In coercive methods of dispute resolution in the UK, the parties are required to participate because the judgment or award will be final and binding, subject only to limited rights of appeal. No commercial organisation can run the risk of a wrong decision against it with the prospect of enforcement in the courts. Most will therefore participate in the process to ensure their case is heard. A consequence of this practice has been long trial lists. To reduce these and the costs of litigation, the UK courts have boldly adopted the new Civil Procedure Rules 1998, which transfer to the judge significant powers to manage the case.

Early identification of the real issues in the case. can only come about if it is investigated and analysed at a much earlier stage than in the past. Underpinning this approach is the idea that disputes will be resolved early and at reduced costs if both parties are aware of the real issues.The natural inclination of some organisations to keep their options open increases the costs of dispute resolution and prolongs the process. If a dispute is to be resolved early, it is necessary that the parties quickly establish realistic levels of expectation. This requirement for dialogue and ‘reality testing’ is recognised in the UK rules, which give the judge power to stay the proceedings whilst the parties adopt ADR.

The approach is not new but follows similar trends in the US, Canada and Australia, among other jurisdictions, for the adoption of different ADR processes.

Mediation

Of all the ADR processes, mediation has shown considerable success in bringing the parties to a settlement. Mediation is an extension of the negotiation process in which the appointment of a third party fundamentally alters the relationship between the parties in negotiation. If the appropriate mediator is appointed and he adopts the appropriate structure, mediation will facilitate settlement. The mediator does not take sides or usually issue a recommendation but acts as a facilitator for the parties to explore and identify a mutually acceptable solution to the issues. It differs from arbitration and conciliation in that the mediator does not usually have to make a decision or give a recommendation which determines the issues.

The choice of mediator is crucial to success. His main attribute must be his ability to create an environment in which the parties can recognise the other side’s perception of the situation to allow a change in attitude. This is achieved by creating an environment of mutual trust and understanding to allow the parties to determine a structure for resolution. A significant role is to facilitate communication between them, either through the mediator, where they are separated and the mediator sees each alone (private meetings or ‘caucases’) and directly, where they are together with the mediator (plenary meetings).

Mediation is a consensual process, whose objective is to seek a mutually satisfactory solution, but the standards are set by the parties themselves, not necessarily based on legal analysis. The solution must be one that can be fulfilled by the parties and is a form of party empowerment. Frequently, if settlement is not achieved during mediation, the effect of the process leads to settlement shortly afterwards.

Conciliation

Conciliation is the process whereby the parties select a person to assist negotiations by making recommendations which are not binding on the parties; it has a more formal structure than mediation. Conciliators form a view about the issues, make comments and recommendations to either party to attempt to settle the dispute. The conciliator moves between the parties, examines each complaint and narrows the issues. He accumulates information in a balanced way, identifies the real interests and exposes unrealistic expectations.

The International Chamber of Commerce (ICC) has published Rules of Conciliation where the conciliator may conduct the process “. . . as he thinks fit, guided by the principles of impartiality, equity and justice.” When the parties sign a settlement agreement, the rules stipulate that any such settlement is binding and must remain confidential, except to the extent that its application or enforcement requires disclosure.

The new FIDIC forms of contract adopt conciliation as the ADR process following the approach taken by the World Bank. Clause 20.4 allows the parties to refer any matter in dispute to a Dispute Adjudication Board (DAB) appointed by the parties. Within 84 days of the reference, the DAB is required to give a reasoned decision.

UK adjudication

The period for a decision of the DAB under FIDIC is very long. In the UK, there has been considerable experience of Statutory Adjudication, where the period is only 28 days, suggesting that the very brevity of the period encourages the parties to concentrate on the issues. The adjudication procedure results in an adjudicator’s decision, which will be binding upon the parties until the dispute is finally determined by legal proceedings or by arbitration (providing arbitration is provided for in the contract or the parties agree to arbitration) or by agreement between the parties.

The experience of adjudication can be summarised:

  • The adjudicator is usually appointed by a nominating body 2-3 days from referral with an administration charge of approximately $200

  • The referring party makes its submission within a week of referral at an approximate fee of $15 000

  • The response by other party is normally within ten days of the referring party’s submission

  • There are usually some procedural issues lasting about one week at an approximate fee of $1000-$5000

  • The adjudicator makes his decision one week later, 28 days from the referral

  • The decision is enforced by courts, with summary judgment within 4-5 weeks of application

  • There is no appeal on matters of procedure, errors of fact or misapplication of law, but only on jurisdiction

  • The dispute is finally decided in arbitration or litigation, but the parties normally accept the decision.

There has been a revolution in the approach to the resolution of disputes. It is no longer appropriate for those involved simply to grind out the details required to prove their case. Everyone involved needs to consider the efficiency and economy of the process. Time and cost can now properly be considered to be factors in achieving fairness in proceedings.

Alternative Dispute Resolution procedures will inevitably promote settlement in most cases and should be adopted early. Mediation has shown itself well suited to resolving international disputes where the organisational structure of the parties allows settlement without a third party audit. In other cases, the experience of adjudication in the UK shows that a short concentrated process will provide high quality decisions that will prevent further dispute.