DEREK SANDS EXPLAINS WHAT THE LAW SOCIETY'S WORKING PARTY ON ADR AND MEDIATION WORKSHOPS AIM TO ACHIEVEIs Alternative Dispute Resolution (ADR) set to replace litigation as a means of dispute resolution? Probably not.

It should not be viewed as a panacea, the best mediators refer increasingly to 'appropriate' dispute resolution -- but under the new landscape envisaged by Lord Woolf and likely to become a reality in April 1999, solicitors will need to be able to advise their clients -- and, perhaps, the judiciary -- whether and when ADR might be appropriate in the circumstances of any particular case.In order to give that advice, at appropriate times, throughout the life of a case, solicitors must understand ADR, be able to explain it to their clients and to guide them through the ADR process.

The demand for ADR is likely to come, increasingly, from clients and insurers, who will expect their solicitors to be able to advise them about all available methods of resolving their particular dispute.

As well as bringing challenges to the profession, the arrival of ADR and in particular, mediation, which is only one of a number of forms of ADR, will offer many new opportunities to solicitors as they look for new methods of delivering legal services.A good mediation undertaken by a trained mediator and involving parties who are committed to the process can lead to a 'win-win' situation, where both parties come away from the dispute feeling that they have succeeded in their aims.

This is particularly important where the parties need to preserve their business, or personal relationship.

Savings in time and cost could enable parties to pursue and settle cases which they might otherwise have abandoned.

Successful outcomes and satisfied clients lead to repeat business.Mediation, as with other forms of ADR, allows parties to reach settlements which a court might not have been in a position to award, for example, an apology when things have gone wrong, or a restructuring of a contract.

A successful mediation can be rewarding both to the client and to the solicitor.At present, because there are so few trained and experienced mediators, many solicitors have been unable to experience, at first hand, what mediation has to offer.

That is likely to change as the public and the courts look to mediation as a means of settling disputes and more mediators are trained to meet the demand.To help solicitors take full advantage of the challenges and opportunities which mediation will bring to their practices, the Law Society is developing a number of p ractical measures.

The first is a series of awareness-raising roadshows, scheduled to run during June and early July, which will explain mediation as well as offer guidance to the solicitor on how to identify cases suitable for mediation, to prepare themselves and their clients for mediation, and the process itself.This knowledge and skill will form essential items to be added to the toolbox of skills which every litigation solicitor will need to practise effectively and efficiently in the future.The Law Society has recently updated its ADR booklet, which summarises ADR in its many forms and which is intended to be a quick reference source for solicitors.

Early in 1999, the Society plans to publish an ADR handbook which will explain ADR, including arbitration, in its many forms and help the profession to identify and utilise the method of dispute resolution most appropriate to the circumstances of a case.The key to a successful mediation, resulting in client satisfaction is a good quality mediator.

Given the importance of the mediator's role, it is crucial that solicitors and the public should be able to identify quality mediators, to whom cases can be referred with complete confidence.

Mediation is not controlled by statute, so the public cannot be assured that all mediators are properly regulated, suitably trained or comply with an ethical code, although the Law Society continues to regulate solicitor-mediators.In an effort to ensure that the existing regulatory framework continues to be appropriate for solicitor-mediators, the Society's courts and legal services committee set up an ADR working party to revise the Society's specimen code of practice for civil/commercial mediators (set out at chapter 22A of the Guide to Professional Conduct, seventh edition).

The working party is also developing appropriate standards for training, accreditation, re-accreditation and continuing professional development.Consideration will also be given to the establishment of a panel of mediators meeting the Society's standards for civil and commercial mediation.

Whilst setting standards in this area of practice, the Society recognises the need to allow mediation to develop naturally, without becoming strait-jacketed by the constraints of over-regulation.Consideration is being given to the publication of a directory of mediators who comply with the Society's code of practice and who have been trained to its standards, for the benefit of the profession and the public.

The Society does not underestimate the work ahead; it continues to treat ADR as a high priority, to which extra staff resources have been allocated, enabling the Society to play a leading role in the setting of standards and future development of ADR.MIRYANA NESIC OF LONDON LAW FIRM ALLEN & OVERY DESCRIBES A MEDIATION CASE WHICH INVOLVED SOLICITORS IN DIVERSE CAPACITIESNEGOTIATIONS AD-HOC STYLE Party A is a significant UK organisation.

Each year it is involved in contract re-negotiations with its suppliers.

Negotiations with some suppliers are more difficult than with others.

Difficult negotiations often hover between deadlock and brinkmanship.

Disputes in the course of these negotiations often focus on price and may take up to two years after commencement of negotiations to be resolved.

Terminating a relationship would be complex and wasteful.

Caught in this quandary, party A turned to City firm Allen & Overy for advice.NEW FOCUS ON DISPUTE MANAGEMENTAlthough party A's ad-hoc approach to re-negotiations had served it well in times when the number of suppliers was sma ll and the incidence of disputation was low, it did not appear to be a sensible approach at a time when disputation was the norm, rather than the exception, with an increasing number of suppliers.A structured approach, designed to match the most appropriate method of dispute resolution to the type of dispute, would achieve more timely and cost efficient dispute resolution.

Having regard also to the likely positive impact on its relationships with suppliers, party A was easily persuaded by the merits of dispute management.

But what kind of structure should be adopted? Allen & Overy were given a free hand, limited only by party A's guiding principles: the parties were to have control over the outcome of any dispute; the dispute resolution procedures were to be voluntary and flexible; and some mechanism was required to ensure that time and money expended was not lost if the parties could not resolve the dispute themselves.The result was a simple structure:-- A dispute arising in the course of a contract re-negotiation could be referred to a panel.

The rationale for the panel was that knowledge regarding the particular industry would be generated quickly, and in turn would expedite future dispute resolution, by confining dispute resolution to a group of neutral accountants, economists and lawyers with mediation experience;-- The parties would then seek to agree on the identity of a mediation tribunal consisting of at least two, but not more than three, neutrals drawn from the panel and, in the absence of agreement, the composition of the tribunal would be determined by the panel's chairman;-- The tribunal would, in consultation with the parties, formulate a timetable and agenda;-- Each party would exchange written summaries of their cases in accordance with that timetable;-- If the parties failed to resolve a dispute by mediation, the parties could request the tribunal to provide non-binding recommendations on any issues in dispute;-- Confidentiality, mediator immunity and costs provisions were included.

Each party would bear their own costs and the fees of the tribunal would be borne by the parties as determined by the tribunal.OPTING INInventing the dispute resolution structure was easy.

Getting the suppliers on board was the challenge.

That the dispute resolution procedures were not contractually binding was not an oversight.It was a measured approach designed to have considerable PR appeal.

To bring added pressure to bear on suppliers to opt in to the process, a circular was drafted, both informative and promotional, outlining the dispute resolution procedures, their benefits and party A's aspirations to continue and strengthen relationships with existing suppliers.VARIOUS ROLES AND PROCEDURES BEFORE THE ACTION BEGINSThe circular was hot off the press when party A and party B commenced their usual protracted annual contract re-negotiations.

Party A suggested the dispute resolution structure Allen & Overy had designed.

Party B agreed.

Party A selected an economist and a lawyer from the panel to act as co-mediators.The lawyer, an experienced mediator, is a partner at Allen & Overy.

Following disclosure of the firm's involvement in designing the dispute resolution procedures, party B confirmed the lawyer's appointment on the proviso that the economist should act as chairman.

With the parties' agreement, Miryana Nesic was selected as the tribunal's assistant.This unstructured role ultimately involved responsibility for the administration of the mediation, as conduit for communications between the parties, and between the parties and co-mediators and as 'pupil' in the course of the mediation, ensuring that the parties were fully informed about the process, that ideas generated in caucuses were recorded, that parties were encouraged to brainstorm options and that any agreement reached was properly recorded.

A timetable was determined by the mediators, in consultation with the parties:-- One month for submission of written cases;-- Request for additional information within two weeks of submissions;-- Additional information provided within one week of request;-- Mediation within two weeks of additional information supplied;-- Recommendations, if requested, to be provided within one month of requests.This pre-mediation phase ran surprisingly smoothly.

Statements of case and responses were supplied, albeit a little late, in the form of bound booklets, with all relevant documentation attached as schedules.Submissions were concise and illuminating.

That the submissions focused primarily on the economics of pricing, however, should have been the tell-tale sign that the core of the dispute involved no law.ATTEMPTING MEDIATIONThe parties agreed that the mediation should take place at Allen & Overy's offices.

The contract negotiator for party A and the owner of party B attended the mediation.

They were not legally represented, but were accompanied by their finance directors, who assumed the role that a solicitor-advocate would normally assume in a mediation.The finance directors summed up their respective cases in an initial joint session.

Put simply, party B sought a price increase, whilst party A argued that there should be no price increase.

A classic positional approach.In the caucuses which followed, the finance directors assumed a low-key role, providing information, as and when requested by the mediators.The caucuses focused on the economics of pricing.

The dispute seemed intractable and the parties requested the mediators to provide a recommendation on what the new price should be.Instead, the mediators persuaded the parties to explore concerns and interests other than price.Bringing the parties together again in joint session reaped extraordinary benefits.

It afforded party B an opportunity to vent considerable frustration regarding its small profit margin on the product supplied to party A.

It was critical to the process that party A immediately focused on this problem and generated options to address party B's diminishing profit margins and cashflow problems.Ultimately, when the parties remained deadlocked on the last few issues, a more interventionist, almost evaluative, approach by the co-mediators, at the request of the parties, broke the stalemate.TAILORING AN AGREEMENTThe mediator produced a creative and sophisticated solution which a judge or arbitrator could not have provided:-- A lump sum was payable by party A to party B to help resolve party B's immediate cashflow problem;-- Party A would assist party B to obtain loans to ward off additional cashflow problems, to obtain planning permission to expand its operations to achieve economies of scale, and to address competition concerns by providing party B with a measure of exclusivity;-- The parties entered into a three-year-contract, with a formula for pricing, to avoid frustrating annual contract re-negotiations;-- Party A agreed to bear the cost of the mediation tribunal.An agreement in those terms was signed by the parties' authorised representatives.

The entire mediation took about eight hours which included lunch, morning and afternoon breaks.The cost of the tribunal came to about £3,000 -- a considerable saving over the alternative, about two years' management time and other costs.IMPLEMENTATIONMediators probably dread most the prospect of having referred back to them a dispute arising out of the agreement reached in a mediation.

The co-mediators in this case almost suffered this fate.The mediators were advised of a breach of the agreement which had been reached in the mediation.

But before they had decided how to approach the problem, the parties had resolved the issue by direct negotiation.This was a remarkable achievement.

Only six months earlier, any disagreement between these parties would have resulted in a flurry of correspondence, threatening termination of their relationship and legal action.VEXING ISSUESIn a field where there are currently few ground rules, it is not surprising to come across many vexing issues.

In this case there were three:-- Party A was concerned that, if time and money were spent obtaining the mediators' recommendations, those recommendations should serve a useful purpose, even if the parties did not agree to accept the recommendations.

To address that concern, the dispute resolution procedure Allen & Overy designed allows party A to publish, for the benefit of all its suppliers, any recommendations made by mediators.

Although publication would obviously create pressure to accept the recommendations, it would also provide a useful guide for future re-negotiations;-- Party A was also concerned to ensure that any unacceptable behaviour by suppliers should be taken into account by mediators when making recommendations.

That issue was resolved by party A embarking on the development of a code of practice for suppliers.

The code is also likely to go some way to preventing disputes between party A and its suppliers;-- The issue of sanctions for recalcitrance in the course of a mediation is a topic of much current debate.

Should sanctions be imposed on a party who does not mediate in good faith? Putting the debate to one side, the issue was addressed in this case by imposing an increasing scale of costs for the mediation tribunal.

The tribunal's hourly rate increases after three hours of mediation and increases, once again, if the tribunal is required to provide any recommendations.

Allen & Overy considered that this type of cost structure would provide considerable incentive for the parties to approach any attempt at mediation seriously.