We are pleased to introduce our latest ADR e-bulletin summarising recent developments reported through our blog, ADR notes.
From across our network, we report on a number of interesting ADR developments in Asia, New York and the UK in particular, including the UK government's plans for implementing the EU ADR Directive.
We also report on the most recent Herbert Smith Freehills initiatives to gather research data on the use of mediation and other forms of ADR - through a landmark London convention on international dispute resolution and through our recent client research on the use of mediation in Hong Kong.
You can visit the blog any time for the latest updates on ADR topics, including searching by category or key word. It can be found at:
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A. UK DEVELOPMENTS
1. Before you leave the mediation – a reminder of the need to be clear whether a settlement agreement is subject to contract
A recent High Court decision has underlined the need for parties who have agreed to settle a dispute to specify very clearly if they intend that the terms agreed will not be immediately binding on them and will be subject to the negotiation of a more formal contract: Bieber v Teathers Limited  EWHC 4205 (Ch).
Although the case was in the context of bilateral settlement negotiations via solicitors’ correspondence, the message applies equally (if not more so) to settlements reached through mediation or other structured forms of conciliatory ADR. It highlights that, provided the agreed terms are sufficiently clear and certain as to the parties’ obligations, the court will be loath to accept that the parties did not intend them to be immediately binding on them in the absence of clear words indicating that.
Applied to the mediation context, it also underlines the importance of the parties giving proper forethought to all the issues that will need to be addressed in a settlement agreement if the mediation is successful. Click here to read more.
2. Court decision discouraging stays or "windows" in trial preparation to allow for ADR
One way in which courts commonly encourage and facilitate the use of ADR in the context of litigation is to allow the litigants a pause in trial preparation to engage in mediation or other form of settlement negotiations. Such a pause may be in the form of a formal stay of the proceedings or by fixing a ‘window’ for such discussions when setting the trial preparation timetable.
However, in a recent decision, a judge in the Technology and Construction Court (a division of the High Court) refused to fix a window for mediation and, in doing so, expressed the somewhat controversial view that the fixing of any lengthy window to allow for ADR ‘is bad case management’ because of the resultant delays to the trial date and increased costs: CIP Properties (AIPT) Ltd v Galliford Try Infrastructure Ltd & Ors  EWHC 3546 (TCC). Click here to read more.
3. UK Government announces plans for implementing the EU ADR Directive and ODR Regulation
The UK Government has announced its plans for implementation of the ADR Directive and the ODR Regulation, both of which are aimed at promoting the use of ADR schemes in disputes involving consumer complaints throughout the EU.
While the Government is not at this stage pressing forward with a suggested proposal to restructure the entire UK landscape for consumer ADR, the plans include:
- the creation of a new "residual" ADR scheme to fill the current gaps in the existing consumer ADR landscape;
- the appointment of the Trading Standards Institute (TSI) as the UK’s competent authority to monitor ADR providers in the non-regulated sectors;]
- an 8 week extension to the standard 6 year limitation period for bringing court proceedings (in disputes covered by the Directive) in cases where ADR is ongoing at the expiry of the 6 year period; and
- new statutory obligations on businesses to provide information to consumers regarding the availability of ADR schemes.
Businesses engaged in selling to consumers in the EU will need to familiarise themselves with the new consumer information obligations and ensure that they take steps to comply, including by amending contractual terms and website information where necessary. Click here to read more.
4. Judicial support for dispute adjudication boards
Three separate court decisions in different jurisdictions have given support to dispute adjudication boards (DABs) as a form of dispute resolution and, more generally, the enforcability of contractual dispute resolution clauses.
DABs, which often comprise a panel of three members, provide a decision on a dispute which is binding pending any subsequent determination by a court or arbitral tribunal should one of the parties pursue litigation or arbitration. In this sense they are similar to adjudicators’ decisions – applying a "pay now, argue later" approach.
Two decisions in England and Switzerland last year both considered the provisions in the FIDIC suite of contracts (used extensively in the construction industry) that require referral of disputes to a DAB. In both cases, the courts held that the referral to a DAB was mandatory, with only limited exceptions – rejecting arguments that the parties could opt out of the process once the dispute had arisen and refer the dispute direct to arbitration or court proceedings (although, on the facts in the Swiss case, the court considered that an exception based on principles of good faith applied).
Shortly after those judgments, in an important decision in an arbitration context, the Singapore Court of Appeal upheld an interim award made by an arbitral tribunal giving effect to an obligation to promptly comply with a DAB decision. Our arbitration team comments on this Singapore decision on our Arbitration Notes blog here.
Underlying all three decisions is the view that parties should be held to their bargain where they have clearly expressed their intention to resort first to a particular form of dispute resolution (in this case DABs) before escalating the dispute to court or arbitration. Click here to read more about the English and Swiss decisions.
5. High Court finds that agreement to engage in time-limited "friendly discussions" is enforceable
In a surprising decision, the Commercial Court held that a dispute resolution clause requiring the parties to seek to resolve a dispute by "friendly discussions" constituted an enforceable condition precedent to arbitration: Emirates Trading Agency LLC v Prime Mineral Exports Private Limited  EWHC 2104 (Comm).
Although decided in the context of an arbitration clause, it appears from the judgment that the same conclusion would have been reached if the agreement had required such discussions before issuing court proceedings. If this approach is followed in other cases, it will represent a stark change in the English courts’ position on agreements to negotiate in dispute resolution clauses – which has historically been that a bare agreement to negotiate is too nebulous and does not define the parties’ rights and obligations with sufficient certainty to enable it to be enforced.
However, it is important to note that the clause being considered in this case obliged the parties to engage only in informal discussions – as distinct from a more structured ADR process, such as mediation or conciliation. The decision’s relevance to the latter type of clause is worth considering, particularly as the conclusion appears at first blush to be at odds with the established line of authority regarding the enforceability of such structured ADR clauses. Click here to read more.
6. Latest judgment illustrating the limited scope for challenging an adjudicator’s decision
A decision of the Scottish Court of Sessions rejected various challenges to an adjudicator’s decision which alleged that the adjudicator (i) did not have jurisdiction to make the decision he did because he had adopted an overly restrictive review of his task by failing to entertain a relevant line of defence; and (ii) had unfairly failed to give the parties an opportunity to comment on factors taken into account in the decision: Bouygues E & S Contracting UK Ltd v Vital Energi Utilities Ltd  CSOH 115
The decision is a good illustration of the courts being astute to reject parties’ attempts to challenge the merits of adjudicators’ decisions by seeking to shoehorn the complaint into one of the very limited available grounds for challenge. As has been recognised in numerous judgments, any other approach would undermine the purpose of the adjudication regime, which is to provide a swift and binding (albeit provisional) resolution to a dispute and prevent ongoing argument/appeals de-railing contracts. Click here to read more.
7. Adjudicator’s decision not enforced due to a party’s misrepresentations in the appointment process
In a landmark decision, the Technology and Construction Court refused to enforce an adjudicator’s decision because the adjudicator had been invalidly appointed, due to misrepresentation by one party on its application to the appointing body. The decision is a clear warning to parties that objections to adjudicators must be made honestly and not for ulterior motives: Eurocom Ltd v Siemens plc  EWHC 3710 (TCC).
In essence, the court accepted that the party’s indication that various potential adjudicators had a conflict of interest was false or reckless and was designed to exclude those that the party did not want to be appointed. Although the courts have previously warned against improper interference with the adjudicator nomination process, this is the first decision to give that principle practical effect by refusing to enforce an adjudicator’s decision on the basis of such conduct.
Read more on the decision in our Construction team’s bulletin "Appointing Adjudicators – The Limits of Objection".
B. INTERNATIONAL DEVELOPMENTS
8. New Singapore Mediation Institute launched
On 5 November 2014, the Singapore International Mediation Institute (SIMI) was officially launched by Singapore’s Senior Minister for Law and Education, who described mediation as the “third jewel” in the crown of Singapore’s legal services landscape, alongside arbitration and international litigation.
SIMI, which has a partnership relationship with the International Mediation Institute (IMI), was founded by and is housed at the National University of Singapore Faculty of Law. As a professional standards body, SIMI will not itself conduct mediation sessions but will provide users with tools to make basic decisions on using mediation and choosing a suitable mediator. More details on SIMI’s remit can be found here.
9. Mediation within arbitration – a new Med-Arb-Med protocol in Singapore
One particularly interesting feature of the launch of the Singapore International Mediation Institute (SIMI) on 5 November 2014 (see above) was the announcement of a new arbitration-mediation-arbitration (‘Arb-Med-Arb’) protocol (“AMA Protocol“), under which the SIMI will work closely with the Singapore International Arbitration Centre (SIAC) to promote mediation within international arbitration.
Our Singapore office examines the new AMA Protocol in this post on our arbitration blog, Arbitration Notes.
10. Superstorm Sandy litigation ruling on hold pending parallel mediation
By way of update to our previous report (here), the New York federal court managing the consolidated Superstorm Sandy insurance litigation deferred ruling on a crucial insurance issue pending the outcome of mediation by the Federal Emergency Management Agency (FEMA), the US agency generally tasked with coordinating disaster response at the federal level.
Recognising FEMA’s and the relevant insurers’ commitment to engage in good faith negotiations to resolve the claims through mediation, a federal magistrate judge overseeing the litigation deferred issuing a ruling on the validity of policyholders' proofs of loss until the mediations conclude. Click here to read more.
11. New York state court green-lights mandatory mediation pilot programme
As we previously reported (here), the New York Supreme Court Commercial Division (a Manhattan-based division of the state court of first instance which exclusively hears complex commercial cases) has been considering a proposal for mandatory mediation.
The proposal has now been adopted and the 18 month pilot programme became effective on 28 July 2014, with one in every five cases filed in the Commercial Division now being subject to mandatory mediation. Click here to read more.
C. HERBERT SMITH FREEHILLS NEWS
12. Herbert Smith Freehills publishes ADR in Asia Guide
Herbert Smith Freehills’ Hong Kong dispute resolution team has launched its first ADR in Asia Guide, featuring a spotlight on mediation in Hong Kong. In particular, the Guide includes the results of our recent client research on how international corporates use mediation in Hong Kong.
If you would like an electronic copy of our Guide, please email email@example.com.
- summarises seven ADR processes and their use in Asia
- contains a practical guide to help you get the most out of mediation (with an emphasis on the procedures in Hong Kong)
- summarises the outputs of our recent client research (of around 100 clients and contacts), to enable organisations to benchmark themselves against their peers when assessing their dispute resolution options
The research indicates that mediation remains under-utilised in practice, despite being widely supported and recognised as having the potential to resolve disputes in a quick, cheap and confidential way. Read more about our client research in our Hong Kong Dispute Resolution e-bulletin.
13. Landmark convention in London produces new data on what corporate users need from ADR
Herbert Smith Freehills was pleased to be the principal sponsor of a major convention held at the London Guildhall on 29 October on "Shaping the Future of International Dispute Resolution". The occasion brought together over 150 leading stakeholders involved in ADR from over 20 countries – including corporate users, ADR providers, advisors, the judiciary, legislators and educators.
Hosted by the Corporation of the City of London, and with keynote addresses from the Lord Mayor of London, Fiona Woolf, and Master of the Rolls, Lord Dyson, the convention was organised with the cooperation of over 20 of the world’s leading arbitration and ADR organisations.
The focus of the convention was to identify whether there is a gap between what corporate users need from international mediation and arbitration and what leading ADR service providers including dispute resolution institutions are delivering – and, if so, how that gap can be bridged. Almost half of the 30 panellists contributing their views were corporate users, including senior in-house counsel from GE, Shell, Akzo Nobel, Standard Chartered Bank, Hinduja Group, BT, Orange and many others across a broad range of sectors.
Importantly, the occasion also provided an opportunity for the audience to contribute their views in a structured format. Delegates used individual voting keypads to register their responses to various propositions throughout the sessions, with the results displayed instantly for discussion. In addition, iPads allowed delegates to post and read live comments and submit questions for the panellists. Given the paucity of research data in this area, the information gathered will serve as useful intelligence for the future development of ADR initiatives both in the UK and globally. Click here to read more.
14. ADR Practical Guide no. 5: Preparing for Mediation
Herbert Smith Freehills’ publication "Preparing for Mediation" is the fifth in our series of ADR Practical Guides, designed to provide clients with essential practical guidance on various processes falling under the banner of ADR, with a particular focus on mediation.
This fifth guide highlights issues that parties preparing for mediation should turn their minds to before the day, to maximise the effectiveness of the process.
15. ADR Practical Guide no. 4 : Selecting your mediator and drafting the mediation agreement
Herbert Smith Freehills’ publication "Selecting your mediator and drafting the mediation agreement" is the fourth in our series of ADR Practical Guides, designed to provide clients with essential practical guidance on various processes falling under the banner of ADR, with a particular focus on mediation.
This fourth guide identifies key factors that will be relevant to consider when:
choosing a mediator for a particular dispute; and drafting or negotiating the mediation agreement that will govern how the mediation is conducted.