Parliamo Italiano – the language of mediation

Italy is making mediation mandatory, but the UK should resist following suit says Michael Dawson

Hot on the heels of the Italian Ferrari victory in Dubai, the Italian government has become the first in Europe to introduce mandatory mediation for civil and commercial disputes. All Italian disputes – from consumers complaining about faulty goods to construction disputes – will have to go through a mediation before the matter can be determined in court by a judge. The legislation takes effect from March 2011.

This follows a recent EC Directive that requires all member states to introduce legislation by May 2011 to put processes in place so that all cross-border civil and commercial disputes can be mediated. Mediation involves all of the parties to the dispute endeavouring to reach a mutually acceptable solution with the assistance of an independent mediator.

It’s questionable whether the Italian government’s move was brought about by this Directive or by the volume of long and protracted cases that are a feature of Italy’s judicial system. Whatever the reason, Italy has decided to make it mandatory for its citizens to use mediation to resolve disputes that arise within its borders before recourse to litigation.

Apart from making mediation mandatory in cross-border disputes, the Directive (2008/52/EC) suggests that mediation should be more frequently used in all member states, including the UK.

It stresses that “mediation can provide a cost-effective and quick extra-judicial resolution of disputes in civil and commercial matters through processes tailored to the needs of the parties”, and argues that “agreements resulting from mediation are more likely to be complied with voluntarily and more likely to preserve an amicable and sustainable relationship between the parties”.

It then goes further, requiring each member nation to allow any judge, at any stage of the litigation process, to suggest that the parties consider mediation and also requires that governments establish systems whereby agreements reached in mediation can be enforced if those involved in the dispute want them to be.

Any time involved in mediation should not count towards any overall limitation period for bringing legal proceedings, and information obtained during the mediation cannot be used against any party in subsequent judicial proceedings.

To comply with the Directive, the UK will have to introduce legislation to facilitate and promote mediation for cross-border disputes by May 2011. With more construction work being undertaken across EC borders, as when foreign specialist contractors work in the UK and UK contractors work on projects within the EC, the Directive will undoubtedly impact on the UK construction industry.

It is, however, unlikely that the UK government will follow the Italian example. The UK judiciary, following the case of Dunnett v Railtrack (2002) and successive decisions, including McMillan Williams v Range (2004) and Burchell v Bullard (2005), tends to encourage commercial disputes towards mediation through the use of cost sanctions if mediation is not attempted. That is to say, the winning party in a court action will not have their costs paid by the losing party if mediation has not been attempted.

Encouraging parties towards mediation rather than forcing it on them via Italian-style legislation is the favoured option of many mediation practitioners. Mediation is intended to be a voluntary process entered into by the disputing parties, not one which they are compelled to follow.

The problem with coercing people is that they may simply attend a mediation to “tick the box”, or in some cases to use it as a “fishing expedition” for more information about the other side’s case before proceeding down the arbitration or litigation route. I have experienced both scenarios: one solicitor in particular announced at the mediation that he was only there to avoid the possibility of cost sanctions being applied. Needless to say, that mediation did not settle.

A study of mediation in construction disputes between 2006 and 2008 undertaken by researchers from King’s College London indicates that of the 261 cases studied, mediation was “ordered” by the Technology and Construction Court in seven cases, of which six settled. This 86% success rate is large, but the sample is too small to draw firm conclusions. In the same study, voluntary mediation was used for 72 cases resulting in 62 successes, which is also an 86% success rate.

Another study in Boston in the US found that the mandatory option resulted in a 46% success rate against a 62% success rate for voluntary mediations. And a study of the Central London County Court saw a huge rise in mediations following the Dunnett v Railtrack decision in 2002, but settlement rates fell. This evidence, on balance, tends to confirm the view that coercion results in fewer settlements.

But relatively few people understand what mediation is, how it functions and the benefits to be gained. When a dispute arises on a project, the average contractor would probably first consult a solicitor with a view to litigation, arbitration or adjudication. Communicating the benefits of mediation to construction businesses is a huge task, but inroads are being made.

The UK must soon follow the EC Directive in respect of cross-border disputes, and it is to be hoped that implementing the Directive even in this limited field will increase awareness of mediation and that more people will be encouraged to use it. Hopefully, they will also realise that its benefits would be compromised if mediation ever became the mandatory “waiting room” to the court-room, and that the process should be kept as it has always been – voluntary.

Michael Dawson MCIOB is an accredited mediator at Cunningham Lindsey Mediation Services

Back to basics: How to win an adjudiction

Before the contract is even executed, there are steps you can take to ensure you are on the winning side. The first is to read the dispute resolution clause.

Is there an adjudicator already nominated? If so, who? If they have been nominated by the other party, can they truly be independent and impartial? Are there any clever tricks with the costs of the adjudication? If so, now is the time to get rid of them.

Ensure your paperwork is in order. Print off all relevant and helpful emails and get a witness statement from anyone who can help you convince the adjudicator. Write down the person’s name, qualifications, role on the project, what they say happened and conclude with a “statement of truth” (Google this to find the exact wording).

If you are the claimant in the adjudication, the key is not to rush. Make sure the notice of adjudication and the referral are ready. The referral needs to contain all the relevant evidence as a narrative, cross-referenced to other documents that help evidence your case. Try to anticipate the other side’s arguments at this stage.

If you are the responding party, the key is not to panic. The adjudicator will probably offer you a week to respond. If you ask for more time, you will often get it. Try raising jurisdiction challenges such as; “there was no crystallised dispute”, “the terms of the contract were not in writing” or “it is not a construction contract”. Even if you cannot follow through on these, you can sometimes use them to “muddy the waters” and negotiate a better deal.

Finally, the majority of adjudications are dealt with in writing. So whether you are the claimant or the respondent, try to be the one to get the “last word” in – it may be the one that convinces the adjudicator.

Stephen Clarke is head of construction at solicitor Clarke Willmott