Mediating: a cultural revolution

This was the thrust of the Lord Chancellor’s announcement in March this year that, in future, Government Departments will only go to court as a last resort. Disputes involving government departments will be dealt with by mediation and other alternatives to litigation wherever possible. Does this reflect a change in culture which will have significance in Scotland?

Of course, alternatives to litigation have been available for a long time: many lawyers pride themselves on being able to negotiate settlements without a court hearing. Arbitration and expert determination are well established and tribunals of all kinds have popped up. Ombudsmen have appeared. Adjudication has arrived on the construction scene. “Dispute Resolution” departments are replacing Court departments. Litigation is seen by many lawyers and, perhaps more importantly, by their clients, as only one of the many ways by which disputes may be resolved.

Mediation represents a further means for resolving disputes where traditional negotiation is not working effectively. In England, in commercial and public sector disputes, professional negligence claims and even in personal injury cases, mediation is now part of the landscape, following trends in the United States, Australia and elsewhere. In some States in the US, in Hong Kong, Canada, Australia and England, courts have the power to refer cases to mediation. In England, the arrival of the new Civil Procedure Rules, following the enquiry by Lord Woolf, resulted in a large increase in referrals to mediation. In the year after their introduction (1999) the number of mediations handled by the Centre for Dispute Resolution (CEDR) increased by 140%. CEDR’s statistics reveal an overall successful settlement rate for cases referred to mediation in excess of 80%.

In Scotland, for the first time in non-family cases, alternative dispute resolution (of which mediation is the most commonly used method) is now referred to in court rules. The Act of Sederunt (Ordinary Cause Rules) Amendment (No 3) (Commercial Actions) 2000 provides at Rule 40.12(3)(m) that the Sheriff has the power to make any order which he thinks will result in the speedy resolution of the action, including the use of alternative dispute resolution.

There is already increasing use of mediation in Scotland in non-family cases. Recently, disputes involving web site design, building contracts, local authority services and employment have been resolved successfully by mediators. There is currently a review of the use of mediation in disputes involving patients and the health services in Scotland. It seems likely that mediation will become a fact of professional life for Scots lawyers. How is that going to affect the profession? Will it result in a loss of lucrative work or is it an opportunity for lawyers to embrace a further line of business and provide a valuable additional service for their clients?

What is mediation?

Mediation is a flexible, voluntary and private process, in which an impartial third party (the mediator) seeks to help the parties to negotiate a satisfactory outcome to their dispute. Unlike litigation and many other adjudicative processes in which a decision is given by a third party, the mediator assists the parties to communicate and negotiate but does not issue a decision or make a ruling. The parties themselves are usually involved and can identify and explore the real issues with the mediator, in total confidence, and address any problem areas in the case. They can also gain a greater understanding of each other’s situation. If the mediation is successful, the parties will sign an agreement which is binding like any other legal agreement.

What are the advantages of mediation?

• Mediation provides speedy resolution of conflicts: most mediations are completed within one day. Preparation beforehand is important but will tend to be far quicker than for a court case.
• The costs of mediation are relatively low compared to litigation: in a recent mediation, one party identified cost savings of between £10,000 and £50,000 compared to litigation. The costs of organising a mediation and providing a mediator are readily ascertainable from mediation providers.
• The parties retain control over the procedure, which is flexible, and also over the outcome: there is no binding outcome unless and until each party is satisfied that it is in their interests to sign a settlement agreement.
• Mediation saves management time and reduces opportunity cost: the speed of resolution can relieve managers and other employees of the retrospective, tiresome and often stressful process of reviewing what happened in the past and preparing to fight a potentially long court case, leaving them free to attend to current and future business.
• It is “without prejudice”: the process, like any other negotiation, is “without prejudice”; being voluntary, either party can leave at any time and maintain their legal rights.
• It is confidential and avoids the publicity of a court hearing: the whole process, as well as the outcome, is conducted in privacy, unless parties agree to disclosure.
• Mediation provides a reality check for the parties: where a court case has been raised or is in contemplation, often the enthusiasm to make a point can cause the parties to overlook reality, such as the validity of a contract or the reliability of a witness – which will be crucial in a proof. A mediator is likely, in private, to give the parties the opportunity to review their true strengths and weaknesses.
• It creates the possibility of creative and forward-looking solutions rather than outcomes based on the past: the parties are free to look at practical solutions which are wider than the scope of a court case, which tends to focus primarily on the past and on legal remedies or rights.
• Mediation enables the parties to have a continuing business relationship: rarely do parties do business after a court case is won or lost. The experience following mediations is different – often, a future working relationship can be encouraged.
• The mediator is independent: of the parties and their legal representatives, thus providing a basis for confidence in his or her impartiality (and lack of baggage) and ability to assist both sides to find a mutually acceptable outcome.

One of the parties in a mediation conducted in Scotland this year had this to say:

“The end came sooner than it would have in litigation; there was no adverse publicity; a measure of reconciliation was achieved; staff could be spared the stress and time involved in appearing as witnesses, and preparing for the case; and the potential expense of lengthy and fractious litigation was avoided.”

What are some of the arguments used against mediation?

• If the clients’ legal case is strong, mediation may produce a worse result than going to court. This tends to ignore the fact that the strength of the case will be a crucial factor in the mediation, just as in any negotiation. But most cases settle, because parties recognise the risks of going to court.
• There is a need to disclose one’s hand. There is no need to disclose any information to the mediator or to the other side which you do not wish to disclose. In a court action, most of the relevant information is likely to be recovered at some stage. All information disclosed to the mediator in the course of the mediation is confidential unless disclosure is specifically agreed.
• Pressure to settle is created by the mediation. Like any opportunity to settle and avoid the costs and risks of proceeding to court, this may be a valuable aspect of the mediation process. But either party may walk away at any time if they wish.
• Going to mediation displays weakness or may be seen as an admission of liability. Being prepared to explain one’s case at mediation is seen by many as an indication of strength. A party speaking from strength has the opportunity to put its case to the other side.
• It is just another delaying tactic. It takes a relatively short time to organise and conduct a mediation. Often, it can be held while parties await the next stage of court procedure.
• Recovery of evidence is not available. As in any negotiation, parties are not able to force others to disclose material in a mediation but they know that, if the mediation is not successful and the matter proceeds to court, the court may require disclosure.

When is mediation not appropriate?

Most cases settle without a final court order. Mediation is a way to bring about that settlement more quickly and less expensively. Thus, most cases are suitable for mediation. Nonetheless, it should be recognised that mediation may not be appropriate where:

• there is a desire to establish a legal precedent;
• a party needs a summary decree or rapid interdict;
• a party wishes to enforce an award;
• there is a need to compel and examine witnesses;
• a party wishes to make a public statement on some matter; or
• there is no genuine interest in settlement.

Even in these cases, mediation may have a role at some stage.

The lawyer’s role in mediation

Mediation does not leave legal rights and lawyers standing at the door. In most mediations, it is sensible (if not essential) for lawyers (solicitors and / or counsel) to be directly involved in the entire process.

Before there is any hint of conflict:

Lawyers have an early role in advising clients of the various dispute resolution clauses which may be included in commercial contracts. These commonly include reference to arbitration or an expert and now, increasingly, reference to mediation. Indeed, there may be a professional obligation to advise on the inclusion of a mediation clause if the benefits are likely to include those mentioned above.

On the emergence of a conflict:

Mediation provides another option for the lawyer to suggest to his clients. Awareness of the three pillars of dispute resolution - “Negotiation, Mediation and Adjudication (including litigation and arbitration)” and informed commitment to mediation can send a powerful message to clients. In practice, it may be easier for the solicitor to advise clients to continue with litigation where the clients are satisfied that mediation as an option has been tried or, at least, canvassed and validly rejected. Where clients are intimidated by the possible cost, delay and uncertainty of court, they may well wish to go to mediation.

In the course of a conflict:

Disputes can be referred to mediation at any stage - including during litigation. This is an additional weapon in the dispute resolver’s armoury if negotiation has failed to produce a satisfactory result or where there is a need for parties to have their expectations tested. Mediation may at least focus and narrow the issues.

In the arrangement and conduct of the mediation:

There is a real role for the legal adviser in ensuring that the arrangements for and conduct of the mediation are handled in such a way that no unnecessary prejudice is caused to the clients’ position. Representing a client in a mediation is a challenging task, requiring a rigorous approach to the issues while looking for ways to resolve the dispute and create a climate for settlement. Deciding what to disclose and when, considering the options and advising on the alternatives all require sound negotiating and tactical skills.

In the preparation or approval of the Agreement to Mediate, other pre-mediation documents and submissions:

It is as important to ensure that all the relevant information and points are properly organised prior to a mediation as in a court hearing. It is well accepted that an essential pre-requisite of a satisfactory mediation is the availability of sufficient legal and factual information to each party to enable it to make a realistic analysis and assessment of its case. The legal adviser’s role in assembling and advising on this material is invaluable.

In drafting or approving the Settlement Agreement:

The terms of any agreement are normally reduced to writing. This can be complicated and may involve detailed drafting by the lawyers.

And finally: broader opportunities for the legal profession

Mediation gives members of both branches of the profession in Scotland the opportunity:

• to consider new and practical ways of safeguarding and pursuing clients’ priorities, aims and interests (and to market these as part of its repertoire);
• to review the options it makes available to clients for resolving disputes and to become engaged in a process which widens (and markets) these options;
• to develop (and market) new skills in new areas of work;
• to embrace a relatively new culture which, expanding on existing processes, can put Scotland amongst the world leaders in providing a creative, efficient and cost-effective dispute resolution service to its citizens and to those who do business here.

Perhaps the last word should be given to a party who recently experienced mediation in Scotland:

“Having been unfamiliar with the process of mediation prior to last week, we are now fully aware of the huge benefits to be gained by using mediation in this type of dispute.

“Whilst we accept that mediation is not appropriate in all cases of dispute... we believe that in cases such as ours, where issues such as a breakdown in communication and a general sense of antagonism exists between both parties, whilst it is mutually acknowledged that an area of common ground remains, this type of arrangement can work very positively for both parties involved.

“The benefits and advantages of mediation are numerous, but personally we identified a few as being:

• the fact that individual reputations and dignities are preserved and maintained throughout and following the process,
• a greater understanding of the specific difficulties faced by both parties can be achieved in a very positive, constructive and respectful manner,
• mediation works effectively by encouraging the use of positive, constructive language and attitudes,
• particular roles and responsibilities of individuals could be fully appreciated and respected,
• the successful outcome derived from mediation produced a ‘win - win’ result, leaving everyone with a real sense of achievement and success. “

* Note: There are a number of mediation organisations which will assist with setting up a mediation and providing information about it. In Scotland, David Semple and John Sturrock are Directors of Core Mediation Ltd which provides a full mediation service for disputes in commercial, public sector and professional matters (including advice on whether a dispute is appropriate for mediation).

E-mail: johnsturrock@core-mediation.com, davidsemple@core-mediation.com