Extra time for ADR

In the UK, alternative dispute resolution has been rocked by a fall in commercial mediations.

Yet, as Philip Hoult reports, it could be revived by government backing and moves in Europe

This summer, the Centre for Effective Dispute Resolution (CEDR) - the largest provider of alternative dispute resolution (ADR) services in the UK - reported an apparently dramatic fall-off in the number of commercial mediations it handled.

Its CEDR Solve arm dealt with 338 commercial mediations in 2001/2002, a 28% drop from a record 467 in 2000/2001.

The figures were seized upon by critics to suggest that the boom in ADR - and particularly mediation - over the past decade was at an end.

However - unsurprisingly - the CEDR, other providers, and mediators deny that the figures represent any waning in the level of fervour for ADR.

Terry Jones, the director at CEDR responsible for the major corporate sector, says the figures were distorted by an earlier surge in mediations caused by the uncertainty surrounding the introduction three years ago of the Woolf civil justice reforms.

'Over the long term, we are seeing a gradual increase from the pre-Woolf level and it is certainly holding,' he says.

CEDR's view is backed by statistics produced by the Lord Chancellor's Department (LCD) in a report published last month that assessed the first three years of the Civil Procedure Rules (CPR) (see [2002] Gazette, 5 September, 4).

The report suggested that there had indeed been a gradual 'levelling off' in the number of cases where ADR is used.

However, in the eyes of other mediators the CEDR figures also reflect the fact that there are now more ADR providers in the market.

Equally important, they say, has been the trend for many purchasers of ADR services to bypass providers and go direct to mediators they have used before.

Although the likes of CEDR suggest that by doing so the parties might not necessarily get the mediator most suitable for their particular case, it nevertheless appears to be attractive to parties seeking to keep costs down.

However, both providers and mediators are united in maintaining that ADR still has a big future, even if it is recognised that there remains much to be done on the promotion and marketing side and to raise awareness among potential new users.

Although there continue to be significant difficulties in promoting the use of mediation for cases in the county courts, because of the cost and the amounts involved, mediators report an increasing number of cases elsewhere and particularly in major commercial disputes.

There are several reasons to justify this continued optimism.

Recent Court of Appeal decisions in the cases of Dunnett v Railtrack PLC [2002] EWCA Civ 302 and Frank Cowl & Others v Plymouth City Council [2001] EWCA Civ 1935 have made it clear that the courts are prepared to impose costs penalties on parties that reject a proposal to mediate.

In the Railtrack case, the court refused - though Railtrack won the appeal - to order costs in favour of the company on the grounds that it had refused mediation.

According to Neil Aitken, head of dispute resolution at City firm CMS Cameron McKenna, the Dunnett case 'exemplifies how macho lawyering is not available for the ordinary man'.

He adds: 'The case forces parties to think more clearly about ADR at the time they have to complete an allocation questionnaire.'

A second reason for optimism on the ADR front is that the government remains committed to the promotion of mediation both generally in the courts and tribunals systems, and also through its use by its departments.

In March 2001, the government made a pledge on behalf of all departments to consider and use ADR in all suitable cases and followed this with a conference for government lawyers in November last year.

It has also distributed, through the Office of Government Commerce, dispute resolution guidance for those entering into contracts with departments.

As yet, the impact of the government's initiative has been small - an LCD report in July this year revealed that a method of dispute resolution had been used or attempted in just 48 disputes involving government departments.

This prompted one leading mediator to suggest that 'the government talks a good game but it has not yet delivered'.

Nevertheless, the government's commitment remains strong.

In announcing the report, the Lord Chancellor, Lord Irvine, admitted that it was an 'apparently slow beginning' but he added that he was encouraged 'by the genuine desire which departments have shown to build on this commitment'.

A third significant development that could fuel additional growth in ADR has come in Europe.

In April, the European Commission produced a Green Paper on ADR in civil and commercial law that could lead to a directive harmonising practices across Europe.

Henry Brown, a consultant at City firm Penningtons - who, along with another leading ADR exponent, Debevoise & Plimpton partner Arthur Marriott QC, has produced a response to the Green Paper - argues that attempts to harmonise practices and procedures should be welcomed.

However, both he and Mr Marriott are concerned at the prospect of the commission imposing standards by regulation, a step they fear would remove the flexibility of ADR that makes it, in the UK at least, such an attractive option.

Mr Brown says that regulation would be inappropriate because of the differences in culture, practice and legal principles between jurisdictions.

'Regulation runs the risk of inhibiting ADR,' he says.

'It should be a matter for the courts and professions in each country to find the level at which they feel comfortable.'

Instead of using a directive, Mr Brown would prefer to see the commission harmonise ADR procedures by drawing up voluntary guidelines.

The prospect of harmonisation has already encouraged some international firms to establish pan-European ADR practices.

CMS Cameron McKenna launched such an initiative in March this year, with training for network members and the planned development of an in-house guide to ADR in Europe.

Mr Aitken says it is difficult to predict how and when ADR in any particular jurisdiction may attract a following and become established and, like Mr Brown, fears the potentially deadening effect of over-regulation.

Should the commission back away from regulation, and should the case law and government initiatives continue, then ADR's future looks secure.

Andrew Paton, a mediator and partner in national firm Pinsent Curtis Biddle's insurance group, suggests that mediation in the UK is about to enter a third stage in its development.

The first stage, he suggests, came in the early 1990s when ADR was championed by a small band of enthusiasts committed to its promotion and the idea of early settlement of cases.

Thus settlement rates were high.

Stage two saw the introduction of the CPR when the likes of CEDR were reporting substantial increases in the number of cases being handled.

Lawyers who might not previously have been committed to ADR were increasingly prepared to give it a try and settlement rates, though still high, dipped a little.

The ADR market is now approaching stage three.

'This is where the real "red meat" litigators, who like the cut and thrust of litigation as an end in itself, have realised that, like it or not, they have to go through with it for their clients,' Mr Paton says, adding that as a result settlement rates have gone down further, with people finding it more difficult in the past year to achieve settlements.

'The reason is that we now have people who are possibly going through the motions,' he adds, arguing that it will take two or three years to win over these lawyers to the advantages of mediation.

'Once we have done that, we will emerge on the other side and mediation will have found its correct level, whatever that is.'

Philip Hoult is a freelance journalist