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ALTERNATIVES IN DISPUTE RESOLUTION -
MEDIATION
(Guest Editorial for
"Construction Law")
The last few years have
seen a period of enormous change in construction law: new statutes for
adjudication and arbitration, new civil procedure rules in the courts (Woolf
reforms)
and an important decision from the House of Lords affecting the choice
between litigation and arbitration.
The Arbitration Act 1996
created a new regime in arbitration with procedures aimed at making
arbitration more effective, streamlined and user-friendly. As soon as
construction lawyers were up to speed with the new arbitration
procedures, the House of Lords decided Beaufort Developments
(Northern Ireland) Ltd v Gilbert-Ash Northern Ireland Limited and Others
in 1998. The effect was that Judges do have jurisdiction to deal with
extensions of time, opening up and revising decisions, certificates and
opinions of Architects and Engineers under standard form construction
contracts. Previously that had been the sole province of arbitrators
since decision in the Court of Appeal, 14 years earlier, in Northern
Regional Health Authority v Derek Crouch Construction Co Ltd.
Suddenly, draftsmen were free to choose arbitration or litigation in
construction contracts; we all began to consider whether arbitration was
such a good idea after all. Even JCT 80 now contains alternative
provisions for either arbitration or litigation.
Much has been written over
the last 12 months about adjudication under the Housing Grants
Construction & Regeneration Act 1996 (HGCRA) as a method of dispute
resolution. Now that the dust has settled on all these changes, except
as yet the new civil procedure rules in the courts, it is interesting to
see where they have left other alternative methods of dispute
resolution. The most used of those is mediation.
Mediation (and
conciliation under the ICE Conciliation Procedure, which is similar) has
a fundamentally different approach to traditional dispute resolution: in
court or arbitration, the judge or the arbitrator decide the legal
rights of the parties and declare them; those rights are then
enforceable by further legal process if necessary. It is the
availability of those legal rights that makes for a civilised society
but they also create the environment in which mediation is possible.
Mediation on the other
hand is a voluntary and confidential principled negotiation, held on a
without prejudice basis, aided by a skilled neutral third party, the
mediator. The mediator’s role is to assist the parties to find their
own solution; he is not there to impose his decision. Does it work? The
answer to that question is an unequivocal yes. There is a high
probability, amounting to about a 90% chance, that the dispute will
settle either at the mediation or, if not, within a few days thereafter.
This all raises the
question as to why mediation is such a successful process. The answer is
simply that it is much closer to what commercial parties really want to
achieve: settle their disputes satisfactorily, under their control, at
minimum cost, on a basis that they can accept voluntarily, in a
negotiating environment that they can understand. Some aspects of this
can be easily seen by looking at the following points about mediation.
·
Mediation
brings to the forefront the commercial and other interests of
the parties, rather than just concentrating on their legal rights.
That is not to say that legal rights are ignored; they are a very
important background to a mediation. Interest based solutions are often
found in successful mediations; business relationships can be re-built
as part of the process - a result that is almost unheard of in court or
arbitration proceedings. Lateral thinking can produce solutions that are
unavailable in other dispute resolution methods; for example, funding
part of a settlement payment by giving a discount on future supplies up
to a fixed value, or agreeing to work together to tender in joint
venture for a new project.
· The
procedure in a mediation is flexible and easily understood by
non-lawyers; arbitration, adjudication and court procedure is rigid
(even after the new Arbitration Act, the HGCRA and the new civil
procedure rules) and is almost completely lacking in transparency to
non-lawyers.
· Mediation is
consensual, not adversarial. The parties are in control of the process,
not the lawyers. It is voluntary and either party can stop it at any
time if they wish.
·
In the
context of the average construction dispute, the costs of mediation are
tiny (a few thousand pounds, shared equally by the parties) compared
with the massive, sometimes crippling, cost of running arbitration or
litigation. After winning an award from the Centre for Dispute
Resolution last year for exceptional commitment to mediation, Bill
Pearce of insurers ITT London and Edinburgh said that more than £1
million had been saved in legal cost in one year through the use of
mediation. By reason of the imposed procedure and necessary formality in
statutory adjudication, the costs are likely to be much higher in
adjudication than mediation.
·
It is very
quick indeed; most mediations last a day; a few are two days, and even
fewer are three days. The lead time can be very short; if necessary, it
can be just a few days - faster than the 28 days for statutory
adjudication.
·
Provided it
is set up properly and governed by a carefully drafted mediation
agreement, it is private, confidential and without prejudice; so no
evidence of what has been said or done in the mediation, if it is
unsuccessful, can subsequently be given in an arbitration or in court.
·
Mediation
enables each party to tell the other party directly (not the mediator)
what their claims and grievances are. This is the equivalent of “having
a day in court”. It is an important part of the process but it is also
much cheaper and quicker to do it in mediation than it is to have a real
day in court.
·
A skilled
mediator assists the parties to face the reality of their position in
the dispute in an environment that is not threatening or judgmental. He
can help to cut through previous failures in communication between the
parties, personality clashes and the fact that peoples jobs may be on
the line if litigation does not go well. Mediation inevitably brings the
real decision makers into the dispute settlement process. All of this
can bring about a successful settlement where previous negotiations have
failed; it explains why mediation adds value to ordinary inter-party
negotiation.
Even now, after the
increasing success of mediation in the UK over the last few years, to
many people mediation still sounds like something imported from the
hippies of California. That view is at last beginning to be seen much
less as the understanding of mediation increases in the construction
industry, in its professions and amongst lawyers. The reality is that
last year about 30% of the mediations handled by the Centre for Dispute
Resolution were in the construction and engineering sectors.
The moral here is not to
forget mediation as a primary dispute resolution method simply because
there is so much talk currently of statutory adjudication, which is a
blunt and inflexible instrument compared to mediation. Mediation in the
UK is now a success story. The new civil procedure rules will increase
that success. So the approach should change: do not ask whether a
dispute is suitable for mediation; assume that it is, unless there are
really good reasons for not using it.
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