LORD Woolf reported an intriguing statistic this month when he said that mediation delivered “a £1bn cost-saving” a year for business by diverting cases from the courts. The former Lord Chief Justice added that commercial litigation costs UK Plc £33bn per year. An average case going through the courts costs £1m and consumes three years of wasted management time.
For this reason and others, mediation is sure to become more popular in the downturn. Professor Karl Mackie, who has headed up the Centre for Dispute Resolution (CEDR) for nearly 20 years, says that he has recently seen a growth in cases being mediated – and he reckons that the “litigation tsunami” is yet to hit.
Mackie points out that mediation has had a role in previous recessions. “In the last recession we were involved in the Atlantic computers crash and the Maxwell pensions case,” says Mackie. He also adds that he is “fresh from a mediation with two FTSE 100 companies” involving a dispute worth several hundred million pounds.
Certainly, the mediation industry is cranking up for the downturn. Lord Woolf was speaking at the launch of a new mediation service specifically targeting FTSE 250 companies which he, alongside Cherie Booth QC, will spearhead. The Institute of Chartered Accountants in England and Wales (ICAEW) and the ADR Group have joined forces to launch the new scheme boasting a panel of 20 mediators split equally between leading accountants and lawyers. It will include partners from the top four accountants and Joseph Wan, chief executive of Harvey Nichols, as well as Booth and Lord Woolf. The idea is for the accountants to sit alongside lawyers to hear disputes.
“We think that the opportunity for a sensible commercial deal is heightened by two mediators from different professional backgrounds working with the parties to find sensible commercial solutions when there is a lot of money potentially at stake and organisations are facing financial pressure,” explains Mike Lind, managing director of the ADR Group. “The last thing that they want is a two-year high profile, maximum publicity litigation. It can be damaging and this is a way of minimising that exposure.”
Wolf von Kumberg, European legal chief at the international aerospace defence company Northrop Grumman, is a panel member on the ICAEW/ADR Group scheme. “They are trying to bring the mediation message to the finance directors who are controlling the purse strings and not through the traditional route – the lawyers,” he says. “Mediation allows the company to have control over the process and not legal system.”
Michael McIlwrath, General Electric’s head of litigation based in Florence, is another mediation enthusiast. “GE generally has been pushing mediation for 15 years as part of our “early dispute resolution” process. It’s a tool we think that any sane business lawyer ought to know and to know well,” he says.
But take-up varies hugely. McIlwrath reports that, “as a rule of thumb”, probably one offer of mediation made by GE out of 20 is accepted. Von Kumberg reckons his company mediates 80 per cent of all disputes. While mediation has become more entrenched in the US, Canada and the UK, there is resistance elsewhere.
Von Kumberg tries to build a mediation clause into all international contracts “as standard”. “At the end of the day it varies as to which part of the world you’re dealing with,” he says. “Parties often don’t have a real understanding of what mediation is: a non-binding procedure where nobody gives an award or judgment and it’s whether parties agree to a settlement. In many countries around the world that process still isn’t really understood.”