Generational Change

ley-contact-matthew-rushton-2Continuing our series of guest posts, here is an extract from Matthew Rushton’s superb article at JAMS International where he picks up on 3 broad ADR themes in the UK market. One of those themes was the generational change occuring in the ranks of UK mediators

…Let’s move on to think a little about commercial mediation, and my second theme of generational change.

The shape of the UK mediation market reflects that of other parts of the legal profession in which very few enjoy a very substantial market share. In the 1930s, FE Smith (later Lord Birkenhead) described the English Bar as a profession of 2,000 with enough work for 1000, done by 500. In commercial mediation circles, these ratios seem unattainably aspirational. Stephen Walker, a mediator and commentator, has suggested that commercial mediation is a “cottage industry of about 6,000 with work for 500 carried out by 100”. That seems spot on to me.

Mediation remains a “nascent” profession – if indeed it can be considered a profession. The first providers into the UK market opened their doors in 1989, but it wasn’t until The Woolf Reforms to civil procedure a decade later that mediation became entrenched in the mainstream of dispute resolution.

Thus those with the biggest practices now are – with notable exceptions – those first onto the bandwagon in the early 1990s.

But that is changing. With a handful of deaths and retirements, some of the pioneers are slowly falling away. And that, in my view, is having two effects:

  1. Work is less concentrated in the hands of the very few than previously.
  2. More interestingly, those who are replacing the pioneers have a different character, outlook and approach.

The second generation are not, on the whole, evangelicals. They have not had to travel the country banging on doors, explaining the process and constantly educating potential users. Most of them are commercial litigators whose experience of mediation comes not from text books and the class room, but from acting as counsel in dozens and dozens of mediations.

Thus, they arrive as mediators with an astute understanding of what they think the process is about: what they’ve seen work, what they’ve seen fail. They understand first-hand what clients like and dislike about the process, and tailor their own offering accordingly.

And this causes more rancour, disagreement and falling out than you’d ever believe possible among a profession of peace-makers.

The gulf between mediation theory and mediation practice has always s been a sore point. Collaboration, problem solving, brainstorming options for mutual gain, expanding the pie – the foundation blocks of mediation are seldom in evidence in mediations I’ve observed.

Mediators are taught that it is a future-focused process: the parties aren’t there to rehearse legal arguments. Mediators are taught not to offer a view on the merits; they are taught not to suggest settlement figures: that’s the job of the parties. It is, after all, the parties’ day – they must own the dispute, and own the solution.

But, the reality is often different. People, and companies come to mediation for all kinds of different reasons – some are well prepared, some are not. Some are experienced users of mediation, some are not. Some genuinely want to settle – some merely want to advance their understanding of the other side’s case for ongoing litigation.

Very often, what they want from a mediator, is an independent third party who – to paraphrase Geoff Sharp– gently pulls at the loose threads in their opponent’s case (and indeed, sometimes their own) – knowing when clients might be badly advised, or simply refusing to listen to good advice. A mediator can reframe those arguments – and in the same way that my son would literally rather drown than let me teach him to swim – advice is almost always better, more politely, received from a “stranger”.

If what I’m describing is sounding somewhat closer to arbitration – where the neutral third party is responsible for the outcome, then I would suggest that could be what the market is asking for.

And if that’s the case, it’s only right that mediation accommodates that. So in some ways this change wrought by a new generation of commercial mediators ties into my first theme – that of leveraging the flexibility of the process into new and different areas in new and different guises. Many will no doubt regret that, but more optimistically, I choose to view that as progress.

Matthew is a regular commentator on ADR and is Deputy Director at JAMS International based in London

Leading UK Sets and Individuals Recognised

Twenty-five UK barristers’ chambers are recognised for exceptional performances in the latest research by Who’s Who Legal across 26 practice areas, including mediation.

Brick Court Chambers is a large and prestigious commercial, competition and public law set with outstanding strength and depth, earning recognition in half the practice area chapters in this edition… Brick Court stands out in particular for its undeniably top-tier competition law practice, as well as its commercial expertise in the banking and finance, insurance and reinsurance, and energy sectors.

The set is also a leader in alternative dispute resolution, earning multiple high-status listings in our arbitration and mediation chapters.

Of the top four mediator silks recognised by Who’s Who as “most highly regarded” two of those four are from Brick Court;

Brick Court Chambers boast an impressive bench of commercial mediators with extensive experience in high-profile disputes worldwide. Three prominent silks are recognised.

Door tenant John Sturrock QC is considered a “thought leader” in the area. Sources cite his keen intellect”, “preparation to get at core issues” and “massive wealth of experience in difficult negotiation situations”. Another respondent maintains, “John is the best mediator I have met and has brought about a settlement in two cases which I thought resolution was impossible.”

William Wood QC is also regarded as a “thought leader”, earning widespread praise from peers who regard him as a “stellar performer” and “one of the world’s top mediators”. Wood regularly mediates on a wide variety of complex and high-profile disputes internationally, including a high number of competition, insurance and telecoms matters.

The “extremely popular and successful” Stephen Ruttle QC is a leading mediator in the international commercial sphere praised as an “innovator” and “extraordinary performer”.

Tony Willis of Brick Court Chambers is an eminent mediator with an excellent reputation in the field. He often handles cases across Europe and the Middle East.

Challenging Assumptions in Mediation

I share examples from two very different mediations, each challenging some assumptions about what can be achieved – and how.

Number one: a dispute about interpretation and application of a limitation clause in a commercial contract. No factual dispute at all. In a large construction claim arising out of building a public facility in an overseas jurisdiction, the parties had agreed that the claim was so high (multi-tens of millions) that whatever the decision on the matter of interpretation, it was unnecessary to explore the figures. Similarly, primary liability was not in issue. Subject to a couple of further interpretation variables, if the clause provided for A, then x was due; if B, then y would be payable.

Classically, this fell into that small category of cases for which mediation has often been deemed inappropriate – or unnecessary. It was a simple point of law for a judge or arbitrator to decide. But here we were at 11.15am, after the lawyers had met with me to prepare an agenda of the issues requiring to be addressed, each party (lawyer and client) laying out its arguments in front of the other’s legal advisers and client. They were analysing legal propositions and the risk attaching, with me posing some questions about the meaning being ascribed to certain words in a contractual cap and inquiring about the advice tendered by leading counsel.

It still took several hours to explore the risks and opportunity costs, test the realism of some key arguments, and deploy “Mr Justice Not Very Bright “ in each room. For one reason or another, this notional judge tends to ask awkward questions, as if he does not understand the points being made. He proves to be a useful tool on occasion, sometimes dropping hints about how he might view things in a court. He performs the same role privately for all parties, but in different ways of course. And he always qualifies his comments with the observation that he does not have complete knowledge and that parties and their lawyers are completely free to disregard his remarks.

Incidentally, while my penchant for inviting the clients and counsel to join me for a quick pastry or “breakfast” at an early stage does not always meet with ready approval, here it worked a treat. In this session, the principals soon discovered a common bond from the past in their industry, and this gave them much to discuss throughout the day, as well as generating the goodwill to enable them to meet and complete the deal when the lawyers needed that extra commercial input later in the day. It was in their corporate interests to reach an agreement and they did, on the back of the risk analyses which the day had encouraged and empowered them to conduct.

Number two: an oil and gas employment dispute involving a very senior strategic adviser and his erstwhile employer. It seemed to be a classic for a bit of relationship-building, as hurt and humiliation were high on the list of the consequences of an unforeseen redundancy. It also seemed to be as much about ego as about money.

The two protagonists could still speak fairly amicably to each other in a kind of mentor/mentee relationship. Inviting them to meet together early in the day would have been an obvious strategy for this mediator, with an opportunity for each to set out how they saw things, get things off the chest, give explanations for what had happened, enhance understanding, acknowledge the other, and so on.

However, contrary to many of these types of cases, there was no meeting at all between the parties until they came together to sign the settlement agreement at 5.30pm. All negotiations were conducted through or with the two very able lawyers. And when the parties did meet, the clients were soon chatting away, almost as if they might start their working relationship again. They won’t but the geniality confounded many assumptions I might have made. Keeping them separate until an acceptable arrangement had been achieved had worked well.

One small, notable, deviation from the norm may have been the key in this one. I had arranged to meet each party and his lawyer at my hotel the evening before, just to “get to know” them. At the crossover point between meetings, they bumped into each other for the first time in months. They had a pleasant exchange of words. Maybe, in that informal environment and at that moment, that meeting was all that was needed to take the edge off the anxieties about what was to come next day and temper the stored up hostility of the past.

We’ll never know, but what we do know as mediators is that we are always learning and that there is no fixed way to do this.

A New Seat at the Mediation Table? The Impact of Third-Party Funding on the Mediation Process (Part 1)

In the first of a two-part article, Geoff Sharp looks at the development of third-party funding of litigation, arbitration and mediation in part 1 and later in part 2 we will look at how TPF impacts the mediation process

litigation-funding-image

Third party funding (TPF) of claims has been around for quite some time. Historically however, some jurisdictions have prohibited a stranger to a lawsuit financing the claim of another in return for a share of the spoils.

Over time that has changed as many jurisdictions overcome fears that litigation financing somehow perverts the course of justice – that a third-party funder “might be tempted, for his own personal gain, to inflame the damages, to suppress evidence or even suborn witnesses” (Lord Denning in the Trepca Mines Case 1963). 

Over the intervening years, concerns over access to justice have come to trump the very real risks of third-party funding and as a result many jurisdictions have relaxed notions of champerty and maintenance.

Just in the last fortnight the Court of Appeal (UK) confirmed that position in the long running Excalibur Ventures v Texas Keystone case saying “Third party funding is a feature of modern litigation” and that it is “an accepted and judicially sanctioned activity perceived to be in the public interest.”

So the tide has definitely turned and the last couple of years have seen a dramatic increase in the level of TPF generally, with most funding confined to lawsuits (i.e. those claims bought in the courts). However, we are now seeing a similar rise in levels of arbitration funding and in particular, the international commercial arbitration community appear to be embracing TPF with many jurisdictions like Singapore and Hong Kong responding with enabling legislation. 

These South East Asian jurisdictions are reforming to allow funded arbitration to ensure their continuing status as favoured dispute resolution hubs. On 7 November 2016 the Civil Law (Amendment) Bill was introduced in the Singaporean Parliament allowing for third-party funding of arbitration by early 2017 and Hong Kong is currently in a consultation process that will see a similar result.

With the rise of TPF in litigation and arbitration, it follows that funding of mediation is also on the increase, given that much mediation happens along side these two dispute processes and in the 2nd part of this article we will look at the consequences of TPF for the mediation process itself, in particular the dynamics of the mediation table itself, but first…

What is TPF and how does it work?

Well, at its most simple, it’s not complicated.

Although TPF products offered by third-party funders are now quite sophisticated, basically TPF is the funding of litigation or arbitration parties (usually claimants and increasingly class claimants) in return for a share of the proceeds. 

“Litigation funding is where a third party provides the financial resources to enable costly litigation or arbitration cases to proceed. The litigant obtains all or part of the financing to cover its legal costs from a private commercial litigation funder, who has no direct interest in the proceedings. In return, if the case is won, the funder receives an agreed share of the proceeds of the claim. If the case is unsuccessful, the funder loses its money and nothing is owed by the litigant” (Association of Third Party Funders – England and Wales)

On one view, TPF is simply another way to fund claims there having always been a number of ways to pay the costs of pursuing a claim in the courts or in arbitration – obviously, parties can simply fund their own costs, or equally, they may finance them by a loan from their bank or they may negotiate a fee structure with their lawyer (e.g. a no win, no fee contingency arrangement or a success fee conditional upon the result of the litigation).

Third-party funding however is different – a funded party will not normally have to pay any amount back to the third-party funder if the proceedings are unsuccessful. And these days it’s not only for financially distressed claimants who lack the ability to bring a claim.

As Ruth Stackpool-Moore, Director of Litigation Funding at Harbour Litigation Funding says, claimants approach her organisation with a request to fund for a variety of reasons ranging from hedging risk to not having a legal budget to fight the case.

To record the funding arrangement, the third-party funder and the funded party sign a Third-Party Funding Agreement covering the matters you would expect, including what and how the funder gets paid out of a money judgement or award, the degree of the funder’s control over the conduct of the proceedings, what happens if there is a disagreement (for instance, around settlement), the funders liability for things like adverse costs orders or security for costs etc. Such agreements are usually bespoke and very much depend on the individual circumstances.

TPF Issues

One of the issues currently exercising a number of jurisdictions is whether there should be greater regulation of the TPF industry to mitigate risk of abuse.

Some, like in England, favour self-regulation where funders subscribe to a voluntary code of conduct setting out capital adequacy requirements, ethical matters, limitation on the withdrawal of funding and what happens in the event of disagreement etc. A particularly important question is the funder’s level of control and ability to influence the conduct of a claim. There are competing views depending upon the jurisdiction – for instance ALF’s voluntary code takes a relatively conservative position requiring a funder “not seek to influence the Funded Party’s solicitor or barrister to cede control or conduct of the dispute to the Funder”.

The alternative view is that since a funder is putting up the money and has a stake in the outcome, important decisions like who to appoint as arbitrator or whether to settle at a particular level are quite properly a matter for funder input.

Jane Player of King & Spalding says “As an adviser I think funders are here to stay  and the good ones leave you alone to run the case and report  back at regular intervals on a risk assessment basis… I see [funders] as a positive influence as they often lend objective thinking to ultimate settlement offer discussions”

The reality is that there is usually little disagreement between the parties to a Third-Party Funding Agreement where it has been well drafted following a solid due diligence process and more importantly where there is effective communication between the parties who understand what is expected of each other.

Ruth Stackpool-Moore again; “When we do our due diligence we try to establish not only the legal merits of the claim, but also the realistic value and the realistic budget. We then agree the cost of funding based on the risks, the size and length of the case. Our pricing process – agreed upfront with the claimant – includes discussions regarding their settlement expectations. Our terms are clearly expressed in our funding agreement, so the claimant can calculate with ease how much they will owe us at all times“. 

Steven Friel, Chief Investment Officer at Woodsford Litigation Funding says;

“Ultimate control rests with the claimant and the claimant’s lawyers. We have the right to provide input, but we don’t necessarily have veto rights. Ultimately, however, my objective as a commercial funder is to ensure that I choose and cultivate the relationships with my claimants in such a way that I rely on cooperation, rather than strict contractual rights, when advancing my position in relation to settlement.

I am delighted to say that I have never found myself in dispute with one of my claimants in relation to settlement (or anything else, for that matter). If there is a dispute however, it is open to either party to refer it for expert determination”.

So, what kind of claims attract third-party funding?

Well, they are usually high value and often international.

There are varying reports of how strong a case must be before it will interest a third-party funder – some reports have that as low as 60% chance of success or as high as 85% – the Jackson Preliminary Report (2009) put it at around 70% for UK funders. Harbour Litigation Funding will fund a claim value greater than £10 million and the only cases unsuitable for funding are divorce and personal injury cases.

One thing is for sure, funders will normally undertake their own case assessment and only fund a very small proportion of the those offered to them.

 Steven Friel again;

“We will only fund meritorious claims, pursued by motivated claimants against solvent defendants, where costs are proportionate to the likely recovery, and where the governing law and jurisdiction afford relative certainty”.

In part two of this article Geoff Sharp will look at what factors are taken into account in deciding whether or not to take a funded case to mediation, how funders decide whether to attend on mediation day and what impact that has on the mediation dynamic, what role they do play if they do attend and the volume of funded cases actually going to mediation… and more

In the meantime, an excellent publication with a focus on contemporary issues in third-party funding of arbitration is Norton Rose Fulbright’s International Arbitration Report, issue 7, September 2016

Brick Court home to “some of the most highly regarded” mediators in the world

The sixth edition of Who’s Who Legal: Mediation Analysis published this week features over 300 mediators across 52 countries selected as leaders in the field.

The UK Bar continues to be well represented, most notably by Brick Court Chambers whose “fantastic” mediation offering includes two of our most highly regarded individuals. Our research also highlights a number of stand-out individual practitioners.

Home to some of the most highly regarded individuals in our research, Brick Court Chambers continues to demonstrate the depth and breadth of its mediation expertise and its leading position at the UK Bar. The “absolutely charming and totally brilliant” William Wood QC is described by many as “one of the best mediators in England”. He has experience mediating in Dubai, Hong Kong, New York, Johannesburg, UK and Nairobi making his practice “truly international”. Considered “an elder statesman of the mediation field”, Tony Willis is recognised for his “distinctive ability to adapt to any given conflict”. For many respondents, Stephen Ruttle QC is “a truly sensational mediator” and is admired for his “instinctive and intuitive nature” when dealing with disputes in both the public and private sector. Geoff Sharp is a door tenant at the chambers and is “one of New Zealand’s pre-eminent mediators”. He possesses “vast experience mediating in Asia and the Middle East”. Also a door tenant at chambers is Core Solutions Group’s founder and chief executive, John Sturrock QC. He is regarded as “a seasoned expert in the field”, and is recognised for “the great ease with which he facilitates high-level disputes”.