Be reasonable – or else

ADR in its various manifestations is still a mystery to many people. They would be bemused by a court order requiring them to settle their differences other than by legal means. So what is this process about and what is its relationship going to be with our construction courts?

Mediation is no more or less than a form of structured negotiation, presided over by a party that is neutral to the dispute. The strength of the process – which is also its weakness – is that no solution is imposed on anybody. If settlement is reached, then it is by the free will and judgment of the parties themselves. From their point of view, the beauty of the system is that they remain in control in a way they do not with court proceedings.

Settlement can be structured to take into account considerations that a court could not contemplate, including the future commercial relationship between the parties. If the process fails, then the theory is that no harm is done, because the whole proceeding is off the record and can never be referred to in the future.

Anyone who has seen this process at work knows that it is the very reverse of a soft option, and even the sceptics will concede that the settlement rate is impressive. ADR providers say that settlements occur at something between 80% and 90% of all cases dealt with.

There are some very interesting issues to be resolved in this context. Not least of these is one question that will doubtless come to the fore in the future: the impact of the Human Rights Act, which provides for the right to a fair trial. Might this be infringed by a court that obliged the parties to engage in mediation?

How will the Technology and Construction Court get to grips with this new culture, in which mediation is to play a central role? In a recent public lecture Mr Justice Dyson expressed the view that most TCC cases are candidates for ADR.

It is therefore relevant to consider which types of cases the judges will consider appropriate for ADR and which are not. How will they go about this task? A recent Guide to the Judiciary issued by one of the main ADR providers, CEDR, attempts to identify the kinds of cases that will not be suitable.

Examples include:

• Where issues turn upon interpretation of the meaning of a contract clause

• Where one party is determined to delay resolution of the dispute or is completely convinced of the rightness of its cause

• Where a “rights-based” solution is necessary, perhaps because of standing orders, or where a legal precedent is required

• Where only a court can give the relief sought, perhaps by way of an injunction or mandatory order.

Apart from these categories, CEDR’s view is that any case capable of being resolved by negotiation is also capable of being resolved by mediation. In other words, there is no particular category of construction case not susceptible to mediation; so a defects claim, a delay/loss and expense claim, a “clause 12” claim, a claim for unpaid certificates and even multiparty disputes are all considered suitable for mediation.

An American lawyer friend of mine was recently good enough to send me a paper that analysed 500 construction mediations carried out in the USA and concluded that the two most important factors in them were that the parties should have negotiated their own rules and that some discovery had taken place. The researchers concluded that the first point demonstrated a commitment to mediation, and that the second indicated that a level playing field was essential. Issues of fairness were key considerations for the participants, but the subject of the dispute was by and large irrelevant.

If this is right, then the key question for the future may become, not whether the case in question is inherently capable of being mediated, but at what stage in the proceedings would it be appropriate for the courts to encourage the parties to adopt it?

The American research plainly suggests that mediation should not be attempted too early, because the level playing field will not yet be prepared. In defects claims, for example, it would be prudent to wait until experts have been instructed and have been able to form a view.

At the conference I mentioned above, the point was tellingly made that the real change taking place in the culture of disputes is that mediation is being regarded less and less as a sign of weakness.

Now that the courts are obliged to require litigants to consider ADR, it will become quite usual for a claimant’s solicitor to suggest ADR to his or her opponent long before proceedings are begun.

The question of how much pressure the courts will bring to bear on reluctant parties is as yet unclear.

This columnist does not like the idea of the courts imposing mediation against the parties’ wills, still less that the courts might impose cost sanctions upon those who decline to use the procedure. What about a financial incentive instead of a penalty? Reimbursement of court fees, for example, if mediation is agreed to and is successful?

It will be important to retain the notion of mediation as a voluntary process and for the courts to accept, as Mr Justice Dyson plainly does, that they are there to serve their customers and to make a decision on the legal merits if they are asked by either of the parties so to do.

We must wish the process well, but it would be naive to assume that it is a panacea for the industry.