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Mediation - the implement of choice for disputing parties

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legal matters

The ADR tool box, to coin Lord Mustill's phrase, contains a variety of dispute resolution procedures, for which disputing parties can reach when they want to avoid the rigours of litigation. Some forms of Alternative Dispute Resolution, such as arbitration and adjudication, are so commonplace as hardly to be considered 'alternative'at all.

Others, such as 'early neutral evaluation' and the 'mini-trial', despite having a lot to recommend them, seem not to have caught on, at least not yet.

Perhaps the most popular and widely understood form of ADR is mediation. The process involves a skilled mediator who shuttles between warring parties and facilitates a compromise that, far from being based upon any legal rights or tested evidence, seems to utilise a combination of common sense and black magic to bring about a successful commercial result. In most cases, no one is more surprised than the protagonists themselves.

With such results, it is not surprising that the courts have recognised the advantages of mediation and have written into the Civil Procedure Rules a requirement that the courts should encourage the parties to use it.

Many commercial concerns are also keen to avoid the demands of litigation in favour of negotiated settlement. Some go so far as to include an ADR clause in their contracts, so that any dispute is either negotiated or referred to mediation before the litigation button is pushed.

With such a track record, mediation had got to be worth a go. This must have been IBM's thinking when it signed up to supply Cable & Wireless (C&W ) with information technology services throughout the world, pursuant to a Global Framework Agreement (GFA).

The GFA provided that any dispute would first be negotiated through a series of 'problem escalation procedures' involving increasingly senior layers of management, failing which they would attempt to resolve it through mediation with the Centre for Dispute Resolution (CEDR). When the parties fell out over the quality of IBM's services and the standards by which they were judged, and the problem escalation procedures failed to produce a negotiated settlement, C&W refused to refer its £45 million claim to mediation and commenced litigation proceedings instead.

C&W said the ADR clause was unenforceable.

It relied upon Lord Denning, who had said that the law cannot recognise a contract to negotiate because it is too uncertain to have any binding force. An agreement to mediate, it said, is no more than an agreement to negotiate, and is unrecognised by English law.

In Cable & Wireless plc v IBM UK Ltd (judgment 11.10.02), the court held that the ADR clause was enforceable and stayed the litigation proceedings for what it hoped would be a successful mediation. The court relied upon the following factors when reaching this decision:

The dispute resolution procedures of the GFA negotiated by the parties at the outset clearly intended that litigation was a last resort.

The ADR clause was not an agreement to negotiate. The parties had agreed to participate in a recognised and defined procedure, namely mediation pursuant to the CEDR's Model Mediation Procedure.This gave the negotiations structure and certainty.

The courts recognised that mediation could provide solutions which were beyond their powers to provide. To decline to enforce an ADR agreement would fly in the face of public policy.

Even if an ADR clause did not specifically refer to the CEDR's procedures it could still be enforceable. Provided there was an unqualified reference to ADR, the courts would not find it hard to find a minimum duty of participation sufficient to make the provision certain and enforceable.

The reference to ADR is analogous to an agreement to arbitrate.Usually the courts would adjourn legal proceedings or space out the case management timetable to allow for ADR.

The courts will usually apply the ADR provisions, unless the mediation would be a completely hopeless exercise.

As mediation is set to increase in popularity as the implement of choice for disputing parties, it seems that the courts will continue to encourage its use, and in some instances may even send disputees packing unless they have tried it out.

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