In the last five years there has been a marked increase in the use of alternative dispute resolution (ADR), and in particular mediation, as a means of settling disputes quickly and on a commercial basis. Despite the improvements to the litigation procedure in the post-Woolf era, litigation remains an expensive, time consuming and stressful process which can turn into a continuous drain on a businesses resources (management time and profits), often with costs in excess of the sum in dispute.
It is estimated that mediation saves UK businesses nearly £1 billion a year. As well as being quicker and cheaper, the mediation process lends itself to settlement as it brings about a more conciliatory attitude on the parties than might prevail in preparation for trial. Most mediators have a settlement success rate of over 70 per cent and in some cases as high as 95 per cent.
At Kirwans we strongly advise clients to consider mediation as a cost effective tool early in proceedings, and we are seeing more and more commercial disputes settled this way. In the last three months we have settled a large defamation claim against a national newspaper and a complex IT/IP dispute by mediation.
Mediation is currently the hot topic in civil litigation as it is the most popular method of ADR chosen by litigants. The long awaited Mediation Directive was approved by the European Parliament on 23rd April 2008 which covers five main issues which should hopefully ensure a large percentage of all mediations held in the EU end successfully. At national level, a mediation working group, comprising of senior members of the judiciary, government bodies and the legal profession, is currently consulting on plans to require all civil litigation parties to state at the outset of a claim whether they would consider settling out of court. Such a requirement is already partly in place by the introduction of the new Allocation Questionnaire, in use from this month, which has almost an entire page devoted to ADR and promoting settlement before a hearing.
The courts are also increasingly becoming keen promoters of ADR.
Judge’s are increasingly looking at awarding costs against parties who unreasonably refuse to mediate regardless of whether that party goes on to win at trial. Refusal to mediate is, therefore, a high risk course to take and it is no longer sufficient to simply say mediation has not been considered as it isn’t suitable for the case. Solicitors also have greater responsibility on them to explain the options of ADR (including mediation) to clients as well as setting out the risks of refusing to mediate unreasonably.
Examples of unreasonable grounds to refuse mediation include:
• Heavy costs already incurred in preparing for litigation
• An unreasonable belief in a watertight case
• Not wanting to meet the other party
• No court order to mediate
• The parties had previously attempted to settle
However, the advantages of mediation has meant that many businesses are now electing to remove the option to litigate altogether and are instead insisting that all disputes must be mediated by incorporating a mediation clause into their standard terms and conditions.
A word of caution though; such a clause must be carefully drafted to ensure it is not ruled unenforceable or void by the courts. The last thing a business needs is a court hearing to decide whether to have a court hearing!
Philip Gray
at Kirwans Solicitors