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17 January 2012 |
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Introduction Welcome to our first ADR e-bulletin of 2012. On 29 November 2011, the European Commission adopted two proposals: one for a Directive on the use of ADR and another for a Regulation on online ADR. These are expected to be adopted by the end of 2012. The European Parliament has reported on the implementation and impact of the EU Mediation Directive, and has adopted a non-legislative resolution on ADR. Meanwhile in the UK, the government's response to the consultation on solving disputes in the County Courts is expected early this year.
UK ADR legal and practice developments 1. Two recent cases consider Barclays Bank PLC v Nylon Capital LLP [2011] EWCA Civ 826
In our last
e-bulletin, we reported on the Court of Appeal decision in
Barclays v Nylon. In that case, the Court of Appeal considered
whether there should be a stay of court proceedings pending expert
determination under an agreement between the parties. It ruled that the
expert in the case did not have jurisdiction to decide the dispute, and
so there should be no stay of the proceedings. Two recent cases have
considered Barclays. In this case, the parties had entered into a put and call option agreement relating to the sale and purchase of a development site. The put option under the agreement was exercised. However, a dispute arose over the terms and conditions of possible completion. A dispute resolution clause in the agreement provided for any dispute to be referred to an expert if it could not be resolved by directors. The developer advanced an action in the High Court claiming relief under five heads: (1) a declaration as to what the expert decided; (2) a declaration as to the true meaning of the agreement; (3) whether satisfactory technical consents within the meaning of the agreement had been provided; (4) whether the agreement could be rectified to reflect the parties' common intention; (5) an estoppel claim. Head (2) had already been decided in the vendor's favour by an expert. The vendor applied to strike out or stay the developer's claim (other than the rectification claim, which it accepted should go to trial) on the basis that the heads of relief claimed, which included issues concerning the construction of the agreement, fell within the expert's remit and were covered by the wording of the dispute resolution clause. The developer submitted that the dispute resolution clause was not a general provision for dispute resolution by an expert and that it applied only where its provisions were incorporated by reference elsewhere in the agreement. The vendor's application was granted in relation to heads (1) and (3), but refused in relation to heads (2) and (5). The first and third heads both fell within the dispute resolution clause and had to be referred to the expert for determination. However, in relation to heads (2) and (5), rectification was a remedy that only the court could grant. It was always discretionary in nature and its retrospective effect could not be brought about by agreement between the parties, or by the determination of an expert. The agreed exclusion of rectification claims from the scope of the dispute resolution clause showed that the words "any dispute arising between the parties" could not be read literally. The parties must have been taken to have intended that the court should also be free to decide any question of construction of the agreement upon which the rectification claim depended, as well as any estoppel claim which turned on a detailed investigation of essentially the same facts.
The expert's determination, although binding as a matter of contract
between the parties, did not and could not bind the court, which had to
consider the question of construction as an essential preliminary to the
rectification claim. There should be no presumption in favour of
resolution by an expert, Barclays Bank Plc v Nylon Capital LLP
applied. Snowden J stayed the majority of the claim in favour of expert determination. He did not accept that the judge in Barclays Bank Plc v Nylon Capital LLP was intending to lay down a prescriptive rule to the effect that any decision by the expert in relation to his own jurisdiction would inevitably be subject to review by the court, and thus it would be wasteful for the expert to decide such matters first. Instead, it was important first to clarify whether, and if so on what basis, the claimant intended to run a point relating to contractual interpretation, in relation to which an issue existed as to the expert's jurisdiction to decide the matter. In this case, the obvious and convenient forum for that clarification to be sought was in the expert determination itself, and it could be done without prejudice to any argument that the expert had no jurisdiction to decide the matter. Once that point had been established, the expert could decide the appropriate approach.
2. Closure of the national Mediation Helpline telephone service From 1 October 2011, an online civil mediation directory replaced the National Mediation Helpline. The Ministry of Justice announcement can be viewed here and the online directory can be accessed here. The directory allows users to search for civil mediation providers, by county, and is intended to provide members of the public and businesses with a simple, low-cost method of resolving civil disputes out of court. People contacting a provider as a result of using the directory can, in certain circumstances, obtain certain mediation services on a fixed-fee basis.
3. Government publishes response to consultation on Resolving Workplace Disputes The Department for Business, Innovation and Skills (BIS) and the then Tribunals Service (now HMCTS) jointly issued a consultation document on 27 January 2011 that set out a series of detailed proposals on how the employment tribunal system should be changed. That consultation closed in April 2011 and the government published its response on 23 November. The chief aims of the consultation were to achieve more early resolution of disputes without the need for tribunals, a swift, user-friendly and effective tribunal system, and to help businesses feel more confident about hiring people. As well as proposing various changes to employment law, the government's response commits to the following action:
International ADR legal and practice developments 4. Legislative proposals on ADR adopted on 29 November 2011 In our June ADR e-bulletin, we reported on the consultation launched by the European Directorate General for Health and Consumers on the use of ADR as a means of resolving commercial disputes in the EU. The consultation closed in March and responses were published in May. The responses to the consultation were used to inform the two legislative proposals on ADR which the European Commission produced on 29 November 2011:
The press release that accompanied the proposals explained that the European Parliament and the European Council have committed to adopting the package by the end of 2012 as a priority action. Member States will then have 18 months to implement the legislation. In December 2011, BIS issued a call for evidence on the two proposals, seeking views from traders, consumer groups and regulators in the UK to help inform the UK's negotiating position. The call for evidence can be viewed here and responses are requested by the end of January 2012. The call for evidence document says that a consultation on how the UK will implement any finalised European legislation will be launched in due course. The European Commission has also committed to adopting a Recommendation in 2011 on the network of ADR systems for financial services. In addition, the European Commission's work programme for 2012 includes an ADR instrument for business to business disputes. This legislative initiative is aimed at improving confidence among small or medium enterprises when engaging in cross-border trade.
5. Update on implementation of the Mediation Directive In our last ADR e-bulletin, we reported on the progress by Member States towards implementing the EU Mediation Directive, the deadline for which was 21 May 2011. In particular, we reported that in July 2011, letters of formal notice were sent to nine countries for failure to implement the Directive. The European Commission is now taking action against six of those countries (Cyprus, the Czech Republic, Spain, France, Luxembourg and the Netherlands). On 24 November 2011, it announced that they have all been sent reasoned opinions, asking them to comply. On 13 September 2011, the European Parliament adopted a non-legislative resolution on the implementation of the Mediation Directive. The resolution can be viewed here. It concludes that most Member States are not only compliant, but are, in some cases, a little ahead of the Directive's requirements. The resolution emphasises the importance of examining how the legislation has been implemented, ascertaining what practitioners and users of mediation think and considering how the legislation could be improved. A thorough analysis of the main regulatory approaches taken by Member States is recommended, to help identify good practices and draw conclusions about any further action at the European level.
6. European Parliament adopts non-legislative resolution on ADR In June 2011, the European Parliament published a draft report on ADR in civil, commercial and family matters. The report can be viewed here. Following an opinion from the European Parliament's Committee on the Internal Market and Consumer Protection (IMCO) on 1 September 2011, which called on the European Parliament to incorporate various suggestions in its resolution, the European Parliament adopted a non-legislative resolution on ADR on 25 October 2011. The resolution can be viewed here. The resolution called on the European Commission to submit a legislative proposal on the use of ADR for consumer matters in the EU by the end of 2011 (as to which see item 4 above) and emphasised the importance of its swift adoption. The press release which accompanied the resolution described the resolution as "sending a strong message of support to the European Commission to improve cross border access to justice".
7. Hong Kong proposes new legislation to protect the confidentiality of mediations Mediation is one of the cornerstones of the Civil Justice Reform in Hong Kong, and has now become a fixture in civil proceedings. Despite the judicial emphasis on mediation, there is a perception that many parties are not yet comfortable with using documents and passing information to each other as part of the mediation process. With the introduction of legislation that expressly protects the confidentiality of communications that are made not only in the course of but also for the purpose of mediation, it is hoped that litigants will make better use of the mediation process with the comfort that such statutory protection exists. The Mediation Bill aims to protect the confidential nature of any "mediation communication", which is any communication made for the purpose of or in the course of mediation, but does not include an agreement to mediate or a mediated settlement agreement. The Bill provides that mediation communications are confidential and must not be disclosed except under expressly specified circumstances. In some circumstances, such as where all parties involved including the mediator have consented to the disclosure, the court's permission to disclose the communication is not required. In other cases, such as where parties wish to enforce or challenge a mediated settlement agreement, parties must apply to the court for permission to disclose a mediation communication. The court's permission is also required in all cases where a party wishes to adduce a mediation communication as evidence in court proceedings.
The Bill has had its first and second readings in the Legislative
Council but at present, there is no firm time frame for its enactment or
coming into force.
8. Hong Kong Court of Appeal rules on bias in the mediation process in Gao Haiyan and Xie Heping v Keeneye Holdings Ltd and others CACV 79/2011 This case involved an application in Hong Kong to set aside an arbitral award issued by the Xian Arbitration Commission (XAC) in the PRC on the basis that it would be contrary to public policy to enforce the award as the arbitration process had been tainted by bias or the perception thereof. The rules under which the arbitration took place permitted arbitrators and, with the parties’ consent, third parties, to act as mediators, and to meet with the parties jointly or separately. Mediators were expressly allowed to make settlement proposals to the parties. It seems that during an adjournment in arbitration proceedings a member of the XAC contacted the respondent and requested that the respondent meet with him and the Secretary–General of the XAC. The meeting took place over dinner at the Shangri-la Hotel and the discussion centred on the arbitration proceedings and steps that could be taken to resolve the dispute. The applicants contended, and the respondents denied, that the meeting at the Shangri-la Hotel amounted to a mediation. The judge doubted whether the process really was a mediation, and concluded that the events at the Shangri-la Hotel would have given the fair-minded observer “a palpable sense of unease” and would have caused the apprehension of a real risk of bias. As a matter of public policy, therefore, he refused enforcement of the award. However, in December 2011, the Court of Appeal overturned the first instance decision, upholding enforcement of the award. It ruled that the respondents had waived the right to object to how the process had been conducted by failing to raise any objection during the process itself. In any event, the court found that the process had not been conducted in a way that gave rise to bias. As such, there was no public policy ground for refusing to enforce the award. This post in the Kluwer mediation blog contains an interesting discussion relating to the first instance decision, and the issues surrounding hybrid ADR processes.
9. Singapore Mediation Charter launched On 9 September 2011, 26 organisations pledged their support for mediation at a ceremony held at the Conrad Centennial in Singapore. These organisations (a list of which can be viewed here) have pledged their commitment to resolve disputes outside traditional litigation channels. While the Mediation Charter signed by the organisations is not binding, they have publicly committed to promoting mediation by:
10. Herbert Smith co-hosts client seminar on mediation success On 16 November 2011, Herbert Smith co-hosted a client seminar entitled "What defines success in mediation?". This event was one of a series of "Y-ADR" seminars provided by the International Institute for Conflict Prevention and Resolution (CPR). The event consisted of a lively panel discussion and question and answer session focussing on the question "What defines success in mediation?". Conventional wisdom might suggest that a mediation which does not result in a settlement on the day itself constitutes failure. But is this really the case? As the costs of litigation and arbitration continue to rise and mediation is increasingly used as one of a menu of options for resolving large scale and ever more complex disputes, the mediation itself may form only one step on the road towards settlement. The panel consisted of the following speakers, all of whom have significant experience in the use of ADR:
The panel discussion was moderated by David Phillips, Professional Development Lawyer in Herbert Smith's disputes practice, and welcome remarks were given by Olivier André of the CPR Institute and Dr Gillian Dada of GlaxoSmithKline. Alexander Oddy has written a blog post on the topic of the definition of success in mediation, which was published in the Kluwer mediation blog on 1 December 2011. Click here to view the post.
11. Justin D'Agostino appointed as council member of the Hong Kong International Arbitration Centre (HKIAC) Justin D'Agostino, partner and head of the Greater China international arbitration practice, was appointed as one of the council members of the HKIAC, which is the HKIAC's main governing body. The HKIAC was established in 1985 by a group of leading businesspeople and professionals in an effort to meet the growing need for arbitral services in Asia. The Centre is governed by a council composed of 20 leading businesspeople and professionals from all around the world who possess a wide variety of skills and experience. The HKIAC administers arbitrations and other dispute resolution activities, including mediation and adjudication. During interviews with The Lawyer and Global Arbitration Review, Justin commented: "I expect to take on an active role in the Council. The HKIAC has played and continues to play a pivotal role in developing Hong Kong as one of the world’s leading international arbitration centres."
12. Herbert Smith launches new litigation blog Also in November, Herbert Smith launched a new litigation blog, “litigation notes”, where users will find the latest updates on commercial litigation and ADR topics. As well as reporting on new developments, the site contains copies of articles published as litigation e-bulletins dating back to the beginning of the year. The content on the site can be accessed in various ways, including chronologically, or by category (eg ADR, privilege, settlement) or by key word searching. To access the site please go to: www.herbertsmithlitigationnotes.com Clients and contacts will continue to receive regular e-bulletins summarising key developments posted to the site. In addition, users can subscribe to the blog to receive updates by e-mail as soon as they are posted, or of course can visit the site whenever they choose. The aim is to develop the site as a “go to” destination for clients and contacts who want to know what is happening on commercial litigation topics at a time that suits them, rather than necessarily when an e-bulletin is sent. We hope it will be a useful resource, and would be grateful for any feedback you might have.
The contents of this publication, current at the date of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication. © Herbert Smith LLP 2012
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