Who’s Who Legal brings together Rosemary Howell of Strategic Resolution, Kenneth Feinberg of Feinberg Rosen, Tim McFarlane of McFarlane Legal, Jonathan Lux of Stone Chambers, Patricia Barclay of Bonaccord Ecosse and Machteld Pel of Pel Mediation to discuss the types of disputes, increasing sophistication of users, the popularity of mediation, and changes in the market in their jurisdiction.
Bonaccord Ecosse Limited,
WWL: What types of disputes end up in mediation in your jurisdiction? Does this mark a change from previous years?
Rosemary Howell: Mediation is a widely used dispute resolution process throughout Australia. It is hard to think of an area of dispute where mediation is not part of the repertoire for resolution.
I don’t believe there is a significant change in volume from previous years.
Kenneth Feinberg: I agree with Dr Howell. Most private disputes are subject to voluntary mediation in which all sides to the dispute agree to mediate. But mediation is much less common if the government is a party; in such cases, the government may not be as willing to mediate to lose the leverage it has in turning the dispute resolution process over to a third party.
Tim McFarlane: My experience in Australia is similar to Dr Howell’s. In relation to Mr Feinberg’s comment, I am receiving an increasing number of requests for disputes to be mediated prior to the commencement of court proceedings.
Jonathan Lux: I can only speak for England – and even then mainly for London, which is a very popular international dispute resolution centre. I deal mostly with international commercial matters where there is certainly an increasing number of mediations. My impression is that mediation is becoming increasingly popular for most types of disputes including workplace, family, community and “political” (witness the activity of bodies such as Mediators Beyond Borders). The better known mediation becomes, the more its realised that it can be applied in any domain where disputes can arise – the whole spectrum of human activity!
Patricia Barclay: In Scotland I do not feel we are using mediation to its full potential, particularly in commercial disputes. The Gill Report was pretty dismissive of using mediation in “serious” disputes and I am getting kick-back from major law firms when I propose it. The majority of my clients are R&D-based companies and for them the real advantage of mediation is the speed of result – they simply can’t afford to wait on the courts. I am finding that the parties are very receptive to mediation but may be put off by their lawyers. We are seeing a lot of non-litigators in mediation and I think this is very helpful, as they are much more likely to be looking at the overall needs of their clients rather than looking at how it might run in a litigation.
Machteld Pel: The total number of mediations in 2011 was estimated at 51,690 by the Netherlands Mediation Institute (in 2009 it was 47,300). In 2011 mediations took place in the following categories:
Business to business
However, my own practice is growing in the category of business mediations, especially in building and IT cases and I know that my colleagues have the same experience.
WWL: What impact has the growing sophistication of users had on the mediation process? Has the success rate remained similar?
Machteld Pel: More and more businesses have used mediation in many cases, so they naturally become more experienced and thus sophisticated. By contrast, others have no experience at all. In labour cases mediation is rather popular, so many clients know about it. However, this is not really influencing the process in my opinion and if it is at all it is in a positive manner. It is very useful if professional parties and their lawyers really know about mediation and the process and are obliging to “real” mediation, where the parties take part and play the most important role. Lawyers are there to help them with reality testing and to formulate viable solutions and contract clauses. We use a lot of caucuses, but only to help negotiations develop. Normally we start together and have some breakout sessions. I really do hope we keep it this way, otherwise I would feel like we would be losing the real assets of mediation.
Jonathan Lux: There is reliable published data in England to suggest that mediation enjoys a success rate of approximately 90 per cent; that comprises about 75 per cent settling on the day and up to a further 15 per cent settling within a period of days or perhaps weeks thereafter. The mediation hearing used to be something of a war of attrition – often stretching late into the night or indeed the early hours of the next day. My impression is that the increasing sophistication of users is leading to better preparation for the mediation and an (in my view sensible) inclination to adjourn rather than force through a settlement on the day. In short, fewer cases may be settling on the day but an increasing number are settling within a measurable period thereafter. Hopefully the “quality” of such settlements is better, being less the product of exhaustion and more the product of careful consideration by fresh minds. Overall, I suspect the success rate has remained similar.
Rosemary Howell: Lawyers are certainly more experienced in engaging in mediation and the experience extends beyond litigation lawyers. However, I would challenge the notion that they are really more “sophisticated”. Despite their experience, I think lawyers still fail to recognise the difference between “resolution” and “settlement”. They remain positional bargainers, unaware of, or disinterested in, their clients’ interests. They consistently fail to “increase the pie” in commercial situations where it is quite possible.
However, their growing experience has had consequences:
• the role of general counsel is noticeable in influencing mediator selection and fees - there is growing price sensitivity;
• price sensitivity extends beyond general counsel and fees are an observable factor in mediator selection;
• lawyers have a greater awareness of mediator styles and practices and can be observed choosing a particular mediator to obtain a desired outcome;
• there is an observable preference by litigation lawyers for mediators with a more evaluative style;
• lawyers often refuse a preliminary conference on the basis of cost without having a proper understanding of how it can add value to the process; and
• the ‘faster’, ‘cheaper’ rhetoric used by mediation advocates has not been helpful. Because (as explained above) many lawyers appear to lack an understanding of the range of benefits which mediation may bring, they see settlement on the basis of legal rights as the only outcome. Accordingly they do not recognise the value of mediation in, for example, narrowing the scope of a claim, resolving some of the issues or confirming to the parties that the dispute is one which requires an umpire. Similarly the judiciary apparently still sees mediation as “docket control”, to shorten court lists rather than recognising where mediation fits.
The “success rate” question remains difficult to answer because:
• there is a continuing challenge to define “success”, which makes the comparison between jurisdictions and time periods difficult;
• we have some statistics but they are not up to date, nor are they across the field; and
• the mediation field is very broad and extends far beyond the legal realm. We don’t really have an overview of the entire mediation landscape so success rate data is limited to particular segments. We do need to continue to wrestle with this issue if we are to encourage bolder legislative sponsorship of ADR.
Kenneth Feinberg: Again, I agree with the thrust of Dr Howell’s comments. I do not believe that “the growing sophistication of users” has had much impact on the mediation process or its success rate. I’m not even sure what the phrase “growing sophistication” means. The process is still dominated by the very litigators retained by mediation users to litigate in the courtroom. When dispute resolution is transferred to the mediation table, the same lawyers are involved with all of the strengths and weaknesses that go with it. So I conclude that “growing sophistication” has had no appreciable impact on the process. Nor do I believe that such “sophistication” has influenced the success rate.
Tim McFarlane: I have found the comments of Dr Howell and Mr Feinberg on this question very thought-provoking.
I agree with the comment as to what “growing sophistication” means in this context. Certainly lawyers have a better understanding of what is expected from the mediation process and that doesn’t necessarily just mean that everything settles at mediation. It means seeking to limit the issues for trial, coming up with agreed statements and taking other practical steps to minimise the costs to the parties.
In my experience, it is often not the question of sophistication or experience [that matters], but an issue stemming from the personality of the lawyers involved; and that may, in turn, be passed onto the parties. These comments may also apply in part to the mediators, as Dr Howell refers to, and, in my experience, there is some truth in her observations.
In relation to Dr Howell’s final point, and as I have noted, I am finding that over time these benefits are being identified and used in practice.
WWL: Has mediation become a more popular option for clients? Are the attitudes of lawyers and governments changing?
Patricia Barclay: The Scottish government has come out strongly in favour of arbitration in relation to its own contracts – I suspect influenced by the Law Society, which is trying to establish Scotland as a centre for international arbitration, and certainly the 2010 Act does remove many of the drawbacks to arbitration and offers a very attractive process. I hope that this and the greater exposure at law schools may lead to a greater interest in ADR among the legal community here, but I am not confident of a short-term improvement. There is an obligation to tell clients about alternatives to litigation, but of course that information will come with a lawyer’s opinion. Most clients thankfully don’t have enough disputes to make fair comparisons, but generally if given the chance to experience mediation most are pretty enthusiastic about it, especially in relation to speed of settlement.
Kenneth Feinberg: Mediation in the United States has become more popular – but I offer the caveat that it will never replace, or have a significant impact, on the prevailing litigation system here in the United States. There will always be an important place for mediation, but I reject the notion that it is the “wave of the future,” or will replace litigation as a dispute priority. The litigation system here in the United States is so engrained in the fabric and history of our nation, that it is wishful thinking for those who believe it will replace the conventional way of resolving disputes in America. I do not believe that “the attitudes of lawyers and governments” are changing. Yes, mediation is increasingly popular, but it poses no threat to traditional litigation. It is the exception to the rule here in the United States. It serves society best in two situations: complex disputes involving highly sophisticated litigants; and “small claims” disputes, eg, landlord/tenant, single-employee discrimination claims, disputes involving small amounts of money, etc.
Rosemary Howell: I think Australia is at the crossroads right now. Governments have tinkered with mediation but could not be said to have embraced it wholeheartedly. Both pieces of enabling state legislation have been repealed. There is speculation that our federal legislation is in danger of repeal. There is a draft report from our Productivity Commission (which has a section on ADR) and a Law Reform Commission reference, which may result in encouragement to governments that they should take a bolder leadership role in sponsoring ADR processes. The greatest strides have been taken in areas of consumer protection where consumer/ lobby groups have persuaded governments that power imbalances penalise particular groups of litigants. So, for example, banks are required to mediate with farmers before taking legal steps to foreclose, and there are a number of other examples of mandatory mediation in this category.
The current environment within Australian law firms is very difficult. The market is mature, there is tremendous pressure on fees and many lawyers find it a challenge to “make budget”. This helps to explain why the use of mediation for the very early resolution of disputes is probably not the lawyers’ first choice. There is much talk of the need for a dispute to be “ripe” before mediation should be undertaken, which means that much of the legal work leading to a trial has been undertaken before mediation is recommended or attempted. Experienced mediators tend to find this disappointing.
Apart from pressure from general counsel to reduce litigation bills, there is little evidence of an increasing demand from clients for a greater use of mediation.
Tim McFarlane: Dr Howell has summarised the position in Australia well. However, as in any country, there are differences between states and territories and in Victoria there are some differences worth noting.
The Victorian state government enacted the Civil Procedures Act 2010, which introduced a concept of overarching obligations, both on the lawyers and the parties themselves and in fact obliges them to certify that the claim or defence has a proper basis and further the parties must make a reasonable attempt to settle the dispute using defined appropriate dispute resolution techniques. It also important to remember that it is not only courts, but an increasing number of tribunals, that have mediation as part of the system, and in many instances provide their own mediators to assist the parties.
I am finding – and it may in part be driven by the legislation – that lawyers are willing to engage in mediation well in advance of the issue of proceedings, and it is leading to wider acceptance by litigants, and not only the institutional parties such as banks and insurers. Unlike Mr Feinberg’s experience, I think the cost of litigation is becoming prohibitive at all levels of society, so that parties are looking for viable alternatives and mediation is one such process that is gaining wider acceptance.
Jonathan Lux: Most clients are industry-based and their success depends largely on their reputation in the particular marketplace. As we know, very few clients have any appetite to do business with their counterparty at the end of contested court or arbitration proceedings, whereas mediation, even if overall settlement isn’t achieved, may well save the relationship and open up the possibility of new business. As more clients come to realise this, along with the advantages of cost and speed, so mediation becomes more popular.
There are numerous reasons lawyers must take mediation seriously, including:
• contracts containing multi-tier dispute resolution clauses including a mediation stage;
• it may well amount to professional negligence to fail to advise a client on mediation;
• the English court has power to order costs sanctions if a party unreasonably declines to mediate;
• most importantly, with an increasing awareness of mediation on the clients’ part, lawyers will need to proactively engage with their clients in mediation if they are to remain their clients’ preferred business advisers; and
• the UK government strongly endorses mediation. An incidental advantage is that its success enables the “justice” budget to be slashed!
Machteld Pel: Yes, the use of mediation is growing and rather popular – especially in labour and family cases, but also more and more in business, government and community cases. The attitude towards mediation is also changing. Our government is really promoting the use of mediation and trying to create new legislation about mediation and the quality of mediator.
Until now it had seemed the legislator had a preference for arbitration and conciliation (binding advice and dispute committees) in civil cases and for the ombudsman and objection procedures in administrative conflicts as well as for the other procedures mentioned above. All of these proceedings have been regulated by law for a considerable time. The legislator is now adding mediation to the list of regulated areas of dispute resolution, albeit just for some aspects of mediation.
The sombre mood about the market share, or the development in the market with regard to mediation, is not shared by the professional body of mediators. The Netherlands Mediation Institute (NMI) research questioned mediators about the development in the market. 70 per cent of the mediators expect (strong) growth. The most frequently quoted reason for an expected increase is greater public familiarity with mediation and the rise in the costs of court procedures.
People in the Netherlands are inclined to resolve their own conflicts, and they use many extrajudicial conflict resolution procedures and will go to court only as a last resort. Generally speaking, the legal culture is also a culture of negotiation and settlement out of court. Still, there are different tendencies. Among lawyers there is still some resistance against advising clients to go to mediation, and some lawyers still see the use of mediation as an attack on their professional pride: “If our negotiations don’t succeed, what could a mediator accomplish?” Nevertheless, mediation in commercial matters (4,160) has surpassed the use of arbitration (1,300).
WWL: Would mandatory mediation be a credible option in your jurisdiction? If it is already in place, how effective is it?
Machteld Pel: Mandatory mediation is not yet in place. In some cases judges have the obligation to offer mediation, but this cannot be mandatory. In the new draft code on mediation the government is trying to implement mandatory mediation, but as far as I can predict, I do not think it will succeed as mandatory mediation seems too contradictory towards the principle of voluntary participation.
Barbara Baarsma, in her recent publication The Mediation Market from an Economic Perspective, states that mediation in the Netherlands is still in a developmental stage and that mediation, because of its unfamiliarity in the public at large, is still used much less frequently than would suit this innovative product, and which, with exponential growth, could take over work from the hands of the legal profession and other advisers.
Kenneth Feinberg: There are two schools of thought about mandatory mediation in the United States. On the one hand, any dispute resolution process that is “mandatory,” undercuts the very idea of mediation as a voluntary option to litigation; compelling disputants to mediate is a bad idea because effective mediation requires, as a prerequisite, the willingness of parties to come to the mediation table. Under this theory, compulsion through mandatory mediation is designed to fail, since the parties have not voluntarily decided to try it.
On the other hand, mandatory mediation does have one huge benefit: it exposes the disputants to the wisdom and efficiency of mediation. It undercuts wrong perceptions and misinformation about mediation by forcing the parties to learn first-hand about the benefits of negotiated settlement through mediation. Mandated mediation becomes a marketing tool to educate the parties by showing first-hand how mediation can work to settle disputes. In this sense, mandatory mediation helps demonstrate the efficiency and success of mediation to those otherwise misinformed about its benefits.
Rosemary Howell: We already have mandatory mediation in a number of circumstances and there is some evidence that the settlement rate is close to that achieved in voluntary mediations. The recently published report for the European Parliament, prepared by Professor Guiseppe De Palo, has provided very encouraging data which is being used in Australia by various ADR bodies to persuade governments of the benefits achieved by mandatory mediation.
Tim McFarlane: As Dr Howell has commented, this does already exist and the reality is that courts and tribunals increasingly encourage parties to go to mediation. This leads on to the issues identified by Mr Feinberg.
While parties may be reluctant and not strictly attending on a voluntary basis, I think that in many instances it will come down to the skill of the mediator to get the parties to see the wisdom in seeking to resolve the matter.
Jonathan Lux: In England we don’t have mandatory mediation in commercial cases but, rather, a halfway house of court encouragement in the form of what can be substantial costs sanctions against those who unreasonably refuse to mediate or fail to engage with a proposal to mediate.
I would be against mandatory mediation in that I fear it could become a box-ticking exercise. Also, with the increased number of mediations may come an increased number of undertrained or underperforming mediators who may give the process itself a bad name.
Patricia Barclay: I agree with Jonathan that mandatory mediation would just become a box-ticking exercise and so would not be desirable – but I do think we would benefit in Scotland from similar “encouragement” as they have in England. The vast majority of civil cases settle anyway, so encouraging this to be explored at an early stage can only be beneficial to the client.
WWL: Have you noticed an increase in the number of mediators? Has this had any notable impact in terms of competition in the marketplace?
Rosemary Howell: There is a significant increase in the number of mediators across the entire field. Within the legal environment, mediation is now the preferred retirement option for former judges and for lawyers looking to reinvent themselves. At the other end of the spectrum, increasing numbers of new graduates are showing an interest in entering the ADR field.
The training bodies here are consistently training far more mediators than there are mediations to be undertaken and new mediators are regularly seeking assistance in building their mediation practices. Building a mediation practice is a common theme of training programmes.
This has had a number of consequences that are quite similar to the circumstances observable at the bar. While the most senior and experienced mediators are busy and charge substantial fees, there is significant price competition among the less experienced mediators. Many government panels exploit this by fixing very low fees and relying on the ranks of under-employed mediators to fill these roles.
Another consequence is the growth of mediator specialisation, where mediators seek to distinguish themselves and secure premium work through experience in particular fields, such as intellectual property and construction. This appears to be having an influence on mediator selection and in moderating fee pressure in commercial mediation. Mediators working outside the commercial arena, in family law and consumer claims, for example, have pursued the specialisation route to secure work but remain in a very price-sensitive environment since their disputants are all privately funded.
Overall, there is much more evidence that mediators are devoting much more time and resources to marketing their skills to their target audience.
Kenneth Feinberg: Yes, in the United States everybody wants to become a mediator. I must hear at least twice a week from former judges or senior lawyers who want to become mediators. I am amazed at the number of individuals who have decided that mediation is something they want to do – even if they have no experience or do not have the personalities or background to be effective mediators. No matter. They believe they can help resolve disputes based on experience in the courtroom or in the practice of law. There are still, in the United States, only about a dozen superior mediators with the skill and experience to resolve complex, high-stakes disputes. Yet there are hundreds, maybe thousands of individuals who now promote themselves as mediators. The competition has become increasingly fierce here in the United States – although, again, when it comes to high-stakes mediation, it is usually the case that the same dozen mediators are called on to carry the load, eg, Eric Green, Layne Philips, Dan Weinstein, Francis McGovern, Jonathan Marks, etc. There are a few others but most successful former judges and lawyers who want to mediate may be retained for one case or two; but it is only a handful of experienced mediators who are repeatedly retained to attempt to resolve major disputes.
Tim McFarlane: I agree with the excellent comments of both Mr Feinberg and Dr Howell.
In addition it is worth noting that some years ago, a national body was established here in Australia – the Mediators Standards Board – to oversee the practice and approval standards for mediators and to establish a process for accreditation for people seeking to act as mediators. The fact that this body was established and has support from around Australia is indicative of the growing number of people acting as mediators, drawn from a wide range of professions such as solicitors, barristers, counsellors, architects, engineers, psychologists, health-care professionals… the list goes on.
Jonathan Lux: There is certainly an increased, and still-increasing, number of mediators – which is increasing competition in the marketplace. Hopefully the cream will rise to the top and those who are able will build a reputation and acquire a following – for the good of mediation and for the good of the fledgling profession of mediator in my jurisdiction!
Patricia Barclay: There are indeed more people training as mediators than the market will support; however, many people who undertake mediation training are not necessarily looking to set up as mediators. Some may be looking to use these skills in different ways: to improve their commercial negation skills (which was, indeed, my own reason for training initially), to enhance skills for an HR role or to better understand their roles as advocates for a party in mediation. That said, however, we still have more mediators than the market will bear. I believe increased specialisation should be encouraged, but in a tight market those who are already established are likely still to claim a good mediator can mediate anything – although I think this is a mistaken view.
Machteld Pel: At the end of 2011, the NMI published a report on the number of mediators, the number of mediations and the developments over the past five years. At the end of 2011 there were 4,493 registered mediators, of whom 931 were certified. From 2012 the registration system changed, and currently there are only about 2,500 registered mediators. A small minority work exclusively as mediators (only 9.8 per cent), and the rest engage in additional professional services. For certified mediators this figure is 21 per cent and for registered mediators it is 6.8 per cent.
In 2011, certified mediators performed 29 mediations on average (14 in 2004) and registered mediators performed seven (three in 2004).
On average, 69.8 per cent of the mediations result in full agreement, 13.8 per cent in partial agreement and 16.4 per cent in no agreement. Over the years these percentages have remained more or less constant.
In theory mediation is suitable for many more cases than it is now used. I think the problem with expanding mediation on a grand scale is that it presents difficulties in agreeing on the manner of the handling of the conflict for those who have been involved in one, and in the choice of mediator. That is why a good referral system is required. This, in turn, requires the referring parties to be familiar with mediation methods and for them to be able to provide adequate referrals.