Most parties have become better informed about the costs, risks and time involved. They have also become much more sophisticated in their approach to dispute resolution. Today, most people involved in construction disputes are acutely aware of the need to control legal costs. Their lawyers should have advised them on the cost of pursuing a claim to trial, but in any event, the disputing parties will, almost always, have attempted to resolve the dispute by negotiation before seeking legal advice or the assistance of a mediator. It is no longer sufficient for the mediator to appear and inform each party of the cost of litigation to get a settlement. The growth in sophistication and client's awareness of legal costs is reflected in the trends identified here.
Between 1996 and 2003, the number of claims issued in the Technology and Construction Court declined by more than 68%, from 1609 in 1996 to 508 in 2003. In the same period, the number of mediations undertaken increased dramatically. Mediations referred to CEDR (one of the leading mediation organisations) increased by more than 600% from 100 in 1996 to 631 in 2003. The introduction of the Civil Procedure Rules in 1999 coincided with an increase in mediations undertaken by CEDR from about 250 to more than 500 in one year alone. In that same year, the number of claims issued in the TCC fell 30% compared with the previous year. In effect the decline in litigation and the corresponding increase in mediation started before the introduction of the CPR but has been accelerated by it.
Apparently 74% of the cases referred to CEDR for mediation are settled on the day or shortly thereafter. It is not possible to obtain separate figures for the percentage of property, construction and professional negligence claims that settle. However, a strike rate of 75% is in line with my own experience of what may usually be expected.
Arbitration and litigation in the construction sector has special characteristics. Unless well managed, it tends to be expensive. The dispute often involves more than two parties: it is not unusual for there to be five or six protagonists. Often the issues between the parties are complex both factually and legally and there is no one key issue. Consequently, while neutral evaluation may be useful in reducing the ambit of the dispute, it rarely provides the "magic bullet" that resolves it. Because of these factors, the demands upon mediators handling construction disputes are probably greater than those imposed on mediators in other areas. I suspect that much of the dissatisfaction about mediation arises from parties having appointed the wrong individual as mediator. The nature of those specialist demands has been recognised by the development of construction-related mediation training and mediator panels.
Lawyers and their clients have become more sophisticated and demanding in their approach to alternative dispute resolution (ADR) and now require the mediator to manage the process forcefully and, where appropriate, indicate to parties that their arguments may be untenable. However, the mediator's evaluation has to be done carefully, by asking probing questions that allow the parties to appreciate the difficulties in their position. These mediators will also convene joint sessions at which the protagonists may confront each other in an abrasive and adversarial manner. The old style mediation where the parties are kept apart, bored and inactive, is at best ineffective and at worst counterproductive. In multiparty cases it may be best for co-mediators to be appointed.
To sum up: the use of ADR is growing and the number of TCC claims has shrunk by nearly 70% in the past eight years. And it is clear from the Court of Appeal decision in Dunnett vs Railtrack that parties are expected to give careful consideration to the use of mediation if at all possible. In short, it is here to stay.
Mark Roe is a senior partner in Masons' international construction group and head of its alternative dispute resolution unit.