Representing clients in mediation

Although mediation still has a low profile in Scotland, it presents a challenge to the profession here, which will not go away. The merits of mediation are now being recognised round the world. It is routine practice in the USA and is growing rapidly in Canada, South Africa, Australia, Europe and elsewhere.

In England and Wales, an explosion in mediation practice is now imminent owing to Lord Woolf’s radical reforms of April 1999. There, the courts now regard litigation as a last resort. The court, not the parties, is responsible for case management. Backed by a whole new range of powers, judges are now encouraging settlement or reference of disputes to alternative dispute resolution at the earliest stage. Lay parties may be required to appear before a judge in case management conferences or pre-trial reviews to state whether ADR has been discussed and, if not, why not. Unreasonable failure to refer a dispute to ADR may be countered by a variety of judicial orders or modified costs.

So mediation is now achieving widespread and favourable recognition and is destined to become mainstream practice - although it will not, of course, replace litigation. This has not yet happened to any great extent in Scotland. An overview of the process and of its meaning for solicitors may be helpful in assessing the situation.

Litigation and mediation

In the western world mediation started as a reaction to the problems of litigation with which every court practitioner is familiar. This refers to ‘commercial mediation’ which covers not only business disputes but also every kind of civil dispute including those arising from delict.

Litigation costs are often disproportionate to the amount in dispute. Escalation of costs is hardly controllable. Disastrous awards may be made against a loser. Unless a party is legally aided, wealthy or can arrange a speculative set-up, the doors of the court are firmly closed. Access to justice is unaffordable for most members of the middle classes - an intolerable situation which society will not endure indefinitely.

By contrast the expense of a mediation is a small fraction of what litigation would entail, is usually shared equally between the parties and is known and paid in advance.

The chronic delays of litigation need no elaboration. Actions may drag on for years with adverse effects on the parties e.g. by depriving personal injury victims of compensation when they need it most. A victory in a commercial dispute may yield an unenforceable decree against a liquidated defender.

Mediation is rapid. Within a few weeks from deciding on it, a hearing can usually be fixed and typically one day will suffice.

Court judgments on factual or legal issues cannot usually be predicted with confidence - despite the advocates’ optimism. Judging is not an exact science. Every action involves risk.

Mediation avoids this risk. No decisions are made either about the facts or the law. Under the parties’ control the objective is the best outcome for their mutual interests.

Litigation, especially in business disputes, involves much effort and time. Preparation for mediation is much less exacting with fewer documents.

Litigation causes considerable stress for parties, witnesses, who may be their employees, and even for lawyers. Mediations, by contrast, typically develop friendly co-operation in a joint search for mutual benefit (win-win). Co-operation, not conflict and tension, is the aim. Parties control mediations. In litigation they lose control to the process. The confidentiality of mediation avoids the harmful publicity of courts. In commercial disputes litigation destroys relationships which were originally amicable and productive. An outstanding advantage of mediation is that it preserves or restores such business relationships.

A compelling criticism of litigation is that it is rarely what it purports to be viz a rational process leading to adjudication of a dispute. In practice around 90 per cent of court actions are settled at the door of the court after hasty negotiations under pressure. Such settlements tend to be patched-up compromises, unlike the creative solutions which can be achieved with calm deliberation in mediation. Legal advisers know that most actions will eventually be settled. The real nature of litigation in nine out of ten actions is that it is a wasteful and costly tool of negotiation. Mediation initially could have had a better result at less cost.

What is mediation?

Mediation is a form of negotiation in which a neutral mediator facilitates the voluntary resolution of a dispute by the parties themselves.

Mediators have no authority to decide the dispute or any issues of fact or law. Mediators neither state any opinions, advise the parties nor press them to agree to any settlement terms.

Mediators are purely impartial facilitators. Although they use techniques, the dynamism and thrust towards settlement must come from the parties. A mediator merely assists in this.

Facilitation includes overcoming emotional and perceptual barriers to co-operation, e.g. misunderstandings and hostility and in private sessions, it also includes encouraging the parties to disregard irrelevant feelings and to focus on the real problem, their own real interests and those of the other party. This differs radically from everyday negotiations where parties adhere to rigid positions from which they will only budge in exchange for concessions and from adversarial contests in court where advocates strive to prove that their clients are right and that the other clients are wrong.

Mediation converts the initial contest into a joint, constructive search for a solution which satisfies mutual interests, regardless of rights.

Mediation is voluntary. Any party can terminate the process at any stage. Also the parties agree beforehand that what takes place in a mediation will be confidential and without prejudice. This creates a safe forum for free and constructive negotiation.

Mediation procedure will be discussed in part two.

Mediation and solicitors

Given the merits of mediation, why is it not yet common practice here? A number of Scottish solicitors who are trained mediators, are enthusiasts but most practitioners still lack interest in it and use it infrequently, perhaps for the following reasons.

Lack of familiarity with mediation is one cause. Today no solicitor would claim that he/she had never heard of mediation but a real understanding of it is unlikely without training in or practical experience of the subject. A solicitor is unlikely to advise entry into a process with which he is unfamiliar and in which he has not acquired the necessary skills.

This lack of familiarity is certainly not due to an absence of available information or training facilities. Could it be due to a lack of motivation? If so, does this arise from doubts about the value of the process and are such doubts justified? This question relates to the value of mediation generally and not to its suitability for any particular dispute - which will be discussed in part two.

The value of the doubts of critics who are unfamiliar with mediation may be questioned but their attitude is not unnatural. This new process demands a reversal of traditional adversarial approaches to disputes.

Because of the confidentiality of mediation, objective statistics are unavailable, but various bodies report success rates of around 90 per cent on the basis of their experience. Even allowing for some inaccuracy or exaggeration these results are impressive by comparison with the success rate of litigation where only about ten per cent of actions are decided by a judge. The others settle, often at the last minute.

So which is the more effective method of dispute resolution? The compulsory participation of unwilling parties seems to be the main advantage of litigation over mediation

Undeniably the value of mediation has been abundantly proved round the world. It works. In the USA mediation is mainstream practice. In England, even before the Woolf reforms, disputes totalling billions of pounds in value have been successfully mediated.

Naturally, the above mediation success rates do not show the proportion of disputes where the parties reject mediation. Obtaining their consent to it is the hardest task in mediation.

Nevertheless, while there is no compulsion, there are usually significant reasons for parties to mediate. The comparative benefits of mediation over litigation, which were discussed above can be very persuasive even when a case has already gone to court. All mediation takes place in the shadow of the court - either in a current action which has been suspended for the purpose or as a potential alternative of an agreed settlement.

On the other hand, lay parties may resist mediation if they have not been properly advised about it. Litigation may be preferred if there are optimistic views of the prospects or because a party wishes to exploit the tactical advantage of power imbalance in meeting costs.

Other common concerns about mediation are that to agree to it may suggest that a party has a weak case or that the opponent may benefit from disclosures made there if the mediation fails and the case goes to court. Neither fear has any substance. Once the advantages of mediation are more widely appreciated, it will be realised that they are the reasons why parties adopt it - not weakness. Moreover disclosures in mediation are controlled by parties and in any event, litigation by ambush is no longer acceptable. Fair notice is obligatory.

The cost of a failed mediation in comparison with that of litigation is so small that the risk seems well worth taking.

The conclusion which emerges is that there are no sound reasons for a negative view of mediation generally - although it may not be appropriate for particular cases.

It should be noted that the new English Civil Procedure Rules will create judicial pressure for early settlement or reference of disputes to alternative dispute resolution. This may affect disputes between Scottish and English companies.

Perception of mediation as a threat

Some solicitors may see mediation as a threat to their litigation income. Mediation will indeed reduce fees from litigation but there are compensations. Client satisfaction following successful mediations can enhance practice development and may lead to expansion of work of other kinds, recommendations to new clients, and the building of a desirable reputation.

If advice to mediate is not taken, relationships with clients may still benefit but if litigation occurs without such advice, clients are unlikely to be pleased when they learn about mediation for the first time.

Civil litigation is not the only source of fees. Many firms or individuals restrict or avoid it where possible. It can be time-consuming, stressful, less profitable than other activities and often creates client dissatisfaction.

Salaried in-house lawyers in many organisations - a large sector - will suffer no loss from mediation. They share their employers’ interests in rapid, inexpensive, win-win outcomes and continued business relationships.

Law firms which avoid mediation should consider the possible competition from firms who undertake it - and eventually, even from other professions.

Professional duty

In questions of professional duty, fee income is irrelevant and cannot affect the choice of a dispute resolution process. The only test is to apply professional judgment in the given circumstances to the client’s best interests.

In the present state of mediation can anyone reasonably argue that there is no duty to advise clients properly about the mediation option? Naturally, this duty is only to give advice - not a duty to refer any particular dispute to mediation. What is unacceptable, however, would be to deny the client the opportunity of making an informed decision. Mediation should not be rejected without consulting the client.

Given the existence of such a duty, would failure to comply with it amount to professional negligence? If so, would this be covered by professional indemnity insurance?

Marcus Stone