Different mediation schemes – what does and does not work

A number of European alternative dispute resolution (ADR) statutes require courts to 'take measures' to encourage settlement and to assist the parties by encouraging mediation or other dispute resolution procedures. They provide that a settlement can be made at any stage of the proceedings in any kind of case so long as it is legal and does not violate the rights of unrepresented third parties. They also provide that the settlement agreement must spell out its terms and conditions, the authority of the persons making it, the sharing of costs (otherwise the court will decide costs) and be 'endorsed' by the court.

Voluntary mediation

Notwithstanding the court's duty to encourage mediated settlements, most statutes do not give them power to 'stay' a case for purposes of mediation except at the request of both parties. All those statutes do is give courts power to encourage voluntary mediation (mediation agreed to by all the parties), a process which has failed in every country it has been tried. The reason, of course, is lawyer resistance. In a voluntary pilot scheme tried in the UK's Central London County Court in 1996'“98 the take up rate was 5 per cent of the cases eligible. In the English Court of Appeal scheme '“ also voluntary '“ the take up rate was 4 per cent. The same experience was shared by courts in Australia, New Zealand and the Canadian province of Saskatchewan and by a number of state courts in the US. Texas, Florida and others resorted to automatic mandatory mediation, for example, no trial date unless the parties first tried mediation.

Mandatory mediation

While automatic mandatory mediation schemes have the salutary effect of getting disputing parties to the negotiating table many lawyers and parties view it as a perfunctory hurdle to be overcome,such as nothing more than the last settlement conference before trial. In such cases, it simply is a box to be ticked.

Moreover, 'when mediation is forced upon unwilling litigants, it stands to reason that the likelihood of settlement is diminished' (in Re Atlantic Pipe Corp, 304 F 3d 135, 144 (1Cir 2002)). Whether or not this last comment is accurate, it is clear that if automatic mandatory mediation works at all it is only because there is a pool of really experienced mediators.

Apart from objections to such schemes on grounds that they are ineffective, there is legal authority to the effect that mandatory mediation, automatic or otherwise, violates the right to trial guaranteed by Art 6 of the European Convention on Human Rights (Halsey v Milton Keynes NHS Trust [2004] 1WLR 3002 and [2004] EWHC 90029). Contrast that ruling with (1) the fact that 'what is enforced is not cooperation but participation in a process from which cooperation might come' (Hooper Baillee & Assoc v Natcon Group [1992] 28 NSWL 194 (Giles J)); (2) cases holding that mandatory mediation do not violate the US Constitution's guarantee of the right to trial by jury (such as Rhea v Massey-Ferguson, 767 F2d 266 (6Cir 1985)) and (3) the US First Circuit Court of Appeals' holding that courts have 'inherent power' to compel unwilling parties to mediate (in Re Atlantic Pipe Corp).

In short, the issue in mandatory mediation is not whether it is permissible, but whether it is effective when applied automatically. On the available evidence it probably is not.

Court encouraged schemes: opt out mediation

Opt out mediation, first adopted by state courts in New Jersey, operated on the presumption that mediation would occur unless the objecting party or parties 'showed cause' why it was not appropriate. A similar and successful pilot program was introduced in January 1999 by courts in Ontario, Canada for non-family and case-managed cases. In that scheme one could be exempted from mediation only by obtaining a court order. In the two years the pilot was studied exemptions occurred in only 1 to 2 per cent of the cases. Evaluations of the scheme established that it had led to significant reductions in the time taken to dispose of cases, decreased costs to litigants, reasonably high settlement rates; and considerable satisfaction expressed by litigants and lawyers.

A similar pilot was adopted by the Central London County Court in April 2004 to run for one year. It was an utter failure with an opt out rate of about 80 per cent. There are at least two reasons for this.

The first is that the single district judge assigned to handle 'opt out' objections in the Central London scheme failed to apply Halsey correctly, accepted objections at face value and had little success in persuading parties to mediate. The second is that, unlike the Ontario scheme, most of the UK cases were personal injury claims where both insurance carriers and plaintiffs' lawyers vigorously resisted mediation.

According to Lord Brooke, the personal injury market 'is a very well established market that has always dealt with the negotiation of claims in a particular way and they [are resistant] to change'.

Negative incentives to mediate

In 2002, the Court of Appeal held in Dunnett v Railtrack [2002] EWCA Civ 302 that a successful litigant who ignored a court recommendation to mediate could be deprived of its costs. Brooke LJ said: '[W]hen parties turn down out of hand the chance of [mediation] when suggested by the court. . . they may have to face uncomfortable costs consequences'. The questions that remained were what was an 'unreasonable' refusal to mediate and how that was to be decided. Two years later the Court of Appeal tried to answer these questions in Halsey, deciding along the way that a court could not compel parties to mediate. It nonetheless left Dunnett intact, stating: 'Where a successful party refuses to agree to ADR despite the court's encouragement, that is a factor which the court will take into account when deciding whether his refusal was unreasonable. The court's encouragement may take different forms. The stronger the encouragement, the easier it will be for the unsuccessful party to discharge the burden of showing that the successful party's refusal was unreasonable. An ADR order made in the Admiralty Commercial Court in the form set out in appendix seven to the guide is the strongest form of encouragement. It requires the parties to exchange lists of neutral individuals who are available to conduct 'ADR procedures', to endeavour in good faith to agree a neutral individual or panel and to take 'such serious steps as they may be advised to resolve their disputes by ADR procedures before the neutral individual or panel so chosen'. The order also provides that if the case is not settled, 'the parties shall inform the court . . . what steps towards ADR have been taken and (without prejudice to matters of privilege) why such steps have failed'. It is to be noted, however, that this form of order stops short of actually compelling the parties to undertake an ADR.

Nevertheless, a party who, despite such an order, simply refuses to embark on the ADR process at all would run the risk that for that reason alone his refusal to agree to ADR would be held to have been unreasonable, and that he should therefore be penalised in costs. It is to be assumed that the court would not make such an order unless it was of the opinion that the dispute was suitable for ADR ([2004] 1WLR at 3012-13).'

However one approaches Dunnett and Halsey, the Court of Appeal has made it abundantly clear that a party who, following a court order or recommendation to mediate, refuses to do so will be subject to cost sanctions unless their imposition would be unjust. Were it otherwise, at least half of those orders or recommendations would be ignored. This was evidenced by Professor Genn's March 2002 study on mediation in the UK's Commercial Court where she reported that, of the 233 ADR orders made in that court between July 1996 and June 2000, law firms rejected mediation about half the time. At the time of Professor Genn's study a refusal to comply with a Commercial Court mediation order did not result in any sanction, costs or otherwise. But once the Court of Appeal authorised the imposition of costs sanctions for an unreasonable refusal to comply with a court's order or recommendation, mediation increased across the board. This is reflected in the statistics provided by the Centre for Effective Dispute Resolution (CDER), by the ADR Group and by anecdotal evidence from members of the Panel of

Independent Mediators all of whom reported that the number of mediations post-Dunnett grew exponentially. In 2007, for example, CEDR reported that the number of cases being mediated was 3,400'“3,700 per year, up some 33 per cent from its 2005 estimate (CEDR Third Mediation Audit (November 2007)).

What works

Once a judge determines that a case is suitable for mediation he may on his own initiative 'stay' a case for that purpose or may order mediation at the request of any party. If the order is a Commercial Court-type order, approved by the Court of Appeal in Halsey, it will get obdurate parties to the negotiating table (see Blackburne J in Shirayama Shokusan v Danovo Ltd [2003] EWHC 390 and [2004] EWHC 2288. But what kind of case is suitable for mediation?

Perhaps the best answer is a paraphrase of Rix LJ's famous 1999 statement that 'the trick is to identify the cases that are unsuitable for mediation rather than the ones that are'. 'Unsuitable' cases might be but are not necessarily (1) cases where a party seeks a preliminary injunction, (2) cases which could be disposed of by summary judgment, (3) cases where a party needs a precedent to discourage similar litigation and (4) cases where a party seeks a judgment exonerating his or her damaged reputation. The kind of case is only one factor in determining suitability because all these cases '“ particularly defamation cases '“ are being mediated all the time. Other factors bearing on suitability are timing (is it too early to order mediation?), whether good faith negotiations are already under way, cost issues and 'ability to pay'. For example, if estimated litigation costs exceed the value of the claim in suit, that is a factor strongly favouring mediation (Burchell v Bullard [2005] EWCA Civ 358). Where, however, as in some cases, parties do not have the ability to pay, or the costs of mediation are disproportionate to the claim in suit that will generally result in denying mediation (unless, of course, the solicitors and the mediator are willing to work pro bono or at reduced rates).

Conventional wisdom has it that compelling unwilling parties to mediate is or may be counter-productive to resolution. But what really happens when parties come to mediation kicking and screaming that they are there only because some court said so? More often than not, these cases settle. For example, Colman J's action in the De Lorean (unreported) case where he told both parties that, notwithstanding their insistence on an immediate trial, their case was being stayed for purposes of mediation. Sure enough, the case settled three weeks later for £24m pounds. See also Lady Justice Arden's action directing mediation over the vigorous opposition of the claimant in Kinstreet v Balmargo [1999] WL 1399987. That case also settled. In such cases successful resolution most often turns on the skill of the mediator.

The anecdotal evidence from skilled mediators over the past 25 years is that as many (if not more) cases settled when some court compelled mediation as when parties came to mediation consensually. More recently, in a telephone poll of the Panel of Independent Mediators conducted in 2004 each member reported that as many cases settled when some court 'stayed' a case for mediation as when parties came to them consensually. The second report of the Commercial Court's ADR Working Party put it this way: 'Even where parties are at first ill-disposed to, or highly sceptical of, mediation, the intervention of a neutral may so strongly influence them that initial hostility may change to reluctant enthusiasm.'