Alternative dispute resolution strategies

This article originally featured in Corporate Disputes, an e-magazine dedicated to the latest developments in corporate and commercial disputes.

It is now a quarter of a century since the Woolf Reforms and the Civil Procedure Rules (CPR) which brought alternative dispute resolution (ADR) to the forefront of English legal public policy_ This push continues, with a further consultation on mediation in the civil justice system held in 2022 – initially focused on small claims, but possibly heralding a greater role for court-administered ADR processes. The approach of the courts, practitioners and legal thinkers continues to evolve, in ways that can risk leaving behind the awareness and strategies of commercial parties. This article considers where the courts are now, and how businesses' strategies need to continue to adapt. It considers some of the strategic options open to parties across the dispute resolution spectrum. Finally, it will look at some of the specific approaches to mediation and negotiation that can set the conditions for success.

Commercial contracts have long included tiered dispute resolution clauses, often with requirements for the parties to conduct meetings or negotiations before litigating. These potentially serve a purpose in focusing parties' minds before going to court. However, such 'agreements to negotiate' were historically considered unenforceable as they usually lacked legal certainty, and it is arguably pointless to oblige a party to do something which must be undertaken willingly to have any prospect of success.

That has changed over the last decade, partly in response to developments in other common law jurisdictions. In Emirates Trading Agency LLC v Prime Mineral Experts Pte Ltd, the English court upheld a provision obliging the parties to "seek to resolve the dispute or claim by friendly discussion", staying an arbitration in order to do so. In Ohpen Operations UK Ltd v Invesco Fund Managers Ltd, the test for enforceability of an ADR provision was whether the process to be followed was sufficiently clear and certain on an objective basis, without requiring further agreement between the parties. In exercising its discretion to stay proceedings, the court would have regard to public policy and the CPR's "overriding objective" (to deal with cases justly and at proportionate cost) – factors almost inevitably in favour of ADR.

Parties whom the court believes have behaved unreasonably risk criticism. A key sanction remains in costs, where usual awards may be varied to reflect a party's lack of cooperation, such as in Thakkar v Patel. The court considered that case clearly suitable for mediation, as the sides were not far apart, and the ultimate costs were disproportionate. In Cranstoun and another v Notta, a party rejected a reasonable offer made after mediation. In Gregor Fisken Ltd v Carl, the parties disregarded express encouragement from the court to mediate. In all these cases, the parties considered recalcitrant were punished by the court through costs awards.

There are various lessons to take from this. First, parties should presume that the courts will hold them to their tiered dispute resolution provisions, even if they have previously considered them to be 'boilerplate'. Failure to do so risks preliminary litigation and costs If one actively seeks tiered dispute resolution, one should set out the processes as clearly and as objectively as possible. Even if a contract does not provide for tiered dispute resolution, parties will still be expected to consider ADR, and respond positively to any direction by the court or proposal by the other side. Express consideration of ADR options will help insulate a party from criticism and transfers costs risk to their opponent.

With the right approaches to ADR, even cases which seem intractable may be resolved, or their issues narrowed. ADR can usefully be seen as a spectrum of options which a sophisticated party can use to get the best outcome as effectively as possible.

Sir Geoffrey Vos, the Master of the Rolls, has even questioned the term 'alternative' dispute resolution - on the basis that it should just be part of dispute resolution, and not a side-option to the default path of litigation. Although mediation is a key pillar of ADR, the terms are not interchangeable, and both ADR and mediation cover various different processes. At one end of the ADR spectrum is negotiation between the parties, with or without the involvement of lawyers. While negotiation is often thought of as just a fact of commercial life, and many in business feel that they should be able to do it as second nature, anyone involved in an interparty discussion of a dispute or potential dispute is already engaged in an ADR process. That needs to be reflected in a clear strategy around objectives and methods, even if one of those decisions is to adopt a de-escalatory, informal approach.

At the other end of the spectrum is arbitration, albeit compulsory when agreed in advance, and a separate subject which will not be covered here. Some industry-specific adjudication schemes are available, including for consumers. Simple, binding processes such as expert determination are useful where a dispute turns on the quantity or quality of commodities. Where large projects are ongoing and maintenance of relationships is crucial there can be standing mechanisms, such as dispute adjudication boards. There are many more specialist processes, but the essence is that parties are free to agree a mechanism that is most likely to meet their needs. This strategy should be bespoke and flexible, but often is not While parties should be considering tailoring the dispute resolution process at the transaction stage, this does not prevent them from agreeing other dispute resolution mechanisms when disputes arise.

Parties and practitioners often feel that they 'know' mediation, and that naturally colours a belief as to how it might be used or how effective it would be in any dispute. Mediation is a form of negotiation, with a range of structures and approaches. At the most basic level, does one want to mediate early, or treat it as a last resort before trial? What role does one want for lawyers? Often, parties focus on getting the 'best' mediator, usually one known to them or their lawyers, or with the best general reputation. While a good mediator is essential, their personal style and preferences should not determine the process, which should be party-controlled. The most sophisticated parties should be looking for the mediator who best suits their strategy, and is best equipped to understand the factual and legal context of the dispute.

Formal position papers or opening statements are familiar from many mediations but are not obligatory. It may be helpful in complex disputes for the mediator or the other side to have clear details of chronology, reasoning or quantum. It may also be useful if a party is deliberately keen to rehearse the more formal litigation process and show or check the strength of the arguments. But it is not always the best approach. A mediator may prefer to start with introducing the process, which often works better with parties or practitioners who are less experienced. Setting out firm stances in writing may also encourage negotiating positions from which parties find it difficult to move to reach agreement.

Broad categories of mediation include facilitative, evaluative and transformative. Facilitative mediation essentially facilitates and enhances the parties' negotiations. This can improve the information flow between parties, and their confidence in the process, particularly where there may be an imbalance in power or resources, while leaving parties in control of resolving the dispute. In evaluative mediation, the mediator will take a more active role in assessing the parties' positions, including guiding them on what he thinks the outcome would be in litigation. This type of mediation may be judge-led in some jurisdictions and is similar to other concepts such as 'early neutral evaluation'. This 'bargaining in the shadow of the law' may be what a party wants, if they believe they have a strong case, but may come at the expense of a more pragmatic commercial solution.

Transformative mediation is essentially an ambitious evolution of facilitative mediation, designed to go further in 'empowering' the parties to resolve their conflicts and recognise each other's needs and interests. That may seem less relevant in the commercial context but may be valuable where there are commercial partners or other stakeholders where a long-term relationship needs to be recovered and ideally enhanced.

The study of ADR, including the strategies and techniques parties do, can or should adopt, is well-established as a subject of study in leading law schools and publications. That is in addition to the large body of analysis and advice about negotiation-type skills and processes in the fields of business, psychology and self-help. It is impossible to summarise all those ideas here, but one should be aware that they exist, and that there are opportunities to understand better how oneself and one's counterparts do business and see the world. Key ideas to consider do, however, include the 'barriers to negotiation' and how to get around those, such as 'reactive devaluation' (the tendency to devalue the other side's proposals or ideas). Development of a best alternative to a negotiated agreement (BATNA) provides a valuable metric for assessing a solution and preventing over-investment in reaching a (potentially bad) agreement.

A well-conducted mediation, with the right advice at hand, should enable parties to understand their options and revisit these approaches on a dynamic basis. That ensures the best possible chance of resolving or at least narrowing the issues and limiting the costs and risks of litigation.