ROBERT VERKAIK EXAMINES THE STATE OF COMMERCIAL MEDIATION IN THE COURTS AND THE LITIGATION DEPARTMENTS OF CITY FIRMSCommercial mediation, or shuttle diplomacy as it is known at some City law firms, is proving to be the most popular alternative to litigation.A recent survey of the country's top 200 commercial property law firms found that 70% regard mediation as an effective way of solving disputes.

Only 34% thought arbitration was an effective means of reducing time spent on dispute resolution and even less, 28%, said that expert determination could preserve or enhance client relationships.

The figures prompted the Royal Institution of Chartered Surveyors, which conducted the survey, to suggest that the mediation branch of alternative dispute resolution (ADR) was of 'growing importance in the legal system'.Law Society President, Phillip Sycamore, in his speech to the Solicitors' Annual Conference in Cardiff last month, told the audience: 'Our clients are crying out for less adversarial means of dispute resolution.' He added: 'ADR techniques can be powerful additions to our practices, opening up options for clients and offering them a one-stop-shop.' Mr Sycamore urged solicitors to play a 'focal role' in setting the standards for ADR which he said needed proper regulation and control.To a large extent City lawyers are already offering clients mediation services and judges now have the power to refer cases to mediation.

A practice direction issued by the Commercial Court last year urged the judiciary to refer suitable cases for mediation early on in proceedings.

The pilot mediation scheme at the Central London County Court, aimed at cases valued at between £3,000 and £10,000, was established last summer.

A spokesman for the Lord Chancellor's Department said that as the scheme still had until May next year to run; it was too early to judge its effectiveness.And in Bristol a court-linked mediation scheme has just been given the go-ahead by the Lord Chancellor.

Under the scheme, county court judges send out forms when a defence is filed asking whether the parties want to mediate, and mediators are provided by Bristol Law Society.The courts would prefer cases which are available to mediation to be identified before they reach the court.

Most commercial law firms have risen to the challenge by offering mediation as a matter of course.At Eversheds' Birmingham office, four of the six senior litigators are trained mediators.

One of them is litigation partner Gary O'Brien.

He says Eversheds lawyers are encouraged to think creatively and view ADR and mediation as just another way of solving the problem.

However, Mr O'Brien claims other law firms are not so keen.

'We have found that certain other law firms are reluctant to talk about ADR,' he says.

No matter how willing one client is to look at alternatives to litigation, if the other side will not play ball, then there is no alternative to a costly adversarial settlement to a dispute.'At Eversheds,' says Mr O'Brien, 'we expect all members of the litigation department to be dispute managers.' However, he says mediation is not always the lawyer's or the litigant's first choice for ADR.

Eversheds' clients ask for arbitration first, then expert determination and mediation last.

Mr O'Brien adds: 'Many litigation solicitors assume mediation is merely negotiation by another form.

They think you don't need a set- piece meeting to do it -- call it a different name and hire a mediator to assist you.'Arbitration and expert determination are more familiar techniques to lawyers, says Mr O'Brien.

But he adds: 'In some respects mediation ought to be the more popular because you still have a role for the personal legal advisor and it should result in a speedier solution.'Lovell White Durrant is another commercial law firm committed to the use of ADR.

Charles Dodson, who heads the firm's ADR initiative, spent six months on secondment to the Centre for Dispute Resolution (CEDR), a leading provider of ADR services.

John Trotter, one of the firm's most senior litigators, says mediation is the form of ADR which works the best.

Typical of commercial firms, neither Eversheds nor Lovells has a dedicated mediation department.

Mr Trotter explains: 'Everyone is expected to be able to advise the client on the pros and cons of ADR and how to go about it.' Having a separate ADR department, says Mr O'Brien, would imply that Eversheds' litigators were do-or-die litigators hell-bent on litigation whatever the cost.

That may have been how a bullish firm of litigators behaved ten years ago but not in these conciliatory post-Woolf days.TIM WEEKES TALKS TO SOLICITOR-MEDIATORS ABOUT THE BUSINESS BENEFITS AND PERSONAL SATISFACTION OF ALTERNATIVES TO LITIGATIONMediation and litigation appear to be at opposite ends of the dispute resolution spectrum.

Litigation has a 'winner takes all' ethos, in which victory is the aim no matter how much it damages the other parties.

By contrast, mediation seeks through negotiation to deliver quickly a settlement that all parties can live with.It is perhaps surprising then that by far the largest source of candidates for the UK's cadre of expert mediators in commercial disputes is the legal profession.

But in fact, mediators see their role as being not the opposite of traditional litigation but a variant of it.

With 19 out of every 20 commercial cases in the UK settled out of court, negotiation is already the most widely used tool of the litigator.

Since mediators regard what they do as 'turbo-charged negotiation', they argue that mediation simply allows litigators to agree a settlement far more quickly and cheaply than they would normally do.

Indeed, frustration with the wasted time and effort inherent in most cases listed for trial acted as a spur to some of the UK's longest-serving mediators to the field.Tony Willis, a Clifford Chance partner and non-executive director of the Centre for Dispute Resolution (CEDR), says he was first struck by the power of mediation when litigating in the US, where mediation has been part of the legal scene for 20 years.

So when CEDR began training and accrediting mediators, Willis signed up, and has now mediated more than 20 commercial disputes.

His interest in mediation is prompted by the business benefit it brings to the parties in the dispute.

Mr Willis rejects any suggestion that it is a cosy or easy alternative to the rigours of litigation.

He says: 'I take a very hard-headed view of mediation.

It is a tough process, but it can give businesses good results if they tackle it properly.'Mediation is not just beneficial to disputants, solicitors also find it gives them great satisfaction.

Eileen Carroll, director of strategic development at CEDR, is a commercial litigator by background.

But she says she does not miss litigation.

'I enjoyed the cut and thrust when I was younger, but as a solicitor you take so few cases to court because most are eventually settled.' She says it is rewarding now to be 'the orchestrator who brings parties together to create a solution by working as a team rather than by fighting it out through litigation'.This highlights the essence of the mediator's art: to get the warring parties together in the same room, drain the atmosphere of hostility and get them talking about ways all sides can reach a settlement with which they are happy.

Not every solicitor is suited to the task.

Mr Willis says the mediator needs to be first and foremost a very good listener.

'You must be able to suppress your own ego and see things from the parties' point of view, you need to be very understanding of what drives people, and exceptionally patient and imaginative.'ADR Group, a network of UK law firms offering mediation services, has even used a psychometric test in the past to look for tolerance and empathy in candidates for mediation training.

Pinsent Curtis partner Andrew Paton, a leading figure in both ADR Group and CEDR, says the mediator's role in recognising and handling the parties' emotions is vital at the start of the mediation.A typical mediation begins with a full meeting of all the parties.

He says mediators use specific techniques for diffusing hostility, including arranging the seats so that the parties cannot stare directly at each other.

After the opening meeting, the two parties retire to separate rooms.

At this stage, the mediator shuttles between the two.

Mr Paton says that it is vital that both parties trust the mediator.

'If I can look into someone's eyes and ask, "What do you really fear about this case", and they give me a true answer, then we will get a resolution much more quickly,' he says.In his view, mediation is simply 'assisted communication'.

In a case he mediated, an architect was suing a building contractor for unpaid fees.

The contractor had made a counterclaim of negligence.

Mr Paton says: 'My mediation worked because I showed I understood why both parties felt angry and upset.

They were able to relieve themselves of the burden of anger by talking to me.

After that, they were able to focus on the practical possibilities.' The two sides were then able to reach an agreed settlement, a result that Mr Paton says 'gave me a feeling of overwhelming satisfaction'.

The process he describes, in which the feelings, interests and needs of both parties are acknowledged, is radically different from pure litigation, in which all that counts are facts and the law.

Training solicitors to accept this different approach to dispute resolution is therefore a considerable challenge.Andrew Fraley, a consultant to ADR Group who has been training mediators since 1989, says litigators have the advantage that they are used to handling conflict and to questioning clients.

But he says on the other hand they 'tend to be judgmental.

I have to try and move them away from looking at the law and the position of the parties towards a focus on the interests of the parties.' He agrees with Mr Willis that the ability to listen is a key skill.

But he says even here solicitors need to adjust.

Mr Fraley says: 'Mediators listen to understand whereas litigators listen to refute.'In his view, the difficulty of the cultural and psychological shift to mediation has held up its adoption as an alternative to litigation.

He says: 'The adversarial system has existed for 400 years in the UK.

You cannot expect solicitors to sit up overnight and embrace a relatively new process.' But those solicitors who have qualified as mediators have done so enthusiastically.

They now hope to persuade their fellow litigators to overcome their objections and begin using mediators in greater numbers than before.ANDREW DARLING LOOKS AT HOW COMMERCIAL MEDIATORS ARE TRAINED AND WHETHER THIS SPILLS INTO SOLICITORS' WORK AS LITIGATORSSupporters of mediation maintain that the vast majority of disputes is available to this type of resolution.

However, in principle, the skills and abilities employed by trained mediators are the polar opposite of the adversarial techniques adopted by litigation lawyers.So what effect does the training have on those who become mediators when they return to their usual roles? The Centre for Dispute Resolution (CEDR) is the foremost organisation in this country for training people in mediation skills.

CEDR trains not only solicitors and barristers, but also teachers, surveyors and management personnel in order to cultivate a more empathetic approach to problems which arise in the daily course of business.A mediator must be an independent third party in order to assist discussions and to help the parties in dispute to reach a mutually acceptable resolution.

The prerequisite skill is therefore the ability to understand the problem from both sides, which requires listening, questioning and empathising.However, where lawyers are concerned the training adds a 'soft weapon' to the dispute resolution arsenal.

According to CEDR's director of training, David Richbell, some lawyers find this rather difficult to digest.'People are definitely changed by going on the course', says Mr Richbell.

'Some find it uncomfortable because many of the exercises are designed to make people look into themselves which exposes both their weaknesses and their strengths.'One example of this is the way solicitors are accomplished at asking 'closed questions' in order to gather information from the perspective they hope will facilitate their argument.

However, as a mediator the true skill lies in being able to ask 'open questions' which allows the parties in dispute to do most of the talking.The mediator training course run by CEDR lasts five days, two of which are taken up with vigorous assessment.

Each student has the opportunity to mediate a sample case study after which they must write up the heads of agreement reached and complete a self-assessment which is reviewed by the faculty with the student.

Only about 50% pass the course on their first attempt.

This figure rises to about 65% after re-sits.David Richbell says it is obvious from the outset which students have a flair for mediation.

'You can normally pick out the top and bottom 10% immediately from personal skills like sensitivity and instinctiveness they either exhibit or don't, depending on the case,' he says.According to CEDR, the age group of solicitors who attend the mediation course ranges from about 40 to 60, although they say that on every course there are a number of people who are outside those limits.

However, Mr Richbell says the course is of most benefit to those who bring with them a high level of maturity and commercial experience.

'It is important if they are to represent the interests of their clients in mediation that they can command both confidence and trust', he says.This is a point which Charles Dodson, litigation partner at City firm Lovell White Durrant, acknowledges.

He says corporate counsel in the UK and overseas are waking up to the cost benefits of forms of ADR and in the light of such significant increases in client-led interest, the firm decided to develop a more in-depth knowledge of ADR by sending Mr Dodson on secondment to CEDR.'The training is quite gruelling but really worthwhile and enjoyable', he says.

'The course is adapting to become more sophisticated but the main thing you notice is that mediation requires a different mind-set so you have to learn how to switch from being a macho litigator.

Some solicitors really find it hard to move out of that mould.'Much of the role-playing which takes place in training can produce some extraordinary performances, says Mr Dodson.

Those taking part often find themselves having to play a different gender which some City lawyers embrace wholeheartedly.

While on other occasions students have the opportunity to fulfil roles as colourful as irate Italian businessmen.

Mr Dodson stresses that just about any case is suitable for ADR -- the real test is working out when to take the mediation approach.

'There are many ways to skin a cat and 97% of cases settle anyway.

The benefits of ADR are that it is very flexible and more efficient than negotiation', he says.

However, this view is not shared by all.

One senior assistant litigator at a West End commercial firm says that when clients are at daggers drawn the mediation process can simply add another layer of cost and procedure.She maintains that if parties are already in dispute because of a breach of an agreement then they are unlikely to work through mediation towards an agreement.

While acknowledging she may be 'too much of a litigator', this senior assistant says: 'If the parties have got to the point of issuing proceedings then the plaintiff is feeling gung ho and is probably not prepared to listen to mediation and the defendant will be busy trying to prepare his defence.'This solicitor thinks mediation has its place and that most good litigators will always keep their ear to the ground during proceedings to see if a solution to the dispute can be negotiated.

In this way mediation becomes part of the litigator's job anyway.

But she adds that she has not come across a situation where both the client and the opponent have been prepared to use it.Charles Dodson remains convinced there is scope for increased awareness of mediation and ADR techniques generally in the UK and abroad.

'The next major attraction of ADR for large businesses is bound to extend to cross-border disputes, especially within the EU where ADR can be used to facilitate free trade', he says.It seems certain that lawyers should at least be aware of the possibilities of mediation and should understand how the process works, otherwise their clients will be prevented from access to an alternative form of dispute resolution.

It is therefore the attitude of the lawyer that counts and if a litigator is driven by the goal of resolving disputes as quickly and cost consciously as possible, then mediation should remain an option.MIKE YUILLE LOOKS AT THE ESTABLISHED REIGN OF ARBITRATION IN COMMERCIAL DISPUTES AND THE IMPORTANC E OF THIS FIELD TO LAW FIRMSAside from pistols at dawn, arbitration is probably society's oldest form of dispute resolution.

But it is also one of the least understood.Back in September 1995, debt-laden Eurotunnel created a storm among the financial scribes of Fleet Street when it launched its £1 billion claim under contract against the Trans Manche Link consortium, with allegations involving the late delivery of rolling stock.

Every newspaper wanted the story.

But when it broke, few of them had a firm grasp of what was actually happening.

The City editor of one broadsheet newspaper is remembered as saying: 'Yes, but where's the writ?'.To many professionals who practise arbitration, this misunderstanding of the process comes as little surprise.

It is a procedure operating away from the courts, yet one where a ruling is generally final and legally binding.

Above all, it is a private process.

And instead of being observable in a single public venue, arbitration is happening everywhere, up and down the country, often in the private premises of solicitors, architects, local chambers of commerce.The bigger, international cases may be taken to the big arbitral institutions such as the International Chamber of Commerce (ICC) in Paris, the London Court of International Arbitration (LCIA) or the London Maritime Arbitration Association (LMAA), or similar bodies in global centres including New York, Geneva, Stockholm, or Hong Kong.

These can appoint arbitrators, provide resources, and enforce awards; but the process can be adapted to handle cases just as well on an ad hoc basis in, say, a hotel room in Barnsley.

Paris will always have cache, but while it is significantly ahead of other international arbitration centres, the idea that you need to go there for many disputes is a myth, said one solicitor privately.Construction and shipping are the sectors which have traditionally used arbitration most heavily.

Here, businesses for years have written clauses into contracts to ensure that arbitration is the main course for settling any disputes that may arise.Peter Wood, managing partner of Masons, the leading firm specialising in construction, estimates some 90% of contracts written by the big contractors now use such clauses.

Arbitration is critical to the industry, he says.

Most arbitration arises out of the standard form contracts, containing an arbitration clause specifying the terms under which any arbitration will be held.

These terms are usually those relating to specific arbitral bodies.

Parties wishing to arbitrate may contact these bodies direct; but equally, they, or their advisers, may refer to a professional body which in turn can appoint arbitrators.In the construction world, these so-called nominating authorities include the Royal Institution of Chartered Surveyors, the Institute of Civil Engineers, and the Royal Institute of British Architects.

'In my personal experience, this happens in at least 50% of cases,' says Mr Wood.

While the biggest commercial arbitrations may typically be heard at the LCIA or the ICC, the shipping industry tends to favour institutions specialising in its sector: the LMAA, and its main competitor, New York's Society of Maritime Arbitrators.Colin Sheppard, a senior shipping partner at law firm Holman Fenwick & Willan, is honorary secretary of the LMAA.

During the last 20 years, the disputes have become much greater in terms of monetary value, and more complex, he says.Arbitration is an increasingly important aspect of the law firm's own business as well.

'For Masons, it represents a large proportion of our fee income, some 30% to 35% of the turnover of our construction practice,' says Mr Wood.The tradition of the amateur arbitrator, whose expert knowledge of an industry or trade was called on to solve a dispute, has given way to a growing demand for lawyers to become involved.

And as international arbitration has become more prevalent in other sectors such as oil and gas, banking, commodities, insurance, and securities, so the top City firms have also responded by developing world class teams of arbitration specialists with expertise in these sectors.The unrivalled leaders among the City firms are generally accepted to be Herbert Smith, Freshfields (which advised Eurotunnel), and Clifford Chance, each with large teams specialising in such work.

The Chartered Institute of Arbitrators -- the professional body -- has some 8,500 qualified members worldwide, of whom in the UK some 1,500 are solicitors.

More than 300 are barristers, and at least 30 are judges.

Membership is not a requirement to practise arbitration, and there are undoubtedly other lawyers who arbitrate in cases assigned them by businesses in their specialist sector.The Chartered Institute of Arbitrators provides training leading to qualification, and can appoint arbitrators in the same way the big arbitral bodies do.

Importantly for consumers, it also runs around 80 small claims schemes set up by companies such as BT and Orange, and industry bodies in financial services, holidays, and utilities.

It has not always been plain sailing.

In recent years, arbitration in the UK has come in for growing criticism.

Insurance companies responding to a survey conducted by law firm Berrymans in July 1996 slammed the process as costly, time-consuming, legalistic, and relatively inflexible.

More than 90% thought procedures were too similar to normal litigation, while only 17% preferred arbitration to a court battle.Reform was heralded by the Arbitration Act 1996, introduced in January this year.

Masterminded by top commercial judge Lord Saville, it is bringing sweeping changes to speed up and streamline the process.

The Act has put more power in the hands of the arbitrators themselves, ensuring better control of arbitrations.

For example, unless the parties agree to the contrary, the arbitrator can place a cap on recoverable costs, award compound interest, appoint independent tribunal experts, or conduct proceedings in an inquisitorial manner.These increased powers enable arbitrators to force the pace of arbitration without requiring as much intervention from the courts.

The Act allows parties to a dispute to adapt procedure to the specific needs of their case, and to their own legal, cultural, and even linguistic backgrounds.

More importantly, the Act aims to preserve London's reputation as a world centre for commercial arbitration, where barristers and City solicitors have made a name for themselves in arbitration work, both on the tribunals set up for cases and as advocates for their clients in hearings.

John Beechey, a Clifford Chance partner and arbitrator, says the Act is a major step forward, and has been welcomed internationally.However, improvement cannot come from the Act alone.

There is a view that lawyer-arbitrators have been partly to blame for taking too rigid and legalistic an approach.

Kerry Harding, general secretary of the Chartered Institute for Arbitrators, says solicitors must learn to appreciate more fully the alternatives to litigation, and they must advise better the parties entering disputes as to what the options really are.

Parties sh ould have the knowledge to choose properly.

The trouble is, lawyers have been brought up in a litigation-orientated system, so they often opt for the confrontational approach, he says.London's status as a world centre for business can only be enhanced by improvements in arbitration.

Significantly, two solicitor-advocates who are senior international arbitrators, Lawrence Collins of Herbert Smith and Arthur Marriott of Debevoise & Plimpton, were recently made Queen's Counsel.

'Arbitration is an essential element of London as a financial centre, and I am pretty upbeat about its future here,' says Mr Collins.

Mr Beechey adds: 'I would unequivocally recommend London as an international venue.' Any accurate gauge of the level of arbitration activity is impossible; the private and diverse nature of the process means there is no central data available, says Mr Harding.

The only indications lie in the number of requests made by parties to the arbitral bodies for arbitration tribunals to be appointed.

The LCIA expects one a week, while the ICC in Paris handles around 400 a year.

But Adrian Winstanley, the Clifford Chance lawyer who was appointed registrar at the LCIA this year, now plans to boost the body's overall level of activity.

He says: 'One of my jobs is to see the references to us increase.

We are promoting London, and that is helped by our having this new, user-friendly Act.

It's first class.'Such is the popularity of arbitration around the world, the LCIA, with its track record spanning more than a hundred years, will have to compete keenly.

The ICC court of arbitration, more than 30 years its junior, will itself introduce new rules next January to streamline its own procedures.

And Hong Kong's International Arbitration Centre, set up in 1985, with its continuance guaranteed by China, is set to be the arbitration capital for the tiger economies of Asia.

The quality of British arbitrators will be an important resource indeed if London is to preserve its position as a world capital in dispute resolution.-- LAW SOCIETY ADR INITIATIVESProduction of a new Law Society ADR handbook has begun, with publication planned for late 1998.

The book will provide practical advice for solicitors on deciding whether a case is suitable for ADR.

A series of ADR awareness roadshows are also planned, probably for spring 1998, which will encourage solicitors to refer cases to mediation.In addition, the Law Society has begun drafting a code of practice for solicitor mediators and a set of training standards for solicitor mediation.