Alternative dispute resolution

Alternative Dispute Resolution (ADR) has for many years been a feature of the litigation process in a number of jurisdictions around the world such as Australia and the United States. As a result of the implementation of the Woolf reforms it will shortly take on a much more prominent role in the UK. The Woolf reforms (named after Lord Woolf) consist of a major review of the Civil Procedure Rules applied in both the High Court and County Courts of England and Wales. In essence the main purpose of the reforms is to introduce a complete change of culture in case handling and procedure. Furthermore judges will invite parties to consider whether the dispute of particular issues can be resolved through ADR and to facilitate the use of ADR the judges may adjourn any case as appropriate.

The adoption of ADR arises for a number of reasons including doubts as to the cost effectiveness of litigation and arbitration under existing procedures. There is also a desire in many instances to preserve ongoing commercial relationships. However, by far the most compelling reason to use ADR is that settlement is invariably achieved at an earlier stage and, indeed, that cases are settled which would not otherwise have been but for the use of ADR.

Different Types of ADR

Although the most commonly used form of ADR is mediation, the mini trial and Early Neutral Evaluation (ENE) are also in frequent use.

Mediation

Unlike traditional litigation conducted in court or arbitration, ADR involves the appointment by the parties of a mutually acceptable mediator. The function of this mediator is to assist the parties to reach an agreed settlement. The mediator acts as a facilitator to the settlement negotiations rather than making a judgement on who is right or wrong. Formal training and industry experience enables the mediator to guide the parties towards consensus. If however no such consensus is found, no settlement takes place. The proceedings remain private and confidential throughout. 

Mini Trial

The mini trial is a more elaborate procedure involving a tribunal comprised of senior executives of the disputing parties, often accompanied by a neutral expert who can advise the tribunal on technical or legal issues. Although the procedure resembles an abbreviated trial, with legal representatives making submissions on behalf of the parties, evidence is usually submitted in an informal way and the decision reached will not usually be binding unless the parties so agree beforehand.

“by far the most compelling reason to use ADR is that settlement is invariably achieved at an earlier stage and, indeed, that cases are settled which would not otherwise have been but for the use of ADR”

Early Neutral Evaluation

ENE involves a judge (or other agreed person) reviewing evidence submitted by the parties and providing a preliminary view on the merits. This view is non-binding and is designed to give the parties an indication as to how the court or arbitrators may regard the merits of their case. If no resolution is reached at this stage, the “judge” can play no further part in any future proceedings without the consent of the parties.

Although any discussions which take place during the ADR process are confidential and “without prejudice”, recent judicial statements have given the clear message that a party’s unwillingness to enter into ADR, and in some cases even a party’s conduct during ADR, may be taken into account in determining costs awards. Otherwise the process does not compromise the privilege which normally attaches to settlement negotiations.

The Philosophy of ADR

The possibility that the recommendation of ADR by one side in the dispute might be viewed as weakness by the other side, has led in the past to some reluctance by the parties to initiate the process. However, it is increasingly accepted that ADR processes are at least, if not more, often initiated by parties with strong cases who wish to bring the matter to a speedy conclusion, thereby minimising costs. The courts increasingly raise the prospect of ADR at directions and other interlocutory hearings, requiring the parties to try ADR before proceeding to the next stage of more traditional litigation.

Although the majority of ADR processes take place in parallel with court proceedings, increasingly this system of resolution is being initiated before formal proceedings are issued.

Mediation in Practice

A mediation normally commences with a joint session at which each party, accompanied by legal representatives and by at least one authorised decision maker, sets out his case. At this stage there is usually an opportunity for the parties to participate in an exchange of views in relation to the issues in dispute. Although there is no strict format laid down for the conduct of a mediation, a series of private meetings generally occurs following the initial joint session. At this stage the mediator has an opportunity to explore the views of each party, in complete confidence, in an effort to find common ground and bring the parties to an acceptable and commercially viable resolution. If an outline settlement is reached, then a final joint session usually concludes the mediation at which heads of agreement are drafted for signature.

If the mediation is unsuccessful and resolution is not achieved, parties may nevertheless have gained a clearer appreciation of the force of their opponent’s case. This has had the effect in a number of cases of parties arriving at a settlement within days or weeks of the mediation’s conclusion. Even if settlement is not achieved on all issues, the result is invariably to reduce the number of matters in dispute and thereby considerably shorten the length of the subsequent trial or arbitration.

The Benefits of ADR

While the benefits of ADR will differ from party to party and case to case, the most significant and common advantages include:

• A reduction in costs of litigation.
• Earlier resolution of disputes.
• Confidentiality.
• Preservation of commercial relationships and/or market reputation.
• Choice of a wider range of settlement solutions.

ITIC would like to thank Ince & Co. for permission to reproduce this article.