Introduction

Welcome to our third ADR e-bulletin of 2011. The deadline for the implementation of the EU Mediation Directive by European Member States passed on 21 May 2011 and the majority have taken measures to implement it. A legislative proposal on the use of ADR is still expected from the European Commission by the end of the year. Meanwhile in the UK, the government has launched a new Dispute Resolution Commitment, and responses to the government's consultation on solving disputes in the County Courts have been published.

• UK ADR legal and practice developments
• International ADR legal and practice developments
• Herbert Smith ADR news

UK ADR legal and practice developments

1.  Government launches Dispute Resolution Commitment

The government has launched a new Dispute Resolution Commitment, which renews and strengthens the ADR Pledge made in 2001. The Commitment's objective is to show how the government intends to lead by example in using "better, quicker and more efficient ways of resolving legal disputes".

The Commitment and guidance for government departments and agencies can be viewed here, and the government's press release here.

The commitments include:

• Being proactive in the management of potential disputes and in working to prevent disputes arising or escalating, in order to avoid the need to resort to the use of formal dispute mechanisms wherever possible;
• Adopting appropriate dispute resolution clauses in contracts with other parties;
• Using prompt, cost effective and efficient processes for completing negotiations and resolving disputes;
• Choosing processes appropriate in style and proportionate in costs to the issues that need to be resolved;
• Recognising that the use of appropriate dispute resolution processes can often avoid the high cost in time and resources of going to court; and
• Educating employees and officials in appropriate dispute resolution techniques, in order to enable the best possible chance of success when using them.

2. Responses to government's consultation on solving disputes in the County Courts

The new Dispute Resolution Commitment (see item 1 above) is the latest in a series of government moves to encourage the use of ADR mechanisms, including negotiation, mediation and neutral evaluation. In our last ADR e-bulletin, we reported on the government's consultation on "Solving disputes in the County Courts: creating a simpler, quicker and more proportionate system", which asked for views on compulsory mediation information sessions, automatic referral to mediation, and extension of the provisions in the Mediation Directive to domestic disputes. Herbert Smith responded to the consultation on 29 June 2011.

Lord Justice Jackson has also provided a response to the consultation, as have the Lord Chief Justice and Master of the Rolls on behalf of the judiciary as a whole. These can be viewed here.

Lord Justice Jackson's response to the consultation includes the following points:

• ADR should be encouraged, but Jackson LJ does not support compulsory mediation;
• He supports the proposals for an accreditation scheme for mediators and the introduction of a mediation handbook;
• In terms of higher value claims, an information pack about mediation should be sent to the parties in every case;
• There should be improved training for judges and lawyers on mediation and steps taken to increase public awareness of the benefits of mediation; and
• The Mediation Directive should not be extended to apply to domestic cases, as this would add a raft of unwelcome rules to no useful purpose.

The judiciary's response to the consultation includes the following points:

• The judiciary recognise the benefits of ADR, but caution that it is not suitable for resolving all civil disputes. They highlight the need for courts to remain in control of the progress of proceedings;
• It is essential to have a proper, rigorous accreditation system for mediation;
• They also support automatic referral to mediation for small claims. However, they do not support compulsory mediation;
• There is little point in introducing compulsory mediation information sessions for cases with a value of up to £100,000; and
• Extension of the requirements of the Mediation Directive to domestic cases would be unnecessary and disproportionate.

The Ministry of Justice plans to publish its response to the consultation by the end of October 2011, setting out the proposals it intends to take forward.
 

3. HMRC publishes litigation and settlement strategy and ADR draft guidance

HMRC is seeking comments on the draft guidance to staff for the implementation of the revised litigation strategy published in July 2011. Comments on the draft guidance should be sent to HMRC by 31 October 2011. 

Following HMRC's original Litigation and Settlement Strategy published in June 2007, HMRC published a refreshed Litigation and Settlement Strategy on 14 July 2011 and draft guidance for staff on the Litigation and Settlement Strategy and the use of ADR on 12 August 2011. All three documents, and the facility for making comments on the drafts, can be accessed here. 

The Litigation and Settlement Strategy sets out the principles within which HMRC handles all tax disputes between HMRC and taxpayers, from the earliest enquiries into a tax return through to litigation in the tax tribunals and higher courts. The version that has now been published "refreshes" the original 2007 strategy. 

The ADR guidance follows on from an extensive internal review of how HMRC handles disputes and a number of ADR pilots undertaken in the first half of 2011. The guidance recommends the use of ADR, particularly mediation, when considered suitable. The guidance states that it is fully consistent with the government's Dispute Resolution Commitment (see item 1 above). 

Our separate tax disputes e-bulletin of 27 July 2011 provides further information on HMRC's published approach to resolving tax disputes.

4. High Court comments on mediation in Samuel Smith Old Brewery (Tadcaster) v Philip Lee (trading as "Cropton Brewery") [2011] EWHC 1879 (Ch)

The High Court has held that Cropton Brewery infringed Samuel Smith's registered trade mark for a stylised white rose device and committed passing off by using one of its labels incorporating a white rose device for "Yorkshire Warrior" beer.

In the introductory paragraph of the judgment, Arnold J said that the dispute was one which ought to have been capable of settlement out of court a long time ago. Instead, it had grown into a case the costs of which were out of all proportion to what was at stake. "One explanation for this is Yorkshire pride; but I fear that the English legal system bears a measure of responsibility as well."

In a postscript to the judgment, the judge said that he considered that the case should have been referred to mediation at an early stage. "The legal process appears to have caused the parties to become entrenched in their positions rather than seeking common ground. I suspect that the costs will themselves quickly have become an obstacle to settlement…. in future disputes of this nature the possibility of mediation should be explored as soon as is practicable."

The case provides a helpful illustration of the role ADR has to play in the resolution of intellectual property disputes, which have in some quarters, largely historically now, been perceived as unsuitable for mediation.

5. Adjudicator answers correct question, so decision enforced in Urang Commercial Ltd v Century Investments Ltd and Eclipse Hotels (Luton) Ltd [2011] EWHC 1561 TCC

Edwards-Stuart J in the Technology and Construction Court considered applications for summary judgment in two separate adjudication enforcement actions, brought by a contractor against an employer. The adjudicator had decided the dispute in favour of the contractor, but the employer failed to comply with the resulting order. The contractor applied to the court for enforcement, and the employer resisted this on the basis that the adjudicator had answered the question wrongly.

Although the court accepted that the adjudicator had made a mistake, it also accepted that it was settled law that even if an adjudicator is incorrect in his decision, the award will still be enforced – Bouygues (UK) Ltd v Dahl-Jensen [2000] EWCA Civ 507. The adjudicator had in fact answered the correct question; the fact that he answered it wrongly afforded the employer no defence.

The employer had tried to present his argument as going to jurisdiction but the court firmly rejected this. Once again it endorsed the principle that an adjudicator's decision, however wrong in fact or in law, must be enforced unless to do so would bring it within one of the well recognised exceptions to the principle in Bouygues (namely where the adjudicator acts outside his jurisdiction, where the adjudicator acts in breach of the rules of natural justice, or where one of the parties is insolvent).

6. Court of Appeal rules that expert has no jurisdiction in Barclays Bank PLC v Nylon Capital LLP [2011] EWCA Civ 826

In this 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.

The case emphasises the difference between expert determination and arbitration. Unlike arbitration, there is no procedural code for expert determination. This means that the activities of an expert are subject to little control by the court. Further, the rationale in the Fiona Trust case (Premium Nafta Products Ltd (20th Defendant) and others v Fili Shipping Company Ltd and others [2007] UKHL 40), that parties should normally be taken, as sensible businessmen, to have chosen one forum for the resolution of their disputes, did not apply to expert determination. This was because arbitration is usually an alternative to a court for all dispute resolution, whereas expert determination clauses generally presuppose that there may be more than one type of dispute resolution procedure.

The court held that it is the ultimate decision maker on whether an expert has jurisdiction to hear a particular dispute. This is the case even if a contract purports to confer jurisdiction on the expert in a manner that is final and binding. However, in some circumstances the expert can determine the issue of jurisdiction. The interests of justice and convenience will decide whether the expert or court should decide the question first.

The fact that the court concluded that the expert had no jurisdiction (because a pre-condition necessary for referral of a dispute to the expert had not taken place) was the reason why in this case it was just and convenient for the court to determine the issue of jurisdiction. As an expert's decision on jurisdiction is not final, it would have been wasteful for him to have decided the issue first and then for this possibly to be challenged at court.

It is also worth noting that the parties notified the court before judgment was given that they had settled the case. However, the court still gave judgment, holding that when a case has been fully heard before it is settled or withdrawn, the court has the right to decide whether to give judgment or not. Lord Neuberger MR set out a list of factors that the court will consider when making the decision whether to hand down the judgment notwithstanding settlement. In this case, it was significant that the draft judgment had already been prepared when the case settled, and the issues were of general importance.

International ADR legal and practice developments

7. Failure of nine Member States to implement the Mediation Directive by the deadline

In our last ADR e-bulletin, we reported on the implementation of the EU Mediation Directive. On 22 July 2011, the European Commission sent letters of formal notice to the Czech Republic, Spain, France, Cyprus, Luxembourg, the Netherlands, Finland, Slovakia and the UK because they had not yet informed the Commission whether they had put all national measures in place to fully implement the Mediation Directive. These countries have two months to respond to the Commission.

The Commission's press release explains that if the Commission is not satisfied with the information and concludes that the Member State in question is failing to fulfil its obligations under EU law, the Commission may then send a formal request to comply with EU law, calling on the Member State to inform the Commission of the measures taken to comply within a specified period (usually two months). If a Member State fails to ensure compliance with EU law, the Commission may then decide to refer the Member State to the European Court of Justice.

The formal notice addressed to the UK related to Gibraltar, which had failed to put in place the necessary measures to implement the Mediation Directive by the deadline. However, such measures have now been implemented and the European Commission has been notified.

8. European Parliament publishes draft report 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.

In the draft report, the Parliament made the following points:

• Any approach to ADR should go beyond consumer disputes, to encompass business-to-business, civil, commercial, family and defamation disputes;
• ADR standards should include: adherence to ADR; independence, impartiality and confidentiality; effects on limitation and prescription; enforceability of agreements resulting from ADR; and qualification of third parties;
• While self-regulation is important, legislative action is necessary to provide a framework for ADR within Member States;
• Caution should be exercised in making ADR compulsory at EU level;
• There should be an obligation on the third party to keep ADR information confidential. The Parliament is considering the creation of a professional privilege;
• There is great potential in online ADR, particularly for smaller claims. Where ADR is carried out online, procedural standards should not be lowered and issues such as the enforceability of awards should be resolved;
• There is potential for ADR within the ongoing discussion on collective redress (as to which see item 9 below);
• More information should be given to citizens and small and medium-sized enterprises about ADR schemes in general; and
• The Commission should explore providing a harmonised legal framework for some aspects of ADR across sectors.

In our last ADR e-bulletin, we reported on the consultation launched by the EU 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 2011. They can be viewed here. The responses to the consultation will be used to inform the legislative proposal on ADR which the EU Commission has committed to producing in late 2011. The draft report is essentially the next step towards this legislative proposal.

9. European Parliament publishes draft report on collective redress

In July 2011, the European Parliament published a draft report on the Commission's consultation earlier this year entitled "Towards a coherent European approach on collective redress", which contains a section on ADR in the context of collective redress. The report can be viewed here.

The report notes that the European Parliament encourages the setting-up of ADR schemes at European level so as to allow fast and cheap settlement of disputes as a more attractive option than court proceedings, and calls for a legal obligation for the parties involved first to seek a collective consensual resolution of the claim before launching collective court proceedings. The report notes that certain criteria will be required in order for such a mandatory settlement procedure to be compatible with the right to effective judicial protection. A starting point for such a procedure is the criteria laid down by the European Court of Justice in Alassini v Telecom Italia SpA (Joined Cases C-317-320/08) [2010] 3 C.M.L.R. 17 ECJ:

• The ADR procedure must not result in a decision which is binding on the parties;
• It must not cause a substantial delay for the purposes of bringing legal proceedings;
• It must suspend the period for the time-barring of claims;
• It must not give rise to costs for the parties;
• Electronic means must not be the only means by which the settlement procedure may be accessed; and
• Interim measures must be possible in exceptional cases where the urgency of the situation so requires.

The explanatory memorandum to the report notes that the proposal on ADR expected from the European Commission in late 2011 should form the starting point for developing such a mechanism.

10. New Australian Civil Dispute Resolution Act comes into force

The new Australian Civil Dispute Resolution Act 2011, which applies to all federal civil law matters and came into force on 1 August 2011, encourages parties to take ‘genuine steps’ to resolve their disputes before commencing certain proceedings in the Federal Court of Australia or in the Federal Magistrates Court. A person will be taken to have made genuine steps to resolve a dispute if the steps taken are a sincere and genuine attempt to resolve the dispute, having regard to the person’s circumstances and the nature and the circumstances of the dispute. The Act does not mandate the taking of any particular steps before proceedings are commenced.

Key points to note are:

• Applicants will be required to file a ‘genuine steps statement’ saying what steps they have taken to resolve the dispute prior to commencing proceedings, or if they have not taken any steps to resolve the dispute, the reasons why not;
• Respondents will be required to file a genuine steps statement indicating if they agree with the applicant’s statement and, if not, the reasons why not;
• Failure to lodge a statement by either party will not prevent the commencement of a proceeding in the courts. However, the court can take into account any such failure when using its existing case management directions and costs powers;
• Information disclosed during the genuine steps process is subject to the same protections from disclosure that currently exist; and
• A lawyer acting for a person who is required to file a genuine steps statement must advise the person of the requirement and assist the person to comply with the requirement.
  

11. Kuala Lumpur Regional Centre for Arbitration (KLRCA) revises its Mediation/Conciliation Rules

KLRCA, in collaboration with the Malaysian judiciary and the Malaysian Mediation Centre's committee members, recently revised its Mediation/Conciliation Rules, demonstrating its support for mediation as a form of ADR. The revised KLRCA Mediation Rules have been adapted from the UNCITRAL Conciliation Rules 1980 and include provisions to support confidentiality, flexibility and the parties' choice of mediator. The KLRCA has expressed the view that the new rules will allow parties easier and more efficient access to the time and costs savings associated with mediation.

12. Bangkok to host first Asia Pacific Mediation Leadership Summit

On 2 - 4 December 2011, various organisations, including the Asia Pacific Mediation Forum, will host the first Asia Pacific Mediation Leadership Summit in Bangkok. The summit, entitled "From Talk to Action", is aimed at promoting mediation, conflict transformation and the peace building process in the Asia Pacific region, where mediation is still growing.

Herbert Smith ADR news

13. Herbert Smith gains two new CEDR-accredited mediators

Herbert Smith now has ten CEDR-accredited mediators, following the accreditation of  Gary Milner-Moore and Rupert Shiers, both partners in the Dispute Resolution division.

Rupert, who is a partner in the firm's tax disputes practice, undertook the CEDR training in a course specially arranged by CEDR and HMRC for tax disputes experts. Rupert is part of a joint public/private sector HMRC working group that meets regularly to discuss progress and developments in ADR in the context of tax disputes (see item 3 above).

Our last ADR e-bulletin set out a list of Herbert Smith's accredited mediators.

14. Herbert Smith partner named in the International Who's Who of Commercial Mediation 2011

Nicholas Peacock, a partner in Herbert Smith's Singapore office, has been recognised in the International Who's Who of Commercial Mediation 2011 as a leading individual in mediation in Singapore. Nicholas has advised clients on a number of mediations, usually in relation to international disputes, and has been actively involved in the arbitration and mediation communities in South East Asia since joining the Singapore office.

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.

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© Herbert Smith LLP 2011