This report presents an evaluation of the Commercial Court's practice of issuing ADR Orders in selected commercial disputes (Chapters 2 to 4) and a review of the Court of Appeal's mediation scheme established in 1996 (Chapter 5). The broad findings of these evaluations are combined in the final Chapter of the report with the results of an earlier evaluation of the Central London County Court mediation scheme to draw conclusions about court-based ADR initiatives that might be helpful in guiding future policy development on ADR.
ADR Orders in the Commercial Court
Since 1993 the Commercial Court has been identifying cases regarded as appropriate for ADR. In such cases Judges may suggest the use of ADR, or make an Order directing the parties to attempt ADR. If, following an ADR Order, the parties fail to settle their case they must inform the Court of the steps taken towards ADR and why they failed. Thus although the Court's practice is non-mandatory, ADR Orders impose substantial pressure on parties.
This study assessed the impact of ADR Orders on the progress and outcome of cases and explored reactions of practitioners to ADR Orders. The results are based on information collected from court files and interviews with solicitors relating to 233 ADR Orders made between July 1996 and June 2000.
During the first three years reviewed in the study, the annual number of ADR Orders issued was about 30. There was a substantial increase toward the end of the period, with some 68 Orders being issued in the final six months. This was the result of one or two judges significantly increasing the number of Orders issued.
ADR was undertaken in a little over half of the cases in which an ADR Order had been issued. However, the figures suggest increasing use of ADR towards the end of the review period, supporting evidence from elsewhere of a developing interest in the use of ADR among commercial litigants.
Of the cases in which ADR was attempted, 52% settled through ADR, 5% proceeded to trial following unsuccessful ADR, 20% settled some time after the conclusion of the ADR procedure, and the case was still live or the outcome unknown in 23% of cases.
Among cases in which ADR was not attempted following an ADR Order, about 63% eventually settled. About one fifth of these said that the settlement had been as a result of the ADR Order being made. However, the rate of trials among the group of cases not attempting ADR following an ADR Order was 15%. This compares unfavourably with the five percent of cases proceeding to trial following unsuccessful ADR.
The most common reasons given for not trying ADR following an ADR Order were:
ADR Orders were generally thought to have had a positive or neutral impact on settlement. A small minority believed that the Order had hindered settlement. Orders can have a positive effect in opening up communication between the parties, and may avoid the fear of one side showing weakness by being the first to suggest settlement.
Experience of successful ADR following an ADR Order was overwhelmingly positive. The factors most valued were the skill of the mediator, the ability of ADR to get past logjams in negotiation, the opportunity to focus on the strengths and weaknesses of cases, and client satisfaction. There was also a perception that successful mediation avoids trial costs, leading to substantial savings for clients.
When ADR was unsuccessfully attempted in compliance with an ADR Order there was a lower level of satisfaction. Concerns centred on the shortcomings of neutrals, the intransigence of opponents, and the problems caused by pressuring unwilling opponents through an ADR Order to come to the negotiating table. However, some solicitors felt that even in the absence of achieving a settlement, the ADR process had been constructive.
ADR Orders issued by the Commercial Court are said to have had a significant impact on commercial practice and the advice given by the profession to clients about commercial dispute resolution.
ADR in the Court of Appeal
The Court of Appeal ADR scheme, established in 1996, is a voluntary scheme in which the court invites parties to participate. Cases are not individually selected, but, with the exception of certain categories of case, a standard letter of invitation is sent to parties involved in appeals. Since 1999 parties refusing to mediate have been asked to give their reasons for refusal. If both parties agree to mediate, the Court of Appeal arranges mediations and mediators provide their services without charge.
Between November 1997 and April 2000 some 38 appeal cases were mediated following agreement by both sides. In an additional 99 cases one party was willing to mediate. When the scheme had the benefit of a full-time manager, there was a significant increase in the proportion of cases in which both sides agreed to mediate.
The most common reasons given for refusal to mediate were that:
About half of the mediated appeal cases settled either at the mediation appointment or shortly afterwards. Among those cases in which the mediation did not achieve a settlement, a high proportion (62%) went on to trial. This suggests that there are special characteristics of appeal cases that need to be considered in selecting cases for mediation. Blanket invitations to mediate, particularly with an implicit threat of penalties for refusal, may not be the most effective approach to the encouragement of ADR at appellate level.
Solicitors' experiences of successful mediations in appeal cases were largely positive. However, there were expressions of concern, even among cases that were successfully mediated, about clients' perceptions of being pushed into mediation and sometimes being pressured to settle.
Solicitors involved in unsuccessful mediations occasionally complained about having felt compelled to mediate, even though there had been little scope for compromise. There was evidence of an occasional mismatch between the mediator's approach to the mediation and the expectations of the parties and their advisers.
Although solicitors generally approved of the Court of Appeal taking the initiative in encouraging the use of ADR in appropriate cases, it was felt that there was a need for the adoption of a more selective approach, such as that being used in the Commercial Court.
Bringing together the results of research on ADR Orders in the Commercial Court, the Court of Appeal ADR scheme, and the Central London County Court mediation scheme, the following conclusions can be drawn:
Voluntary take-up of invitations to enter ADR schemes remains at a modest level, even when the mediator's services are provided free or at a nominal cost.
Outside of commercial practice, the profession remains very cautious about the use of ADR. Positive experience of ADR does not appear to be producing armies of converts. Explanations may lie in the amount of work involved in preparing for mediation, the incentives and economics of mediation in low value cases, and the impact of the Woolf reforms. More pre-issue settlements and swifter post-issue settlements may diminish the perceived need for ADR in run-of-the mill civil cases.
An individualised approach to the direction of cases toward ADR is likely to be more effective than general invitations at an early stage in the litigation process. This would require the development of clearly articulated selection principles.
The timing of invitations or directions to mediate is crucial. The early stages of proceedings may not be the best time, and should not be the only opportunity, to consider using ADR.
Subjective perceptions of the profession support the view that successful ADR saves the likely cost of proceeding to trial and may save expenditure by promoting earlier settlement that might otherwise have occurred. Unsuccessful ADR can increase the costs for parties.
ADR generally results in a high level of customer satisfaction. Mediators with excellent skills and familiarity with the subject-area of the dispute produce the highest levels of satisfaction. The approach of mediators needs to be matched with the expectations of parties and their solicitors.
In order to maximise take-up of court-administered schemes there is a need for dedicated administrative support.