also changed is that commercial mediation is now being promoted from the top. ‘We are seeing a decline in the view, often held by the judiciary, that a case is too complex, too large or the parties are too far apart to be successfully mediated,’ says Jackson-Stops. ‘We know from experience that these factors are not barriers to the successful resolution of a dispute.’
ADR should no longer be viewed as ‘alternative’ but as an integral part of the dispute resolution process. That process should focus on ‘resolution’ rather than ‘dispute’
Sir Geoffrey Vos, master of the rolls
Tone from the top
‘There have been prominent voices calling for parties to consider mediation, both within government and by senior members of the judiciary,’ adds Steinfeld, and ‘this may be having an impact as the message trickles down to parties and their legal advisers.’
There are numerous examples. In April 2020, Lord Neuberger argued that ‘instead of going to court and having an expensive and uncertain piece of litigation, parties may be sensible to consider mediation’. Another former Supreme Court president, Lord Phillips, stated that ‘parties should consider mediation… at an early stage of legal proceedings’. They were among a number of senior judges and academics discussing the effect of the pandemic on commercial contracts during a meeting of the British Institute of International and Comparative Law.
The following month the government issued guidance on ‘responsible contract behaviour in the performance and enforcement of contracts impacted by Covid’, encouraging parties to engage responsibly and fairly with requests for mediation. Then, in September 2020, at the Bar Council’s Opening of the Legal Year seminar, commercial court judge Mr Justice Knowles told the audience: ‘As judges, lawyers and parties, we should make sure we know all about mediation and build all the experience we can of it. We must respect it right up there along with other forms of dispute resolution including litigation and arbitration.’
More recently, responding to the Civil Justice Council’s report on ‘compulsory ADR’, master of the rolls Sir Geoffrey Vos said that ‘ADR should no longer be viewed as “alternative” but as an integral part of the dispute resolution process. That process should focus on “resolution” rather than “dispute”.’ The CJC chair and head of civil justice added: ‘It is exciting to see the HMCTS reform project delivering online justice’, and that ‘all kinds of dispute resolution interventions will be embedded within that online process’.
Singapore sting: ‘Enforcement has never been a problem’
The UN’s Convention on International Settlement Agreements resulting from Mediation was meant to facilitate international trade and promote mediation as ‘an alternative and effective method’ of resolving trade disputes. But take-up has been slow. Practitioners say it is a solution in search of a problem, and an unconvincing solution at that.
So far, 55 countries have signed the convention, up from the 46 that joined the signing ceremony in Singapore on 7 August 2019. These include the US, China, India, South Korea and Australia, but not the UK or EU. Only eight countries have ratified the convention, among them Singapore, Fiji, Saudi Arabia and Turkey.
Christopher Newmark, a partner with London-based law firm Spenser Underhill Newmark, tells the Gazette that he was never a fan of the convention. Having spoken to its proponents, Newmark says that the reason it came into being ‘wasn’t because there was in reality a difficulty over the enforcement of settlement agreements, it was out of an attempt to put mediation on an equal footing with arbitration, to give it more profile and international credibility, and in that way increasing its use’. The New York Convention, the instrument for cross-border arbitration agreements, was signed in 1958.
The Singapore Convention only applies to settlements resulting from commercial mediation, but Newmark says: ‘My experience, having been mediating for more than 20 years, is that the enforcement is not and never has been a problem of mediated settlement agreements.’
This is because ‘when parties have resolved a dispute through an agreement there is in any event far less appetite to get into another dispute over that agreement, but more importantly there are usually in my experience invariably ways in which the settlement agreement can be drafted so it is self-enforcing’, he says. Additionally, the convention ‘adds a level of regulation, administration and form filling’ which Newmark says ‘is just not necessary’.
He forecasts that over time ‘it will fade into the distance and be forgotten about it’.
Eversheds Sutherland partner Sheena Buddhdev is more positive. She says: ‘The Singapore convention will give additional comfort to those who settle disputes through cross-border mediation’ and that its impact ‘should become more apparent as data becomes available’.
In January 2021, Sir Geoffrey had asked the CJC to look into the legality and desirability of compulsory mediation. In its July report the CJC concluded that introducing ‘a procedural rule which requires parties to attempt ADR at a certain point or points, and/or empowers the court to make an order to that effect, is, in our opinion, compatible with Article 6 of the European Convention on Human Rights’. Furthermore, this could be desirable and effective in many cases.
This is a significant departure from Halsey in 2004. This found parties could not be compelled to engage in mediation, and more generally with other forms of ADR.
Roger Levitt, an accredited business mediator and non-practising solicitor, believes ‘compulsory mediation is on the horizon’ and that the catalyst for this was Covid-19. Even before the pandemic courts ‘were already completely overloaded’, but the backlog has only got worse. ‘The courts just can’t cope with the number of cases coming before them so they are trying to make sure that as many cases as possible go to mediation,’ he adds.
As a result, Levitt is ‘seeing a much greater percentage of cases that go to mediation before issue, and then after issue the judges are being much more forthright in their direction for people to mediate’.
Commercial mediation is currently voluntary (unless contractually agreed) but under the Civil Procedure Rules there is an obligation to consider it before commencing proceedings. For example, the pre-action protocols set out that the court will expect the parties to have ‘exchanged sufficient information to consider a form of ADR to assist with settlement’. The courts have the power to stay proceedings for mediation to be attempted, and they can also impose costs orders on the winning side for unreasonable refusal to mediate.
But Jackson-Stops says that ‘in practice, the bar as to what constitutes an unreasonable refusal appears to be high and it is not often that parties are sanctioned for their conduct’. But she notes that there are an increasing number of instances where the courts are telling litigants to mediate and ‘threatened with consequences for not doing so’.
‘The judiciary now expects disputing parties to make serious attempts at engaging in [ADR],’ notes Sheena Buddhdev, a partner in Eversheds Sutherland’s commercial dispute resolution group. She adds that ‘increasingly, judges will issue adverse costs orders against parties who do not at least attempt to mediate or negotiate’.
Many cases miss the opportunity of mediation simply because one party has enough money to avoid the responsibility to try and settle… there is a responsibility to try and resolve disputes
Amanda Bucklow, commercial mediator
Call for evidence
Following publication of the CJC report, in early August, the Ministry of Justice launched ‘a major call for evidence’ seeking views ‘on the best ways to settle family, business and other civil disputes away from the courtroom’. On issuing its eight-week consultation, which closed on 31 October, the MoJ said that in 2019 only 3% of the two million civil proceedings issued went to trial. This showed ‘the vast majority of claims can be resolved without the need for a judgment’.
Levitt, a CMC board member, says: ‘The CJC report was very much in favour of recommending some form of compulsory mediation, but we don’t yet know exactly what form it will take.’ But he points to private family law where, barring a few exceptions, an applicant must attend a Mediation Information and Assessment Meeting (MIAM) led by a trained mediator before making a court application.
He says MIAM could be extended to civil cases, which would be a ‘good step’. CMC chair Sir David Foskett hailed the CJC’s report as ‘a significant development. It is also a step further towards the CMC’s aim for automatic referral to mediation to be the default means of dispute resolution in the civil justice system’.
‘Time will tell as to how things will proceed, but the indications are that mediation for certain disputes may well become an “opt-out” rather than an “opt-in” process,’ says Steinfeld, also a CMC board member.
Amanda Bucklow, an accredited commercial mediator with extensive experience of mediating disputes across a range of sectors, thinks mandatory mediation is ‘a sensible step given the reluctance of many people to try and settle their disputes without resorting to the courts. Some argue that mandatory mediation would prevent access to justice or undermine the development of law, but that doesn’t recognise that litigation is costly and beyond the reach of many who need the assistance of professionals’.
Compelling litigants to mediate would also address the problem of an imbalance of power between parties. ‘Many cases miss the opportunity of mediation simply because one party has enough money to avoid the responsibility to try and settle,’ says Bucklow. ‘And I do think there is a responsibility to try and resolve disputes. The court should be the last resort, and I support the principle of conserving court resources to deal with matters where people have tried but not succeeded and need someone to tell them what to do.’
Away from the debate on compulsion, mediation’s proponents continue to press on clients the manifold advantages of commercial mediation.
First, there is no binding agreement until one is signed by all parties. ‘That is a compelling backdrop for productive discussion and effective decision-making,’ says Bucklow. ‘The only ingredients parties and their lawyers need to bring to the table are goodwill and an open mind. But even [when] that is not present, we can often generate those qualities to a reasonable extent.’
Second, mediation is ‘without prejudice’, meaning it can run in parallel with litigation. ‘While parties are establishing their legal case, they have an option to pause the litigation and try to negotiate a settlement on their own terms,’ says Steinfeld. ‘If the matter doesn’t settle, the case can simply proceed to court and the judge will be none the wiser as to the offers made or discussions held.’ But in the process litigants will have usually gathered evidence, information about the facts, strengths or weaknesses of the case, and may also have a better understanding of what the other side thinks the case is worth. ‘The mediation can be seen as money well spent in the context of the litigation.’
Third, participants are ‘entirely in control of the outcome’ and ‘can devise their commercial terms and ask for non-pecuniary items a judge has no power to award such as an apology or guarantee that a company will change its practices in some way,’ Steinfeld says.
Fourth, it is also confidential, which is important if a company wants to protect its brand.
Fifth, the costs are ‘reassuringly certain’ for the disputants and generally only relate to the mediation day, Steinfeld continues. Typically, a fixed amount is paid to the mediator and that is split equally between the two sides; and another fixed amount is paid to the legal representatives for preparation and representation at the mediation.
‘Sometimes rooms need to be hired but many law firms and barristers chambers offer them for free if using a mediator from that firm or set,’ Steinfeld adds. ‘For a two-party dispute, the mediation is usually held over one day and can usually be settled on that day, thus ending the need for any further costs.’
Another reason for the growth of commercial mediation is that ‘more and more lawyers are training to become mediators and setting up mediation teams at their firms and chambers’, according to Steinfeld. This is ‘giving them an impetus to “sell” mediation to clients as a tool which can be used during litigation.’
David Foster, a commercial mediator and head of dispute resolution at UK law firm Moore Barlow, says that although commercial mediation is still ‘quicker and cheaper’ for parties than court proceedings or arbitration, ‘the costs have escalated as lawyers have become more involved’.
The average fees of a commercial mediator range between £1,481 and £4,247 for a one-day mediation, depending on experience, according to the CEDR survey.
Levitt tells the Gazette that for a ‘mid-range’ commercial claim of £100,000 a mediator would typically charge £2,500-£3,000. This includes pre-mediation preparation and mediation time on the day, meaning £1,500 (plus VAT) per side. But that excludes legal costs for the solicitors and barristers.
Regardless of the size of the dispute, ‘the mediator’s fees are going to pale into insignificance [compared] with lawyers’ fees,’ says Levitt. He cites the example of a recent construction dispute where the side with solicitors had spent over £15,000 on them to the point of the mediation.
Despite the lawyer expense, Levitt considers it a ‘false economy’ to do without them. Clients should instruct solicitors if only to support them for the mediation, he suggests. CEDR states in its guidance that it is an option to waive legal representation. However it advises individuals and organisations to instruct ‘a solicitor or legal representative or an appropriately qualified adviser’ if the mediation involves legal rights and obligations.
Rogers emphasises that mediation is a process ‘where you cut your cloth to your budget’. For instance, a high-value, complex dispute between two multinationals may involve in-house and external solicitors, representation by counsel and a QC acting as mediator over a two-day period. For lower-value claims, ‘prices are more sensitive’. For example, a domestic construction dispute over a conservatory can be dealt with in half a day by a telephone call or two with a legal adviser who may not be a solicitor.
Whatever the client’s budget or choice, in practice lawyers tend to be involved in some manner in mediation as they are ‘often the key influencers in mediation appointments’, according to the CEDR report.
Existing large-scale mediation schemes may point to the future of the sector. While the government is mulling over the issue of compulsory mediation, it should look no further than the ADR schemes supported by various industries and regulators. For example, the Advisory, Conciliation and Arbitration Service (ACAS) for employers and employees; or the claims mediation service for patients, families and NHS staff launched by NHS Resolution in December 2016 as part of its strategy to ‘deliver fair and cost-effective resolution’ and ‘keep healthcare and health professionals out of court’.
NHS Resolution (formerly the NHS Litigation Authority) funds the cost of mediator fees and expenses in cases where the claimant is unrepresented and where liability is admitted in whole or in part. In all other cases and in costs mediations, mediator fees are shared equally by the parties.
Since the service started, over 1,500 claims have been mediated, and until the pandemic the number of claims mediated had been increasing annually. In 2019, 81% of cases settled on the mediation day or within 28 days of the mediation (up 7% on 2018/19). Although the number of claims mediated fell in 2020/21 to 299 cases, the settlement rate remained high with 77% of the cases settling on the mediation day or within 28 days of the mediation.
CEDR is one of four service providers to the scheme, which Rogers describes as ‘influential in other areas and walks of life’ because of its scale and success. Unlike ad hoc mediation under the CPR, ‘you have a situation where everyone is being offered mediation, so if people are looking around for a proof point – that is to say, does it work – then the proof point exists’, he says.
Covid-19 has opened up new horizons for mediation. Zoom has become mediators’ preferred online platform, according to Steinfeld, and ‘anecdotally at least, settlement rates appear to be as good as in-person mediation’. Furthermore, the fact that ‘mediation can now be swiftly, and almost effortlessly, conducted online, has opened up the world to mediators in England and Wales, some of whom are concentrating on growing their international presence and practices’.
Christopher Newmark, a partner with London-based Spenser Underhill Newmark, concurs that the new virtual environment has been ‘a great boost’ but this is not confined to mediation since ‘arbitration has also proved to be very effective online’.
Nichola Evans, partner at north-east law firm Ward Hadaway, says: ‘I find that a Teams or Zoom mediation is very cost-effective and ideal for small to medium-sized disputes. Parties can play with the format, so on smaller cases the parties can elect, say, for a half-day mediation or dispense with opening statements.’
Jackson-Stops says that remote mediation ‘makes access to mediation universally available’ and ‘less stressful for participants’, including litigants in person or those who are ‘vulnerable or are likely to feel uncomfortable in a strange office environment’.
But not everyone agrees. Foster says that it is online mediation that ‘has benefited from the Covid crisis, not mediation itself, which is still more effective face to face’.
On balance, there is little doubt that things are looking up for the sector. For Rogers, not only is commercial mediation going ‘from strength to strength’ but ‘we are also seeing the continuing journey of the professionalisation of commercial mediation’.
‘If mediation becomes a more integrated solution in dispute resolution, then we need to ensure that the mediators are properly regulated and accredited,’ says Jackson-Stops, adding that this is something that the CMC already does and is ready to work with the MoJ and others to develop this further.
Marialuisa Taddia is a freelance journalist