Thirty years ago I entered the world of construction law in England to find myself immersed in a system of litigation and arbitration that often felt like all-out war. Proceedings were commenced and pursued aggressively, often preceded by only the most cursory of letters before action. Cooperation between lawyers was generally non-existent. It seemed that the aim was to cause the opposing party inconvenience and expense, and to notch up as many bloodied noses as possible at interlocutory skirmishes in the early stages of proceedings. Finally, at the doors of the court (and after the majority of legal costs had been incurred), discussions might at last take place about the possibility of settlement. Arbitration seemed little different from court proceedings. In fact, there were great opportunities to exploit the problems caused by multiparty disputes in which some parties were bound into arbitration clauses and others not.

My journey from English barrister to international mediator divides neatly into two halves, which to me seem like the dark ages, followed by an age of enlightenment. For fifteen years I felt like a lone voice (although I almost certainly was not) trying to persuade my clients that there was a different way. Many hours were spent urging clients to explore at an early stage whether, rather than incurring massive legal costs, the money saved could be put on the table to narrow the gap between the parties, which could help that gap to be bridged. Stubbornly, clients resisted, not wanting to make the first settlement move for fear of being seen as weak. With no structure to support negotiations, they headed on until, on the day of trial, the enormity of the risks of trial sank in and, too late, the risks were truly appreciated.

The second half of my professional life truly feels like an age of enlightenment. Of course, my experience reflects only the changes in the UK domestic legal system. However, the situation that brought about those changes is not unique to the UK and the English response has inspired similar developments elsewhere. Other jurisdictions have of course had their own journeys but all, in their own ways, are moving towards the increasing use of mediation as a positive, efficient and cost-effective way of resolving both domestic and cross-border disputes. In some jurisdictions the impetus for change has come from the increasingly unaffordable cost of litigating disputes. In others, the driving force has been the lack of a reliable tribunal, able to determine disputes within a reasonable time.

Whatever the reasons behind the change in particular jurisdictions, mediation, particularly in construction disputes, has become a worldwide phenomenon. The current state of affairs could not be better illustrated than by looking at the ICC, which today appoints mediators and administers mediations all over the world. Although the ICC has always offered mediation as an ADR option ( indeed it is the default option under its ADR Rules - the introduction of a new set of rules specifically designed for mediation sends a fantastically positive message to the international community that mediation is a tool that can and should be used as a constructive means of resolving commercial differences and [Page35:] protecting business relationships. The ICC's support of mediation goes beyond administering cases to include education and training. Its annual International Commercial Mediation Competition draws students from all around the world, ensuring that the next generation of lawyers and businesspeople will regard mediation as the measure of first resort when things go wrong. In a short number of years, mediation has gone from being a novelty to an essential everyday dispute resolution tool.

This article seeks to illustrate that journey by reference to the English experience, and then to consider, with particular reference to construction disputes, some ways in which parties have learnt to use mediation to assist them resolve their disputes.

The English experience

In 1990 the Centre for Effective Dispute Resolution (CEDR) was set up with the support of the Confederation of British Industry and leading law firms, business and the public sector. Its aim was to bring mediation into business practice and the judicial system. A lot of persuasion was going to be needed to overcome the scepticism of hard-nosed lawyers. My own early experience of mediation in the early 1990s was sparse but largely positive. I felt that we did not really understand the process or how to get the best out of it. Legal representatives who were used to the cut-and-thrust of the courtroom were suspicious of a process they regarded as smoke-and-mirrors. Worst of all, settlement of a dispute in its early stages was sometimes perceived as a threat to their own practices. Lawyers were resistant to change, and would not adopt this novel procedure unless a change of mindset could somehow be forced on them. As the gatekeepers to their clients, the lawyers had to be persuaded of the need to consider mediation. A change of culture was needed.

Litigation in England was not working, at least for the litigants themselves. The costs of civil litigation were spiralling out of control, to the benefit of lawyers. The unnecessarily combative behaviour of lawyers seemed to be encouraged by the complexity of the system. They were not sufficiently controlled and directed by the judges. Worst of all, perhaps, was that whilst we had moved on from interminable litigation, epitomized by the fictional case of Jarndyce v. Jarndyce in Charles Dickens' novel Bleak House, the time taken from commencement of proceedings to the end of a trial was still utterly unacceptable. The opportunity was there to convert civil dispute resolution into an effective and user-friendly system which worked for litigants.

It was in these circumstances that in 1994 the Master of the Rolls, Lord Woolf, was tasked by the Lord Chancellor with reviewing the rules and procedure of the English civil law and producing a report.1 Lord Woolf's Access to Justice Report published on 26 July 1996 sought to identify principles that the civil justice system should meet to ensure access to justice. He concluded that the system should:

(a) be just in the results it delivers;

(b) be fair in the way it treats litigants;

(c) offer appropriate procedures at a reasonable cost;

(d) deal with cases with reasonable speed;

(e) be understandable to those who use it;

(f) be responsive to the needs of those who use it;

(g) provide as much certainty as the nature of particular cases allows; and

(h) be effective, adequately resourced and organised.

This report led to a watershed in 1998 with the publication of the new Civil Procedure Rules,2 which underpinned the court process with the 'overriding objective' of enabling the court to deal with cases to be dealt with justly and at proportionate cost. This objective meant, so far as possible:

(a) ensuring that the parties are on an equal footing;

(b) saving expense;

(c) dealing with the case in ways which are proportionate -

(i) to the amount of money involved;

(ii) to the importance of the case;

(iii) to the complexity of the issues; and

(iv) to the financial position of each party;

(d) ensuring that it is dealt with expeditiously and fairly;

(e) allotting to it an appropriate share of the court's resources, while taking into account the need to allot resources to other cases; and

(f) enforcing compliance with rules, practice directions and orders.

Judges were now to be encouraged actively to manage cases to see that the objective was adhered to. Perhaps the most explosive change in this adversarial system was the imposition of a duty on the parties to help the court to further the overriding objective. They now had to cooperate and work together. This was the start of a change in thinking. [Page36:]

Four factors now combined to work in favour of the adoption of mediation in the mainstream.

The first factor was the introduction of pre-action protocols in the Civil Procedure Rules. The Pre-Action Protocol for Construction and Engineering Disputes3 prevents parties from suing first and talking later. The objectives of this protocol were threefold:

(a) to encourage the exchange of early and full information about the prospective legal claim;

(b) to enable parties to avoid litigation by agreeing a settlement of the claim before commencement of proceedings; and

(c) to support the efficient management of proceedings where litigation cannot be avoided.

Now, for the specific purpose of attempting to settle disputes without litigating, the parties came under an obligation to engage in a process by which information is exchanged, the claim is outlined in sufficient detail to be understood, and answered properly rather than by the bald denials that were often put forward. Litigation is the last resort, not the first, and there are sanctions for non-compliance. The protocol cannot be ignored. The culmination of the protocol process is a meeting, to be attended by the parties, their lawyers and any insurers, to agree what are the main issues in the case, to identify the root cause of disagreement in respect of each issue, and to consider whether, and if so how, the issues might be resolved without recourse to litigation. Suddenly there is a major signpost towards mediation.

Should the parties fail to progress from pre-action protocol meeting to mediation, the second factor now came into play. In their new role as modern case managers, the judges devised forms to be filled in when parties attended their first appointment for a case management conference, in which it was necessary to say whether a stay of the proceedings was required to enable a mediation to take place. Judicial pressure could now be applied to see that mediation was properly considered, and that every encouragement was given by building in space for a mediation in the timetable.

The third factor at play was the willingness of the courts to support mediation by costs sanctions for those who plough on regardless to a trial. In Dunnett v. Railtrack [2002] EWCA Civ 302, the Court of Appeal endorsed for the first time the principle that a party that wins its case and would normally expect to recover its legal costs from the loser might be deprived of some or all of those costs if it has unreasonably refused to mediate. This really gave mediation the kick-start it needed.

The final factor resulted from a change in the thinking of lawyers. This was led to some extent by self-interest amongst lawyers in private practice. Seeing the emergence of mediation as a potential threat to income, many lawyers now trained as mediators themselves. Some did so in order to provide a new income stream to make up for lost trial fees. Others trained so as to gain a better understanding of the process and to enable them to advise clients about the pros and cons of mediating and to represent their clients effectively at mediations, or because they saw in mediation the possibility of dispute resolution without the need to send bewigged champions expensively into court to do battle. Whatever the reason, inevitably, familiarity with the process led to lawyers being more comfortable with recommending and attending mediation, and to a better and more informed use of mediation as a dispute resolution tool.

In-house counsel have generally followed a different path, but leading to the same destination. The threat to income is not a problem for them as it is for those in private practice, although there may be the threat of the legal department being reduced in size if disputes are settled by mediation rather than going to formal resolution. Reduction in the fees paid to external lawyers can be an incentive to try mediation, and in-house counsel are increasingly the target of articles and training in mediation. Many organizations are recognizing the benefits of online dispute resolution tools for consumers, which increase familiarity with mediation as a process for all kinds of disputes.

These factors have combined to bring about a revolution. In construction and engineering disputes in particular, it has now become common practice to consider and explore the possibility of mediation in the early stages of a dispute. Whilst some parties will still go along with mediation merely in order to avoid a costs penalty, or in an attempt to fish for information, it is by no means uncommon for a settlement to be achieved despite their scepticism.

Although the courts now have power to control the costs and impose cost-capping orders, litigation of construction and engineering disputes continues to be expensive. The complexity of many civil engineering projects is such that the litigation following a project that goes wrong can become a multi-million pound industry in itself. [Page37:] Mediation is therefore becoming the norm, particularly where the alternative may be an investment of huge sums in legal costs. Even the most complicated mediation is likely to be a cost-effective alternative, and is certainly viewed as worth trying. Settlement rates at mediation demonstrate the effectiveness of the process.

This is a story of the influence wielded by the courts and by civil litigation rules in changing cultures within a single jurisdiction. Courts have power to impose sanctions on parties in a way that arbitration, being a process adopted by the consent of the parties, may not so easily be able to do. A court can penalize a party for refusing to mediate, but it is harder for an arbitrator to penalize a party for choosing to arbitrate. The decision to go to arbitration is what gives the arbitrator jurisdiction, but do the parties give the arbitrator jurisdiction to decide that they should, instead, have mediated? It seems to me that the leverage available in arbitrations is less than the courts enjoy.

This is not to say that arbitration is carried on without regard to the possibility of mediation. There is sometimes a tendency to believe that mediation is not appropriate for, or will not work in, international disputes. But the lawyers who represent disputants in the courts also represent parties to potential arbitrations, both within the UK and across borders. What has been shown to work in domestic disputes taken to litigation also works in arbitration and in international disputes, and the cultural change is spreading across the world. Although different jurisdictions have different approaches to mediation, there is a growing willingness to try it domestically, as well as across borders. Arbitration rules, such as Appendix IV to the ICC Arbitration Rules, encourage case management techniques by tribunals to manage costs and keep them in proportion to the dispute, including informing the parties that they are free to settle all or part of the dispute either by negotiation or through any form of amicable dispute resolution such as, for example, mediation under the ICC Mediation Rules and, where agreed between the parties and the arbitral tribunal, taking steps to facilitate settlement of the dispute, provided that every effort is made to ensure that any subsequent award is enforceable at law. Thus, mediation is being encouraged and adopted in disputes referred to arbitration. Moreover, users of mediation are becoming more sophisticated in their use of the process, as I endeavour to illustrate below.

How parties now use mediation to suit their particular needs

My early experience of mediation seemed to involve a lot of shuttle diplomacy by the mediator as the parties sat in their rooms. The process was familiar and fairly standard as the parties went through a dance of set steps in order to reach settlement. It is my experience that many users have now become more sophisticated in their approach to the mediation and their use of the mediator, perhaps due to familiarity with the process or because they now see the usefulness of a process which is completely flexible. The realization by parties that this is their opportunity to resolve their dispute enables them to devise processes within the mediation which make it relevant and useful to them.

I would like to illustrate this with accounts of three mediations that I have conducted in construction disputes, although I have changed some of the details to protect confidentiality. In some instances I have combined aspects of several actual mediations into one.

1. 'The Final Account'

The Employer (E) and Contractor (C) were in dispute at the end of a project for construction of a process plant. Like so many projects under the New Engineering Contract (NEC) forms, compensation events were not agreed and implemented along the way, and the management and programming of the project had unravelled. There remained at the end a multi-million dollar dispute about the final account - the very thing that the NEC contract is intended to avoid. There was also a counterclaim.

E and C were very substantial organizations from different continents and with different cultures. The dispute would have to be determined by litigation in the territory in which the plant was built, where there was little judicial expertise in construction law. It was thought that a judgment might take more than a decade to obtain. Meanwhile, the dispute was getting in the way of the business relationship between E and C.

The parties decided to try mediation. The massive and expensive exercise necessary to put together a detailed final account and to prepare the many claims had not been carried out, but a bottom line figure was available, and the heads of claim were known. Rather than go to the expense of preparing and answering a detailed claim, the parties wanted an opportunity to explore the issues at high level. [Page38:]

The in-house lawyers forged a collaborative relationship and worked hard to select decision-makers who could also work collaboratively. The mediation teams were matched, with each including people who had been involved in the project as well as the decision-makers (who were one stage removed and thus carried no baggage). Quantity surveyors were on hand to give impartial advice. Nonetheless, neither party attended with the expectation of reaching a settlement. The gap was too large, and the dispute too immature. The relationship and trust between the people who had been involved in the project had broken down so that they could not imagine collaborating and cooperating to reach a compromise.

A number of days were set aside for the mediation and the parties devised the process which would work for them. Claims which might give rise to contractual entitlements but which did not represent actual losses were parked for the purpose of the mediation only. The teams concentrated on actual expenditure and losses actually incurred by both parties. Each day a series of issues, some of them grouped together, were discussed in sufficient detail for the two decision-makers to agree on a fair value that could be allocated to each issue on a provisional basis, or agree to disagree. Some of the discussions were in small groups, and some with everyone together. As mediator, I assisted at all stages. Further information was requested and provided as necessary. Some items were completely agreed, some were agreed as to quantum only. The progress made was quite astonishing.

At the end of this process, it was possible to bring all of the provisional figures together to see a potential overall figure. This was not an end to the mediation, as it was not a foregone conclusion that we could simply add all of the provisional sums to come up with a settlement sum. There still remained the parked items. However, the process enabled the parties to move on to have a more conventional mediation in an attempt to reach a solution.

Although the gap had been narrowed, agreement could not be reached on the final day of the mediation. The parties now decided that they wished me to provide a mediator's recommendation as to the settlement sum, in accordance with an express term in the mediation agreement that either party could request a recommendation in writing (this was to have reasons but must not disclose anything said to me in confidence). I did so.

The parties were then able to meet for a final negotiation and a settlement was achieved. Throughout they had formulated the issues they wished to address and the way in which they wanted to address them, with my help. The final stage was a discussion of lessons to be learnt for future projects.

This was a very mature approach by parties who actually had little experience of mediation. They did not want a mediator reality testing and shuffling backwards and forwards between them. Instead they used the mediator and the mediation to get what they needed in the way they needed to get it. A facilitated workshop, followed by mediated negotiation and then a recommendation, enabled them to bridge what had seemed to be an unbridgeable gap. It was a great success all round.

2. 'The Defective Floor'

The Employer (E) under a design and build contract for industrial premises sued its Contractor (C) in respect of alleged defects in the floor slab. C, in turn, sued the consulting engineer (CE) and the subcontractor (SC). C, CE and SC each blamed the other for the defects, but all three of them agreed that they were cosmetic only. E regarded the defects as serious and warranting wholesale replacement, which involved relocation of its business at vast expense.

Everything was in issue. A great deal had been spent in costs and a trial loomed. Some parties had deeper pockets than others, so there was no certainty of reaching a settlement that reflected in monetary terms the risks faced by each of C, CE and SC. The difference in experts' opinions as to the extent of the defects, the need for remedial works, the appropriate scheme if remedial works were necessary, and the likely cost made it very difficult for the parties to take a view as to settlement. E was not in the construction industry and was reluctant to settle at a figure that would not pay for the works its expert said were needed.

The only thing that was clear as the mediation commenced was that this dispute was about money. E did not want the other parties to carry out remedial works and they had no desire to do so. [Page39:]

The mediation took place quite near the premises in question. Once the parties had taken the opportunity to explore the differences between them, a delegation was sent off to inspect the floor in order to have up-to-date knowledge of its condition and any worsening since it had last been looked at.

The return of the inspection delegation provided the opportunity for a new discussion about remedial schemes. The big issue was whether the floor needed to be replaced or could be repaired, and how to repair it in occupied premises.

Although C, CE and SC were at odds about responsibility for the state of the floor, they were able to work together in respect of the appropriate remedial scheme.

At some point, the parties were able to think again about whether this dispute really was just about money. E really just wanted a serviceable floor that did not diminish the value of the property. C was, of course, a contractor. The idea began to take root that C, with the benefit of a financial contribution from CE and SC, might carry out an agreed scheme.

The day ended but the mediation did not. By now a collaborative relationship had been established in which E and C wished to further explore the possibility of C carrying out the works. A new date was fixed. Meanwhile C visited E's premises to measure up, review the layouts and devise decanting schemes that might work. Details were obtained for repair options, with quotations from new subcontractors. C and E worked together on solving the logistical problems inherent in the solution.

The second mediation day arrived. Building on the trust that had now grown between E and C, a negotiation became easier. It was not a foregone conclusion that C would carry out the remedial works, and the parties considered this option alongside a monetary settlement at all times. At all stages it was important to view the repair option in the light of any additional payments that might be needed in respect of costs, relocation etc. Sometimes the money option was favoured. Sometimes the remedial option seemed preferable.

Ultimately, the parties agreed on a largely monetary option but this was made possible only because of the detailed work that had been done by C on the logistics of the remedial scheme. In working out how to decant the business and keep it going with minimal disruption, C had been able to devise several ways in which E could be helped to get what it needed. There were things C could do to facilitate the works, even if it did not itself remediate the floor. It could provide access, and assistance with relocation of goods during the works. This demonstrated to E that the floor could be repaired at relatively modest cost without the business being disastrously affected. That confidence-building work reassured E, which felt able to take a monetary settlement, safe in the knowledge that it could effect a satisfactory repair in its own time, with its own contractor. The dispute was now unlocked and capable of settlement.

But for the pressure of the mediation, and the flexible process adopted as a result of relationships built up during the mediation, this dispute would undoubtedly have ended in a four-party trial. The costs of the trial would have meant that there were no winners. Departing from the standard mediation model enabled the parties to resolve their dispute themselves, with direction and facilitation from me.

3. 'The Evaluation'

This is not one particular mediation, but a procedure that I have been asked more than once by parties to adopt. Turning on its head the usual principle that a mediator sits neutrally on the fence, never expressing a view until an impasse is reached (and perhaps not even then), experienced parties have asked me to evaluate first, and then mediate.

The dangers of expressing an early view are obvious. If a party thinks I am wrong, I may lose their trust. Negotiation may become impossible.

However, there are disputes in which the parties are experienced commercial bodies, ably advised by experienced lawyers, and well aware of the issues and the risks. There may be a large number of issues, with a raft of different permutations of answers. They may take the view that something more is needed than subtle (or even not-so-subtle) reality testing by a purely facilitative mediator, and that the dispute will only be unlocked by obtaining a view from a neutral third party on some of the issues. A mediator's view can be a cost-effective way of achieving this, albeit rough and ready. It has to be remembered that the mediator is unlikely to have seen all the documents, and will not have the benefit of witness and expert witness evidence deployed and tested by cross-examination. [Page40:]

Recognizing that a definitive answer can only be obtained by incurring the expense of going to trial (by which time it is too late to do anything about it), I have seen parties take the informed decision to seek evaluation followed by mediation. Cognizant of the health warning that goes with such an evaluation, parties can use it as the basis of the subsequent negotiation. On the occasions when I have been asked to follow this course, a settlement has always followed. It is yet another example of parties adapting mediation so that it is relevant and helpful to them in resolving their dispute.

Looking forward

For me, the excitement of mediation is its flexibility and the way it allows parties to fashion for themselves a process that will get them where they need to be. As mediation becomes more familiar to disputing parties, I hope that they will become ever more inventive in the ways that they will use mediation. No longer a novelty, I predict that mediation will go on to be seen as an absolute necessity in construction and engineering disputes around the world, particularly as partnering becomes more common. Already, in addition to Dispute Review Boards which assist with disputes that arise during a project, there is interest in Dispute Avoidance Panels to help avoid the disputes arising at all, demonstrating a real understanding that there is a better way than just waiting until the end of a construction project and then embarking on a hugely expensive, destructive and time-consuming fight.

1
Lord Woolf, Access to Justice: Final Report to the Lord Chancellor on the Civil Justice System in England and Wales (H.M. Stationery Office, 1996), http://www.dca.gov.uk/civil/final/index.htm.

2
The Civil Procedure Rules 1998, S.I. 1998/3132 (L. 17). Available at www.justice.gov.uk.

3
Available at www.justice.gov.uk.