APPEAL RULING: Dunnet v Railtrack sparks increase in form of alternative dispute resolutions

Lawyers this week welcomed figures showing that mediations have increased by more than a third in the past year, but were divided over the courts' use of costs penalties to promote alternative dispute resolution (ADR).

Figures from CEDR Solve, the dispute resolution arm of the Centre for Effective Dispute Resolution, showed a 35% rise in the number of mediations: cases through official court schemes almost doubled from 82 in 2002 to 153 in 2003, while mainstream commercial mediations rose by 24%, from 387 to 478 cases.

CEDR Solve found that 94% of mediations were completed in one day and the settlement rate stood steady at 75% of all cases.

David Shapiro, the head of ADR at City firm SJ Berwin, said the increase is a direct result of Dunnet v Railtrack, the 2002 Court of Appeal case in which - despite winning its appeal - Railtrack was denied its costs for refusing to mediate.

'If you can get the same result quicker and more cheaply, clients will be grateful and success will bring other business.

They won't be thinking "These guys are out to bleed me dry", so they'll reward you.'

Eileen Carroll, CEDR Solve's deputy chief executive, said: 'The importance of activism on the part of the judiciary and advisers is reflected in the trends and there is still tremendous scope for growth and development in this field.'

Anthony Fincham, a partner in the litigation department at City firm CMS Cameron McKenna, agreed that costs sanctions were the main driver for increased use of mediation, but did not welcome them.

He said: 'I am all in favour of mediation, but I do not agree with costs sanctions.

In the long run, they could undermine the litigation system.

'The power of the courts to supervise mediations raises issues for the confidentiality of the process, and if people are not permitted to litigate without having been through a mediation, this might breach article 6 of the European Convention on Human Rights - the right to a fair hearing.

In the long run, they could be counter-productive and undermine the system.'

Jeremy Fleming