UK: Winning Through Mediation

Last Updated: 31 March 2011
Article by John Sykes and Lynne Gregory

An English perspective

When to mediate? Can mediation be successful at an early stage of litigation? Is it necessary to have formal discovery or informal exchange of materials before undertaking to mediate?

In order to achieve the maximum savings in legal costs and case preparation, mediation at an early stage may be desirable. However, as a defendant, there may be advantages in forcing a claimant to take certain steps in litigation to see if they are serious in pursuing the claim, and to demonstrate the seriousness of the defence (thereby lowering expectations).

At a later stage, both sides will be taking the matter seriously and will have sufficient information to assess strengths and weaknesses but costs are large, positions entrenched and on going business relations less likely.

Lawyers especially tend to argue that early mediation, before the disclosure process has been completed for example, is not appropriate. In practice, however, mediation simply requires knowledge of enough information (about the facts and the law pertaining to the case) for the lawyer to be able to advise the client on the strengths and weaknesses of the case, the alternatives to settlement and on any options that are discussed during the mediation. The earlier that mediation takes place and an agreement is reached, the lower the costs will be.

The mediation process can also help to identify what disclosure is essential, rather than the parties simply carrying out full disclosure, or a "search for the smoking gun". The mediator can be invaluable in helping the parties to identify what are important pieces of information. The search for appropriate information in mediation is reflected by the aims and objectives of mediation rather than a trial and in particular the kind of questions that will come up in the mediation: "what does the client want to get out of the mediation?" and "how does this possible result compare with what the court might do?"

That said, in some cases, it may be only after disclosure and witness statements in the litigation process that the parties have adequate information in order to be able to have a productive mediation.

At the moment, it is probably fair to say that most mediation in England still take place some time after proceedings have been issued although this is changing. The Civil Procedure Rules (CPR) (which govern English civil procedure) strongly encourage the use of mediation at the pre-action stage and this is gradually having an impact (see section on CPR below).

How do you select the right mediator?

The choice of mediator will play an important part in the overall success of the mediation process. The administrators of any mediation body will put forward a list of potential mediators for consideration by both parties. Alternatively both parties may propose a list of candidates. Although a wide range of individuals now hold themselves out as mediators, it is important to establish somebody with the appropriate experience and qualifications for the particular case. There are no requirements in English law that the mediator be legally qualified or have undertaken mediation training. In practice most mediators will have undergone some form of training – the CEDR accredited training course is the most popular.

The parties are therefore free to select as mediator a person who is a lawyer or has some other background, depending on the nature of the dispute. If a case turns on issues of law, it may be sensible to have a legally trained mediator, whilst if matters of specialist practice and/or conduct are involved, there may be some advantage in having a specialist (e.g. banker, surveyor) as mediator. Traditionally the party line of most ADR institutions is that mediators need not be an expert in the industry out of which the dispute has arisen. This practice has been altered somewhat by market demand – parties tend to be more comfortable with mediators who know the relevant industry sector – they do not have to explain the jargon or issues that arise. The mediation organisations still argue that it is mediation which are skills are key and industry knowledge merely an added bonus but clients often select mediators because they understand a particular technical sector e.g. IT, telecoms or banking.

The selection of a mutually acceptable mediator can be a time-consuming process. The chosen mediator's style and approach should match the client's case.

Mediators can adopt different styles – they can be facilitative in which case they try to assist the parties to reach their own agreement. Other mediators adopt a more evaluative style where they take an interventionist approach and offer their own strategies for settlement and their views on the merits of the case. Most experienced mediators will use a combination of these techniques depending on the parties and circumstances.

As the mediation market has matured solicitors also appear to be increasingly comfortable about organising mediations themselves rather than instructing mediation providers. Over the last few years a significant number of mediations have taken place without the involvement of an ADR institution. The mediator is selected and appointed directly by the parties and their lawyers (most major law firms now have a pool of trusted mediators who they can instruct direct). This direct mediator market is, in fact, presenting a real challenge to the ADR institutions who provide a valuable role in monitoring mediator quality, educating users, promoting mediation in new areas and introducing new mediators to the pool. There is a risk that the "usual suspects" (the well known tried and tested mediators) get used over and over again rather than trying out new mediators.

Although the parties will be responsible for decision-making in the mediation, and will control the outcome, the mediator will control the procedure and ensure that it is structured in a way that is fair to all parties.

The mediator needs authority and gravitas and must not appear to be partisan in any way. In our experience lay clients and clients from jurisdictions which do not have a culture of ADR can be extremely sensitive to perceived bias and mediators should be alert to this. That said, and contrary to received wisdom, a mediator who is an expert in the subject matter of the dispute can be extremely helpful. Although it goes against traditional mediation theory an evaluative mediator can also assist (i.e. a mediator who gives his own view on the strengths and weaknesses of the respective parties' cases). There are of course pitfalls in doing this since his neutrality may be called into question but some reality testing by a mediator who is experienced in the relevant area can be helpful. What is important is that the mediator treats both parties the same.

How can you effectively present your case at mediation? The role of opening statements or remarks? Can visuals or graphics be effectively used? Should mediation statements be exchanged with opposing counsel? Do experts have a role?

At present it is common in English mediations to exchange case summaries with the opposing party in advance of the mediation and to deliver an opening speech. Some details about these are set out below.

Case Summary

Unlike preparation for a trial, the documentation required ahead of a mediation should, in theory be concise, in terms of both volume and coverage. A case summary, with any supporting documentation, is prepared by each party and provides an early opportunity to identify the main issues between the parties and to provide focus for the mediator. The case summary/written statement should be a concise, tailored document of approximately 10-20 pages, depending on the complexity of the case.

It should be supplemented with other key documentation such as relevant court documents, witness statements, expert reports, excerpts from contracts and any relevant case law. The supporting documentation should not exceed a small lever-arch file (approximately 100 pages).

The case summary and supporting documentation is exchanged by the lawyers, with a copy sent to the mediator, usually at least one week before the mediation.

Sensitive or confidential issues can be discussed privately with the mediator, by sending an additional separate document for the mediator's attention alone. Typically, counsel's opinions and other privileged documents are dealt with in this way.

The case summary could include details of the parties to the dispute; how the dispute arose − background and chronology; key legal and factual issues; client's non-legal concerns; client's aims and objectives − why they are mediating and what they hope to achieve; barriers to settlement; status of existing legal proceedings; key decision makers; the current position; history of efforts to settle; the nature/extent of the relationship between the parties; any suggested approaches (possible frameworks for thinking about the problem or its solution); anticipated costs of litigation (up to the date of the mediation and estimated to trial).

It is perhaps fair to say that lawyers can "over legalise" the case summary – this should be avoided if at all possible – it is meant to be an informal document not another pleading.

Opening Statement

The opening statement or party presentation is, typically, a 10-20 minute opening by each party at the commencement of the mediation at the joint session after the mediator makes his opening remarks.

The benefits of an opening are that it identifies topics requiring discussion during the mediation and identifies the parties' interests, aims and objectives, as well as the priorities. The opening informs everyone about the nature of the dispute and encourages parties' active participation early in the mediation. Accordingly, it can be a useful tool for allowing a client to tell their story and blow off steam. It also provides an early opportunity to assess the other side's strengths and weaknesses. The opening can help build trust and rapport between the parties and the mediator.

It is necessary to prepare the opening statement with the client, in particular if the client will play an active role during the presentation. Although the presentation will usually begin by well-planned statements by the lawyers, it is important that the client has an opportunity to explain the case from their own point of view. The client can articulate his interests more persuasively, with force and conviction. Opponents tend to "tune out" what an opposing lawyer says, but are very interested in hearing from the opposing party.

Whether the client makes a part or the whole of a presentation depends on how articulate, shy, reasonable, angry or bad tempered they are. In addition, it will depend upon the nature of the presentation that is required. If a legal focus is required, then the lawyer is more appropriate. If a commercial focus is required, then the client is the most appropriate. In addition, it is necessary to consider whether the client is likely to say matters that might jeopardise the case or affect the opponent's view of the client's credibility as a witness.

If a client is inarticulate, shy or angry, the client's participation could lower the opponent's view of the case. On the other hand, an articulate party gives the mediator and opponents a valuable tool to use in discussing of the case in private sessions.

If the client is making any part of an opening, it is important for the client to recognise that the opening is part of the negotiations from the outset, and that, accordingly, offensive, threatening or arrogant statements should be avoided. If the client will play an active part in the opening, it is important to have a "dry run" of the opening.

Preparation for the mediation: what do you do to prepare the client? The role of inside and outside counsel? How should the lawyer prepare? Decision making regarding tactics and approaches.

Clients play a hugely influential role in the ADR process. Indeed, when ADR was in its infancy, ADR was typically client driven with lawyers often perceived as hostile to the process – mediation was seen as conflicting with the adversarial litigation skill set of the typical lawyer and lawyers may have feared mediation would cause a fall in their revenues! Whilst most lawyers are now fully committed to ADR, client involvement and understanding of the ADR process is still critical. At Charles Russell, we encourage clients to be involved in the preparation of, and often to co-deliver, the opening mediation statement so that the other side and the mediator understand the impact the dispute is having on the client and/or its business. Clients should be fully involved in all preparation meetings for the mediation and are asked to suggest top and bottom line settlement figures, and to try to come up with innovative solutions to the dispute. In addition we always ensure we take a client of sufficient seniority and with a commercial outlook to the mediation so that any settlement can be documented and signed on the day of the mediation. (In our experience, if everyone is prepared to settle the case but one side lacks the authority to close the deal, the settlement may be jeopardised. There is much to be said for settling the case on the day whilst all parties are focussed on the real issue.) Finally, clients must understand that for a mediation to be successful there will inevitably be an element of compromise – mediations are rarely, if ever, about complete capitulation i.e. one side will not give in totally to the other's demands – some discount must be offered. If a client will not accept this then a mediation will not succeed and it is better to proceed speedily to trial rather than incurring the costs of a fruitless mediation.

To prepare for the mediation we would look at the following types of issues: questions concerning those attending the mediation on the parties' behalf – authority, role/status etc; a summary of the claims being made or defended; any other matters which are in issue either in the litigation or elsewhere; damages being sought including any special damage; interest calculated up to the date of the mediation and at a daily rate thereafter; summary of the factual/legal and, possibly, technical issues; strengths and weaknesses – an honest appraisal including realistic best outcome at trial and realistic worst outcome of a trial; any problems with our evidence (e.g. a witness we know will not come across well in the witness box); details of any offers made to date; costs spent so far; estimated costs to end of trial; trading/business imperatives; ways we can challenge opponent; background information about opponent; lowest offer client would be prepared to accept etc.

The financial analysis will cover our client's loss and how much of that is legally recoverable (looking at legal principles governing remoteness of loss etc); interest being incurred; costs incurred to date and cost to trial and any appeal. These figures need to be analysed in conjunction with the strengths and weaknesses of the claim – if a claim is very strong then any discount to reflect the costs and vagaries of trial will be low. If the claim is less strong then the client may be prepared to accept a discounted sum at a mediation to reflect the possibility of losing. English court rules also provide that the losing party must pay the winning party's reasonable legal costs (including experts' fees etc) and may also be liable for any reasonable success fee or insurance premium which the winning party has incurred in connection with the litigation. Clearly these costs need to be quantified as accurately as possible (it is permissible to ask the other side for an estimate of their costs to date and to trial) – the higher the risk of losing, the higher the risk of paying the other side's costs and the more room there may be for accepting a big discount on the amount claimed.

Is your case suitable for mediation? Under what circumstances do you attempt to avoid mediation?

The type of situational factors that may result in a successful mediation include clients who wish to maintain an on-going business relationship (joint venture parties; partners; computer supply & maintenance contracts; agency & distributor contracts etc). Clients who are both professional litigators (e.g. insurers) also tend to be more amenable to litigation. Other factors which militate in favour of mediation being successful include disputes involving confidential information which the parties may not want made public; disputes where a speedy or imaginative solution is needed; and disputes where the result is a difficult one to predict (i.e. it is a case where a horse trade is possible since the case is fairly evenly balanced between the parties). Where one party may be wiped out (i.e. made insolvent) by any litigation then it may be in both parties interests to settle before that happens.

Mediation is not always appropriate - sometimes direct negotiation between the parties or their lawyers may suffice and there is no need to add an extra layer of costs and complexity to the settlement negotiations. Sometimes a "knock out blow" would be available in any litigation e.g. one party could easily get summary judgment on the claim because it, for example, involves a dishonoured cheque for which almost no defence is available. A claim may not have correctly been brought in the English courts in the first place (e.g. in the face of a US jurisdiction clause in the relevant contract) and therefore the lawyers should apply to strike the claim out on jurisdiction grounds rather than mediate. Litigation remains necessary in certain circumstances e.g. where the client requires a court remedy such as an injunction or where there is a need for a test case or precedent (e.g. a tax case which will affect millions of taxpayers). Litigation can be vital if the opponent is obstructive, fraudulent or vexatious or there are concerns about enforcement.

The mechanics of mediation: Who should attend? Why? Is it useful to have some preliminary settlement discussions before the mediation?

The mediation should be attended by the clients and lawyers. It is the client who has authority to make binding decisions in the course of a mediation. Obviously if the client is a corporate entity, then different individuals within the company will have differing financial levels at which they have authority to settle. It is important therefore that an individual with sufficient seniority and authority attends the mediation in order that they can sign any settlement agreement. If a settlement is likely to require Board approval then one option is to agree with the Board in advance the parameters of settlement i.e. the lowest offer the client would be prepared to accept – or if your client is likely to be making a payment the highest offer the Board will authorise it to make. The person who attends the mediation would then have authority to approve a settlement within these limits.

Lawyers should never accept an offer in the face of a client's opposition or coerce a client into accepting – lawyers can advise on their view of the advantages and disadvantages of accepting any offer and the decision they would make – ultimately, however, it is the client's decision.

To some extent lawyers need to be able to set aside their litigious, adversarial mind set at the mediation (win at all costs!) and adopt a more pragmatic, commercial approach – mediation is to some extent a horse trade and the lawyer has to accept that even if the client has a great legal case sometimes it is better from a business point of view to settle a case quickly at an early stage – this saves management time, cash flow etc.

Nevertheless lawyers must remain committed to their client – it is all too easy in the heat of a mediation, and particularly in the face of an assertive mediator eager to keep up his record of all his mediations settling, for a client to accept a settlement which "sells him short". Lawyers have to be alert to this – it is a fine balance between accepting that a client may need to compromise but not settling for settling sake and allowing the client to enter a poor deal.

In terms of preliminary settlement discussions before the mediation, the parties will typically have tried direct negotiation before attempting to mediate. If this has been unsuccessful it is unlikely that the prospect of mediation will make direct negotiation any more successful. It may however be worth the defendant making some offer (perhaps in part 36 format in English litigation) as a starting point for the mediation.

There are various barriers to effective communication when negotiations are direct (between lawyers or between clients). The assistance of a neutral third party can help overcome these barriers by managing the process, opening communications, instilling a problem-solving approach, encouraging brainstorming of options, and overcoming deadlock. In addition, parties tend to be unwilling to disclose confidential information about their view of the case to an opposing party during direct negotiations. They may also be reluctant to disclose their thinking on settlement proposals or any concerns they may have about the dispute or a settlement of the matter. The mediation can bridge these gaps by allowing private and confidential discussions between the mediator and each party and, in turn, managing each party's expectations about the process, the negotiations and the likely outcome.

What are the five best strategies and practices to obtain a successful outcome at a mediation?

Prepare the case in detail and anticipate your opponent's strategy

Cases are won on detail (or at least lawyers should be on top of the detail). Too many lawyers approach mediation as a high level settlement discussion whereas in our experience those discussions only come about after the strengths and weaknesses of each side's case have been tested. You will be telling the other side that it will lose the case if this goes to litigation. You will need the detail to back up your claim.

Give a strong (but not aggressive) opening speech

Too many lawyers do not bother with this, but it is normally the first time the client on the other side has been told that he is going to lose the case and why. The effect of this cannot be underestimated, whatever the poker faced reaction of your opponent (and often the reaction can be quite telling!).

Don't simply hand over a written statement; mediation is to a certain degree about theatre – a written statement will rarely be read at the mediation.

Prepare the client thoroughly for what it is going to face

Explain the concept of "reality testing" by the mediator and the fact that the mediator is not looking for justice, merely settlement.

Be prepared to walk out

Consider setting a deadline to leave e.g. plane to catch. This can of course have a negative effect so it will depend on the particular scenario and opponent but it can help parties avoid a situation where they start the real negotiation at 7 or 8pm in the evening after 9 hours of posturing. However, there is a view that this is simply part of the psychology of the process. It is worth bearing in mind that a significant proportion of mediations that do not settle on the day often settle within one to two weeks afterwards.

Get the settlement agreement signed there and then

Take a first draft along on a laptop. Many parties will change their mind on a deal after a night's sleep. It is a fact of mediation that the parties are more likely to compromise in the small hours after hours of negotiation. If a deal is agreed it needs to be memorialised there and then, however painful for the lawyers!

What are the English laws on ADR?

Mediation and other forms of ADR techniques were initially developed in the United States in the 1970s and were perceived as a means of alleviating some of the difficulties in the US legal system (such as expensive and lengthy proceedings, the vagaries of civil jury trials and the risk of punitive damages awards). The concept of ADR crossed from the US to England in the 1980s and the Centre for Effective Dispute Resolution (CEDR) (the main mediation body in the UK and now one of the largest in Europe) was founded in 1990. However, prior to 1999, there was resistance to using ADR amongst the majority of legal practitioners and their clients. Possible reasons for this reluctance included the strong adversarial legal culture in England, a perception that suggesting some form of ADR might be seen by the other side as a sign of weakness and a general lack of court encouragement. However, in 1999, English civil court procedure underwent a huge change. Several years earlier, Lord Woolf (a senior judge) had been commissioned to review the English civil legal system which was perceived to be slow, cumbersome and expensive. It was governed by the arcane Rules of the Supreme Court (RSC) which had been in existence in one form or another for over 200 years. Lord Woolf made a number of suggestions for reform in his two "Access to Justice" reports. Woolf was particularly impressed by the examples of ADR he had seen in places like the US and Australia and recommended that it be adopted more widely in England and that litigation be a matter of last resort. His proposals were largely embodied in the Civil Procedure Rules (CPR) which came into force in 1999 and replaced the RSC.

Whilst the CPR introduced changes across all areas of court procedure with the aim of making litigation quicker, cheaper and more effective, ADR was a key component of the reforms. It was the first time that court rules had addressed the subject of ADR. Subsequent amendments to the rules have further emphasised the importance of ADR.

Civil Procedure Rules

Somewhat surprisingly, there is no dedicated section on ADR in the CPR but there are references throughout. These include:

  • Part 1 – the overriding objective - the court has a duty to encourage the parties to use an ADR procedure if appropriate and to facilitate the use of such a procedure.
  • Part 3 & 26 – The court's case management powers include the ability to stay the proceedings for a certain period to allow ADR.
  • After statements of case have been filed (the allocation stage) the parties can request a one month stay to attempt to settle the claim through negotiation or ADR.
  • The practice direction on pre-action protocols provides that parties should, prior to issuing proceedings, consider whether some form of ADR procedure will be more suitable than litigation and should provide evidence that ADR was considered. There are also pre-action protocols for specific types of dispute (e.g. professional negligence, construction disputes and so on) that provide for the parties actively to consider ADR.
  • The costs rules (part 44.3) provide that the conduct of the parties before, as well as during, proceedings will be taken into account when making a costs award including the extent to which parties followed any relevant pre-action protocols and the efforts they made to try to resolve the dispute. This allows the court to penalise in costs a party who has refused to participate in ADR even if the party subsequently succeeds at trial.
  • There are also a number of different court guides which set out the approach of that particular court in encouraging ADR. For example, the Commercial Court (a court in London which deals with high value business disputes) has devised an order directing the parties to attempt ADR. Many courts have now launched their own mediation schemes.

Case Law

The new rules generated interest but there was still no radical change in litigation practice notwithstanding the clear duty on solicitors to consider ADR. However the Court of Appeal (led, at that time, by none other than Lord Woolf) began handing down a series of decisions in which they emphasised the requirements of the new regime and the costs consequences for clients and lawyers who failed to mediate. As a result of these cases, mediation is now very much in the main stream in England.

Government Pledge

In March 2001, the Department for Constitutional Affairs (the government body responsible for the legal system) pledged to promote mediation. It stated that government departments would only go to court as a last resort and that mediation would be used in all suitable cases where the other party accepted. Various measures were put in place to monitor the effectiveness of the pledge including annual reports. In the most recent report the government reported that mediation had been attempted in 374 cases in 2008/9, with 271 leading to settlement - a success rate of 72%. The Ministry of Justice has estimated that the use of ADR saved £26.3m. In the previous year, ADR was attempted in 311 cases and succeeded in 68%.

Court Schemes

There have been a number of local court schemes in the UK introducing judicially recommended and, even mandatory ADR. These include schemes in the Court of Appeal, the Patents Court, Technology & Construction Court (TCC) and the Central London County Court. The latter has introduced the innovative "speed mediation". Under this scheme, mediations have a maximum duration of three hours because the court building has to close at 7.00pm sharp!

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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