Mediation
Jane Fender-Allison, Of Counsel, CMS Cameron McKenna Nabarro Olswang
THERE has been a concerted drive by the judiciary in England and Wales over recent years to increase the use of alternative dispute resolution (ADR), to integrate it into the civil justice system to a much greater extent and to the point that it is no longer seen as alternative.
Here we look at mediation as a key part of that drive and one of the best-used forms of ADR, recent developments, what’s anticipated next and what that means for the construction sector as a significant user of ADR.
Mediation has had a busy few years in the UK. The market for civil and commercial mediation has thrived. 2021 audit figures from leading mediation body CEDR (the Centre for Effective Dispute Resolution), showed a 38% increase in cases mediated annually since its last audit in 2018; evidence of mediation’s resilience during the pandemic; a rapid upsurge in online mediation; and an estimated £4.6bn of savings being made in one year from the ‘quicker and more effective resolution of commercial disputes’.
Updated audit figures are due to be published by CEDR in early 2023 and are expected to show mediation in rude health once again. During 2021 and 2022 a number of important steps occurred in legal circles.
- In March 2021, the (then new) Master of the Rolls and Head of Civil Justice in England and Wales spoke on the relationship between formal and informal justice, outlining an ambitious aim of the ultimate integration of ADR into the dispute resolution process and setting the tone for more to follow.
- By June 2021 the Civil Justice Council had published its report ‘Compulsory ADR’. Significantly, this concluded that compulsory ADR (i.e. compelling parties in a civil court action to participate in ADR) is in principle compatible with article 6 of the European Human Rights Convention and is therefore lawful. The report also said that it has the potential to bring about a beneficial change in the culture of dispute resolution; and that ADR should no longer be viewed as ‘alternative’ but as an integral part of the dispute resolution process which focusses on resolution rather than dispute. This was a major report, clearing the way for a bigger push on compulsory ADR within court processes.
- Between August and October 2021 the Ministry of Justice launched a call for evidence on dispute resolution. This looked at the practice of dispute resolution outside of the courts; highlighting the need for so called ADR to be mainstreamed within the legal system culture, ‘so that resolving disagreements, proactively and constructively, becomes the norm’. Responses showed mixed views around compulsory ADR, although many did support a greater degree of compulsion.
- Between November 2021 and January 2022 the Civil Justice Council published its interim report on preaction protocols within the civil procedure rules and consulted on a range of potential reforms. Notably these included a potential mandatory good faith obligation to try to resolve or narrow a dispute, compliance with which could involve ADR, without prejudice discussions or formal settlement offers.
- Between February and April 2022 the Ministry of Justice ran a long-awaited consultation on whether the UK should ratify the Singapore Convention on Mediation (see more on the convention below). The results of this consultation are currently awaited.
- Between July and October 2022 the Ministry of Justice ran a further consultation, related to increasing the use of mediation in the civil justice system. This proposed making mediation compulsory in small claims court actions (valued up to £10,000), by automatically referring disputes for a free telephone mediation session as part of the court process. It also queried the government’s role in the accreditation or regulation of civil mediators whilst mooting automatic referral to mediation beyond small claims. Again the results of this consultation are (eagerly) awaited.
Taken together, there is a clear trajectory which will see more ADR happening within the court systems in England and Wales. Mediation form a major part of that, which will build on its thriving civil and commercial market
Globally
Mediation has also been making significant strides outside of the UK. In 2018 the United Nations adopted the Convention on International Settlement Agreements Resulting from Mediation (the Singapore Convention), which came into force on 12 September 2020.
The Singapore Convention is an historic development in commercial dispute resolution and a genuine step forward for mediation on the international stage. The key purpose of the Singapore Convention is fast and cost-effective enforcement of international mediation settlement agreements. It created a harmonised framework for the enforcement of such agreements, avoiding the need for full court proceedings and incentivising commercial parties to use mediation across borders.
Parallels have been drawn with the 1958 New York Convention, the near-global framework for the recognition and enforcement of foreign arbitral awards.
However, unlike the New York Convention the Singapore Convention does not have a reciprocity obligation, meaning a mediation situated anywhere globally could be recognised and enforced in a ratifying state.
Alongside the Singapore Convention, the UN General Assembly also adopted the UNCITRAL Model Law on International Commercial Mediation and International Settlement Agreements Resulting from Mediation (the Mediation Model Law), which amended the UNCITRAL Model Law on International Commercial Conciliation (2002).
The Mediation Model Law was designed to assist states in reforming and modernising their laws on mediation procedure, providing uniform rules in respect of the mediation process and aiming to encourage the use of mediation whilst ensuring greater predictability and certainty in its use.
What does all of this mean for construction?
Taken together, there is a clear trajectory which will see more ADR happening within the court systems in England and Wales.
The sector has been a significant user of ADR for many years (think arbitration, adjudication, expert determination). But in parallel with these recent developments, there has also been a growing impetus within the construction sector towards the early identification, management and resolution of disputes and more use of ADR.
COVID added to the momentum, with guidance from the UK Government and industry bodies on the need for fair and responsible behaviour in the performance and enforcement of contracts (e.g. July 2020 Construction Leadership Council, COVID-19: Managing Contractual Disputes and Collaboration – Summary Guide). The UK Government’s Construction Playbook which followed (December 2020) stressed the benefits of collaborative contractual relationships.
It also endorsed the RICS Conflict Avoidance Pledge which encourages collaborative working, the use of early intervention techniques throughout the supply chain when disputes arise and their early resolution. In 2021 JCT released its dispute adjudication board documentation, intended to be a procedure complying with the construction act by way of a dispute board having an adjudication function. This was another sign of momentum behind the use of more collaborative and less adversarial procedures in the sector.
Escalations
Meanwhile we have seen an increasing use of escalations clauses in standard form and bespoke contracts, where ADR is a key element. We also see mediation embedded in the escalations clauses of many infrastructure projects, whilst under JCT there has been a requirement to give serious consideration to a request to mediate since the 2009 revisions.
Escalation clauses can give rise to the question of whether they are mandatory for parties to follow when a dispute arises, or merely optional.
There is a plethora of case law on this question, which underlines that sufficient certainty is required for such clauses to be enforceable, including around details of the procedures to be followed; and that very clear wording is required to make them a condition precedent requiring mediation or other ADR before court or arbitration proceedings can be started. As a result more attention is being paid to the drafting of escalation clauses, to make them effective and if desired, enforceable.
Reality-checked risk assessments
Throughout these developments, mediation has cemented itself as a forum routinely used by the construction sector. It has long since moved away from suggestions that it is in some way a soft option or a route to a simple split the difference outcome.
The sector has been a significant user of ADR for many years (think arbitration, adjudication, expert determination).Instead, mediation allows parties to engage in robust commercial discussions based on reality-checked risk assessments, to reach a common understanding of positions – and crucially the interests which lie behind them – and to explore solutions.
Such solutions can be more creative, tailor-made and realistic than the constrained remedies available in third party processes such as adjudication, arbitration and court and therefore parties are incentivised to buy into them. Of course the construction industry is well used to practical, commercial and risk-based assessments for business-as-usual activities.
Mediation is a process which extends this into the management and resolution of disputes, allowing parties to stay in control of achieving commercially robust outcomes. Therefore it’s no surprise that mediation has long presented an important tool in the dispute resolution toolbox of the construction sector.
Now, in light of the momentum around increasing ADR, early dispute intervention and collaborative working, the popularity of mediation in construction is set to continue.
Jane Fender-Allison, Of Counsel, CMS Cameron McKenna Nabarro Olswang
Jane.Fender-Allison@cms-cmno.com