In Defence of (Defensive) Mediators

Ask most mediators of a certain stripe and they will be only too willing to tell you the story of long ago when they left their law firm or maybe even chambers to become a mediator…. that giant leap of faith, that alarming drop in revenue.

Some will have run away from practice only to later stumble over mediation. Others will have run, arms outstretched in an embrace, towards mediation. And it usually shows in the sort of mediator they become in the years that follow.

But all mediators of this genre have a certain sensitivity in common.

So it was well into the afternoon of a mediation this past week, one of the lawyers who I had last seen when I was at my firm in the 1990’s said to me; ‘So Geoff, when did you give up real law?’

At this point, two answers are possible.

One for a valued and hopefully future consumer of my mediation services; ‘Ha! Spot on Brian – I haven’t opened a law book since 1998’.

But it was the other, giving life to that sensitivity all these years later, that sprang from my lips;

Well, you know Brian, there’s a lot of paddling under the water for us mediators. I have to be able to understand, very quickly, how you twist your square causation argument into the round hole of the law – and test you on it without, of course, putting you on the spot.

Before I can do that though, I need to actually know the law and have a good eye for legal BS so I can ask you, in the nicest possible way, to explain it to me again so others at the table just might pick up the soft spots I got, but they missed, on your first run through.

Sorry Brian, but it felt good.

Brick Court in the Pacific

Brick Court mediator, Geoff Sharp, has been teaching mediation at the University of the South Pacific in the Cook Islands this week courtesy of Cook Islands Law Society, New Zealand Law Society and Massey University.

The course was held at the USP campus on the island of Rarotonga in the Southern Group of 15 tiny islands that make up the Cooks. The resident population of all islands in the group is estimated to be between 11,000 and 12,000, almost all Cook Islands Maori.

By the way, the Cook Islands is one of the few countries in the world to ask a question about coconut consumption as a part of its census – and it was revealed in 2017 that 2,947 households use 28,461 coconuts every week. That’s 10 coconuts per home per week!

In some ways teaching mediation anywhere in the Pacific is taking coals to Newcastle, there being a strong tradition of conflict resolution by mediation within Pacifika social order – in particular in the many villages dotted throughout the islands, often remote from any formal system of justice.

But the modern form, especially for civil disputes – which are mainly land issues – has been eagerly awaited. It won’t be long before mediation is mainstream in the Cooks and it will be very colourful with plenty of food, prayer and maybe even song integrated into the process.

Thanks go to other faculty members, Prof Laurence Boulle, Virginia Goldblatt (co authors of Mediation: Skills and Strategies) and Dick Edwards of NZLS CLE who made it all happen.

John Sturrock Features In The Times

In these turbulent times, some might be interested in John’s article published in The Times newspaper yesterday…

Sophisticated Mediation Advocacy : “Out Loud Adverse Advice”

When I am mediating I often encourage counsel ‘to be brave’.

Easier said than done I know, but bravery can take many forms in mediation.

From counsel backing their own advice when the easier road would be to settle – to something a little more counter intuitive and possibly risky – like strategically signaling vulnerability at the table, often achieved by counsel giving the client out loud adverse advice during a joint session.

Yeah, opposite counsel may be right I guess – we will struggle if that’s the way the judge approaches liability on this aspect – and by the way, we are the wrong side of 60/40 odds. But once/if we get through that, quantum is downhill with a minimum of 1m and on a good day 1.95m – their risk that we get to try quantum is unacceptable and (as counsel turns back across the table) we know you can’t live with that for 15 months until trial

What’s going on here?

Well, good mediation advocates know they don’t have to prove their position is the correct one – their task is fundamentally different at mediation – instead they are asking themselves what can I do to move this case towards settlement?

I have heard it said that all you need to bring to mediation is a big stick – errant nonsense of course and ironically, I have seen some very small sticks, aimed very carefully, obliterate their target.

So, good advocates don’t waste energy debating the legals up hill and down dale – rather, just enough back and forth to condition the debate and create doubt (and therefore risk) for the other side – and if they’re really, really good, by using front-foot concepts like preemptive disclosure and inoculation.

Inoculation is an especially intriguing notion and again belongs to next level of mediation advocacy but, other than what appears below, will have to wait for a future post.

Good counsel reason that voluntary disclosure of negative information removes the sting of negativity and divests the other side of the opportunity to expose and capitalise on it.

I delight in seeing brave mediation advocates making carefully considered concessions on points that do not directly undermine their ultimate goal –  which, in the right hands, is an extremely effective mediation posture. And that’s not to say they would do the same thing at trial – that’s the point, mediation advocacy is so very different.

But great caution is needed – there is an art to this high-wire act and it’s best to read this before you try it at the table; Playing With Fire: The Science of Confronting Adverse Material in Legal Advocacy (Prof Kathryn Stanchi, Temple University – James E. Beasley School of Law).

… it is not surprising that there is considerable controversy among both appellate practitioners and trial lawyers regarding when and how to address information that potentially undermines the position they are advocating. The vehemence of the disagreement among lawyers about the appropriate strategy, as well as the pain of the dilemma, is a testament to the high stakes of the question.

The theory of inoculation is based on the idea that advocates can make the recipient of a persuasive message “resistant” to opposing arguments, much like a vaccination makes a patient resistant to disease… inoculation studies show that raising and refuting adverse information works better than a wholly positive message to insulate message recipients from later attacks on the message… the theory is that introducing a “small dose” of a message contrary to the persuader’s position makes the message recipient immune to attacks from the opposing side.

The key to inoculation is the warning of the impending attack, or “threat”, combined with the refutation of the attack. Refutation alone is not sufficient to produce the inoculation response. The two components work in tandem – for the inoculation response to occur, challenges must be explicitly raised and then answered.

Remember you heard it here at BCC first: “out loud adverse advice”

Read the full article in which Prof Stanchi explains a range of fascinating concepts like bad law, bad facts, stealing thunder, preemptive disclosure and inoculation theory – all useful to the advanced mediation advocate.

J. G . Mean and (Brackets)

My mediations are haunted by a fellow called J. G. Mean who just keeps cropping up. I can be as creative as I like but all too soon JG is there in the room. You encourage some venting, explore various forms of reality, re-frame a little, season the whole boiling with some cognitive dissonance and stand well back – only for somebody to say, “Just Get Me A Number!”.

Now there are various antidotes to JG*. (And in the right place, at the right time JG can be hugely welcome.) But the antidote I have always wanted to try is The Bracket.

We have known for many years that our colleagues in the US were using brackets routinely and successfully to settle cases. I have used them myself, just not in this country. This is the process whereby rather than simply trading offer and counter-offer a party makes a conditional offer: “I will go to £500,000 but only if you come down to £1 million” or more simply says, “My bracket is £500,000 to £1 million. Will they work in that bracket?”.

A word of warning here to our transatlantic readers. If you persevere with this post you will learn nothing. Indeed you may  feel rather like Roger Federer reading a schoolboy’s over-excited essay about his first tennis lesson: simplistic  and with the odd  mistake. Apologies

My own attempts to promote the use of brackets in London have met with abject failure. The parties and their advisors look at me as if I have just suggested trial by combat. “(Sigh) Just get me a number, Bill”

That is, until last week.

Now it is true that last week circumstances were not entirely typical.

First, there were US as well as London lawyers in both rooms so each side had a source of comfort and reassurance as they faced this unusual and discomfiting challenge. Some may object that the record is therefore wind-assisted.

Second, I have to say the mediator was unusually persuasive. Sensing that the door was just slightly ajar I came up with this successful formulation: “Please, please, please be my first London mediation to settle using brackets”. I’ve always thought abject supplication was an effective dispute resolution technique and so it proved in this case.

The magic of brackets, I can now tell you on the basis of extensive experience, turns out to be “the mid-point”.

Of course, in one sense a bracket is at best a conditional offer of the lower figure in the bracket. And the “condition” usually remains unfulfilled. This is because the counter-proposal tends to be another different bracket. So the response in the above example might be: “No we can’t accept your bracket. But we will come down to £1.4 million if you come up to £800,000.”

At a purely prosaic level nothing much has been achieved. But there is poetry here if you look for it. Turns out the bracket connoisseurs are keeping an eye on the mid-point because the most important message of the bracket is that the mid-point of the range is implicitly being signalled as the killing zone for the deal.  The parties tend (at least in private) to say “I have moved my midpoint” more readily than they say they have moved the bracket itself. “She must like my mid-point”, they muse to the mediator.

The midpoint is not being formally offered. It is not even being referred to explicitly. But it shimmers temptingly in the half-light of the negotiations.

Since last week’s triumph things are back to normal. I have once again failed to sell brackets in a couple of purely domestic mediations (“JG! How nice to see you!”). The gleam in my eye is no doubt even more off-putting than before.

Because I have seen the future. Brackets will be here soon, with no more than the customary time-lag, just like hamburgers, rock ‘n’ roll and indeed mediation itself before them.

And they work!

*The best of them set out in the excellent “Making Money Talk” by J Anderson Little

John Sturrock reflects

… on Edinburgh, London and the challenges facing mediation everywhere….

John Sturrock QC, the founder of Core Solutions in Edinburgh and “Scotland’s finest mediator” (Legal 500) has now been a central member of the Brick Court team for two years.

I caught up with John on his way to the airport. He had just left a foreshortened Select Committee meeting on Brexit at Westminster, which he had been facilitating in his Special Adviser role (the General Election announcement had distracted his intended audience). He was flying to San Francisco to speak at an American Bar Association Dispute Resolution conference before going on to Memphis, Tennessee for the International Academy of Mediators conference. Such is the life of a mediation thought-leader!

Q : John what kind of litigation practice did you have at the Edinburgh Bar in the days before mediation discovered you? Have you left those experiences behind or do they still inform the work you do?

 I had a busy and varied civil and commercial practice. We tend to specialise less at the Scottish Bar so my portfolio included a wide range corporate and commercial work. That gives me a really good insight as a mediator into many different types of case.

So I was junior counsel in the then largest patent action in the Scottish courts. I handled major litigation arising out of the tobacco and pharmaceutical industries, property valuation (including petro-chemical plants, large entertainment venues and football stadiums!), banking, oil and gas, construction, planning, judicial review and the usual range of professional indemnity cases involving all sorts of disciplines. Along the way I paid a visit to the House of Lords in which my argument as junior counsel for the appellant on the matter of foreseeability prevailed – a moment of pleasure not to be shared overtly with my learned senior!!

Q : Scotland, not least because of your own efforts, has become something of a mecca for dispute resolution and mediation in particular. Do you have a sense that Scotland punches above its weight in ADR matters? Modesty aside how has this come about?

I think we need to be realistic. Scotland has seen a really significant rise in the use of mediation in commercial cases. And, yes, like you Bill, having left litigation practice to work full time in mediation and dispute resolution, I take some pleasure in that development, in which I have invested my professional career for over fifteen years. But we are still behind other jurisdictions in judicial support.

I sense this is changing now with a quite radical new leadership in our courts. However, this means that I often mediate in situations where the parties are choosing to do so because they want to – not because a court will penalise them for not doing so – and also earlier when more imaginative approaches can be taken. I am a great believer in making best use of the mediation process to help the key players achieve really useful results for their business.

Q : You were busy mediating in London well before you joined Chambers. But I wonder what differences you notice between London and other mediation environments in which you work in terms of the way parties participate in mediations and in their expectations of you?

Interesting question. I sense that there is greater expectation that there are particular ways in which mediators will act. Sometimes there is a more pro forma way which people have developed over a number of years and through great experience. I think one needs to be sensitive to that and the benefits which people have seen accrue. On the other hand, one of the themes at the ABA conference is likely to be the extent to which mediation in the US (especially in Southern California) has become formulaic and the province of the litigation profession. The fear expressed in the US is that mediation is now just a tool for use to achieve (or broker) late settlement. Indeed, they are proposing an alternative “early dispute resolution” model which seems to be just mediation carried out early! We need to avoid falling into the trap of being too predictable , I suggest.

Q : You must have one of the most varied portfolios of any ADR professional that I can think of, with a practice reaching into government, political parties, policy, the environment, churches, industry, as well as covering the narrow litigation-centred world I work in. Do they all complement each other and spark off each other or do you simply have to wear a different head for each of them?

The fundamentals are the same I think. The human condition, by definition, is universal. They say that there are only five themes in Hollywood! The facts and circumstances differ, the emotional component is expressed differently, the players have different drivers, and so on. But the beauty of our role is that, because we enablers and not fixers, we can draw on these many experiences and often use a technique or approach from another environment to help in the instant case. I seek to adapt to the “culture” wherever I am or whatever I am asked to deal with, and that means avoiding stereotyping or assuming that any situation fits into a particular box.

So, there is a sense of each mediation (or “facilitation”, if the “m” word is not the right one) providing a rich resource for all the others. You use the word “spark”: I think that is really important. When we are at our best as mediators, our job is to help spark others into new ways of approaching difficult problems and to do so with energy and commitment. I regard myself as very fortunate to work with such a diverse range of people and issues.

Next time I talk to our New Zealand-based mediator, Geoff Sharp

 

Brick Court Mediators In Asia

This week Geoff Sharp was appointed one of a handful of Senior International Mediators to the new Mainland China – Hong Kong Mediation Center.

Being the first joint mediation center in the region set up by two major mediation institutions in Mainland China and Hong Kong, the Center aims to provide an effective platform for resolving cross-border commercial disputes between Mainland China and Hong Kong, in particular with China’s “Belt and Road” initiative.
The Center is a joint venture between the China Chamber of International Commerce and the Hong Kong Mediation Centre, with the vigorous support of the Department of Justice.
The Belt and Road inititive together with the National 13th Five-Year Plan means cross-border trade is set to increase drastically and commercial disputes are expected to follow.

 

Off With The Wig!

This speech by The Hon Tom Bathurst AC, Chief Justice of New South Wales on 30 March 2017 addresses issues arising for advocates switching from the courtroom to the mediation table and is worth a read.

The Judge discusses what advocates should keep in mind when moving from litigation to mediation and back again.

I want to first discuss the ways in which advocates need to shift gears when moving from a litigation to a mediation terrain, employing different models of advocacy in each setting. I will then move to consider how a lawyer’s ethical duties may manifest themselves differently despite having the same essential content in both venues. Finally, I will discuss the extent to which practitioners are covered by advocate’s immunity from suit when representing clients in mediation…

Olivia Rundle has famously categorised five ways in which lawyers may participate in mediation. This ranges from;

  1. the absent advisor, who assists the client to prepare but does not attend the mediation
  2. the advisor observer, who attends the mediation but does not participate
  3. the expert contributor, who participates but only to the extent of providing the client with legal advice
  4. the supportive professional participant, who directly participates in concert with the client
  5. the spokesperson, who speaks for, and negotiates on behalf of, the client. It is only this final model that replicates the lawyer’s role in court.

… It is important that advocates give consideration to these roles before entering mediation so as not to either hijack the process or leave their client insufficiently supported.

No surprises that the sweet spot for a mediation advocate is to be high on the both the relationship and the expertise scale.

Read the full speech here

A New Seat at the Mediation Table? The Impact of Third-Party Funding on the Mediation Process (Part 2)

This is the second in a series of two posts about third party funding (TPF) of litigation

Geoff’s Part 1 looked at the principle of third party funding. Now Bill Marsh at Independent Mediators and Geoff Sharp of Brick Court get together to share thoughts on the impact TPF has on the mediation processsnip_20170310132157

Whatever else mediation is, it is certainly a forum in which the parties have the chance to make decisions about how to resolve their dispute or conflict. Often difficult decisions. And so the factors that motivate those decisions are crucial to their choices.

In simple terms, this is often a question of carrot and stick, pros and cons.

In our experience, parties in mediation are constantly weighing the upsides and downsides of a given settlement proposal. Part of their consideration is the financial cost of losing – not just any damages, but the costs consequences as well. In many jurisdictions (including ours – England and New Zealand) the loser at trial pays (the bulk of) the winner’s legal costs, and so that cost forms an important part of considering ‘what happens if we actually lose our case?’

Traditionally, a litigating party bears both the upside and the downside risk. If they win, they receive. If they lose, they pay. But TPF radically changes this. And therefore changes the whole consideration of risk. For example, a funded claimant can win the case (and sure, they have to share the winnings with a funder); but if they lose, someone else will pay the costs. In fact, the funder has paid the costs and there is no recourse. So, they feel that they have an upside without a downside – a ‘free run’ at the case.

And for most people, that changes everything;

More Confident Claimants

Funded claimants appear more confident in settlement negotiations, because as we say, they consider they face an upside but no downside. They have managed to secure a safety net. The main question in their mind is the size of that upside!

Another Brain

A fresh perspective is one of the more important impacts on the mediation process – funders will naturally scrutinise a case before agreeing to fund it undertaking quite sophisticated due diligence, and some may want a say in settlement decisions. That means that an additional legal mind has assessed the case, at least at the outset, and no doubt at key stages along the way as well.

In practice, funders will sometimes be present at the mediation. Given the nature of their involvement, they can add a wise head and tend to act as a useful check and balance on the funded party.

The Mere Threat of Funding

Allied to there being another brain in the mix, the mere fact that a claimant has been able to secure funding – can sometimes, in and of itself, lead to mediation and /or settlement.

As James Rogers, a Norton Rose Fulbright arbitration partner says;

I was involved in a somewhat unusual +5 year case where the threat of funding led dramatically to settlement… We eventually had four arbitration awards in hand that we were getting ready to enforce and we were preparing another round of claims… The threat of funding confirmed our client’s persistence and, within a month confirming that we had engaged funders, the Chinese party agreed to settle. It was a very powerful tool.

And that is perhaps why some claimants are sometimes happy to volunteer the existence (and sometimes details) of their funding to the other side, as it can send a very strong message about the merits of the claim and the wisdom of settling now rather than later as the escalating scale of payments to the funder ramps up the closer to trial it gets.

As a mediator, Geoff was recently asked to examine a party’s funding agreement and, while they were not prepared to show it to the other side, he was asked to confirm that a funding agreement was in place together with some of the more salient details that, strategically, the claimant wanted the defendant to know about.

A More Dispassionate View

Funders will often approach settlement discussions much more dispassionately than the parties themselves.

Their concern – understandably – is less with the underlying issues that generated the dispute in the first place (after all, they weren’t even there) and more with the risk analysis that underpins settlement discussions.

Steven Friel, CEO at Woodsford Litigation Funding says;

As a funder, our main concern is in achieving a financial return. If a claimant wants something else, for example vindication on some point of principle, then this introduces the prospect that the claimant’s interest will not always be aligned with our interest. We approach such cases with caution.

Put simply, funders are normally focused on the numbers. This can of course be very valuable.   But it can occasionally run the risk of steering the mediation discussions away from a perhaps more personal exchange of views when the parties themselves may need these to get to a money settlement.

Neither focus need be to the exclusion of the other, but the balance is worth thinking about if you are a mediator.

Funders in the Mediation Room

Mediators report that they are seeing funders at the mediation table, and that this sets up an interesting dynamic. Having a repeat user brain with a dispassionate view on mediation day can be invaluable – especially if the funders and the funded interests are aligned as they should be.

So, if funders do attend mediation, what role do they typically play at the table… silent observer, active participant, agent of reality?

Ruth Stackpool-Moore, Director of Litigation Funding at Harbour Litigation Funding says;

Although rare, if and when we attend mediations, our role is generally one of silent observer. The indirect effect of our presence may be the same as our involvement in the case generally, in that the other side feels the weight of our experience and may be more constrained in trying to “pull the wool” over the claimants eyes. What we wish to avoid is that our presence diverts the other side’s attention from settlement, which would be counter-productive for all involved.

Whose Case is it Anyway?

Exactly who calls the shots, whether to take the case to mediation in the first place or a decision around what level of settlement is appropriate, can be a contentious issue.

There is a concern in some quarters that funders will gradually progress from funding, to controlling, to hands on – which would not be a lot different from a law firm on a contingency fee and lawyers do worry about the degree of control a funder might have.

Indeed, in a 2016 litigation finance survey of over 400 litigators by US litigation funder, Lake Whillans , it was the economic terms of any arrangement that were of most importance to respondents when choosing a funder and a close second came a funder’s right to influence or decide strategy or settlement.

But the funders we spoke to don’t seek drop-dead control – quite the opposite in fact, as Ruth Stackpool-Moore at Harbour explains;

The decision on the appropriateness or otherwise of mediation is one for the claimant and their legal team. At Harbour, we do not control how the claimant and their legal team deal with the dispute. In our experience, mediation employed at strategically sensible stages of a dispute can be a very effective way to reach settlement or narrow the issues which remain in dispute, thereby often reducing the uncertainties and cost of the proceedings.

Consistent with that, Steven Friel at Woodsford;

Ultimately, we don’t decide. The decision whether or not to mediate a case, much like any other important step in the cases we fund, rests with the litigant and their lawyers. Of course, we have input into the decision, and it may be the case that we have the option whether or not to extend our funding to cover the mediation.

When providing our input, and when deciding whether to extend funding to cover mediation, the factors we take into account are exactly the same factors that any reasonable litigant should take into account. In other words, is the mediation reasonably likely to lead to settlement, or otherwise narrow the issues in dispute?

At Woodsford, we are staffed largely by English lawyers, trained in a post-Woolf approach to alternative dispute resolution, so we are relatively open to mediation.

It would seem to us when there is a prospect of settling the dispute, there is perhaps more chance of a tussle over control. Selvyn Seidel of US funder Fulbrook Management acknowledges that a funder “may not have a lot to say over a settlement – we don’t want to make the decision but we have to be able to voice our opinion”.

Again, funders appear to have a fairly consistent approach, with Steven Friel reporting that;

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

Consistent with all of this is the voluntary code of the Association of Third Party Funders (England and Wales) that requires a funder “not seek to influence the Funded Party’s solicitor or barrister to cede control or conduct of the dispute to the Funder” and requires the Litigation Funding Agreement to state whether (and if so how) the funder may provide input into decisions around settlement. The guiding principle being that a lawyer should exercise independent professional judgement and give candid advice regardless of the involvement of a funder.

If there is a dispute the Code requires it to be referred to a Queen’s Counsel instructed jointly or nominated by the Bar Council for a binding opinion.

In a very useful e-book by Steven Friel and Jonathan Barnes Litigation Funding 2017 we are taken on a world tour of third-party funding jurisdictions. Of interest, in the context of this post, are questions around funder’s ability to participate in the settlement process (e.g. mediation) and to veto settlement.

While there appear small regional differences, in most jurisdictions it is perfectly acceptable that funders participate in settlement proceedings, including attending mediation and the good reasons why they should do so are acknowledged.

If there is a veto power in respect of settlement, that would normally be found in the funding agreement and in some jurisdictions it seems it is common practice to include it (for instance, Switzerland and Germany).

In New Zealand the existence of a funder’s veto was tested in the courts and a fairly liberal approach was taken in Strathboss Kiwifruit v Attorney-General where the defendant (the Crown) was concerned at the funder’s power of veto in relation to settlement.

The NZ High Court was not persuaded;

In this case, it was argued that too much control vested with the funder… The Crown was also concerned at the funder’s effective power of veto in relation to settlement of the proceedings…

I am not persuaded that the terms of the deed with the funder in this case are necessarily inappropriate for a representative action of this type. There is likely to be a range of views as to what would constitute an acceptable settlement, or the circumstances in which the plaintiffs may be better advised to explore alternatives for bringing the claims to an end. As between the claimants, the committee representing them will have to strive for consensus, and on major issues will no doubt be cognisant of the attitude of the funder. In most scenarios, I accept Mr Dunning’s point that the claimants and the funder should continue to have aligned interests…

The funder will therefore need to maintain their goodwill to carry on with the action. That goodwill would be in jeopardy if the funder wanted to continue when the claimants considered an acceptable settlement was available…

More importantly, the mechanisms for resolving major disputes contemplate the involvement of independent third parties with appropriate expertise. Reputationally, if in no other respect, that will provide a fetter on the funder’s ability to act unreasonably.

But control can be exercised in the number of ways and the ability to walk away can give a funder de facto control over the way a case is conducted – while it is hard to generalise, in one of the very few examples of a Litigation Funding Agreement we could find online (Roland Prozess Finanz AG), any agreement reached by mediation required Roland’s consent. In the event of the funded and funder failing to agree on a settlement proposal, the agreement could be terminated – with the party refusing settlement paying to the other the amount they would have been entitled to under the agreement if settlement had been reached – in the example agreement this meant a funded/funder split of 70/30 for any sum under 500,000 and an 80/20 split for sums exceeding that (and at mediation, a split of 80/20 applied).

But there is no doubt, the more uncertainty around who is the decision maker in the mediation room, the harder it is as a mediator to read the room.

Funders Stand in ‘Their’ Party’s Shoes

Following the English Court of Appeal’s recent decision in Excalibur Ventures v Texas Keystone, it is clear that funders (at least in England and Wales) cannot just fund the case and then stand back.

Conduct of the funded party will, at least in its consequences, be attributed to them even though, as we see above, funders may not want or have the ability to influence strategy.

In Excalibur the funder provided both litigation funding and security for the Defendant’s costs. The funded claimant, Excalibur Ventures, lost heavily at trial with the judge describing the claim as “speculative and opportunistic”. The Claimant (and hence the funder) was ordered to pay the Defendant’s costs on an indemnity basis, because of the Claimant’s – not the funder’s – conduct.

In response to their objections, Tomlinson LJ said: ‘The argument for the funders boiled down to the proposition that it is not appropriate to direct them to pay costs on the indemnity basis if they have themselves been guilty of no discreditable conduct or conduct which can be criticised.

“Even on the assumption that the funders were guilty of no conduct which can properly be criticised, and I accept that they did nothing discreditable in the sense of being morally reprehensible or even improper, this argument suffers from two fatal defects…”

“First, it overlooks that the conduct of the parties is but one factor to be taken into account in the overall evaluation. Second, it looks at the question from only one point of view, that of the funder…. It ignores the character of the action which the funder has funded and its effect on the defendants… A litigant may find himself liable to pay indemnity costs on account of the conduct of those whom he has chosen to engage – e.g. lawyers, or experts who may themselves have been chosen by the lawyers, or witnesses… The position of the funder is directly analogous”.

‘By funding, the funder takes a risk, a risk as to the nature of which he has the opportunity to inform himself both before offering funding and during the course of the litigation which he funds,’ he added.

Two Surprising Benefits
Early Settlement

Funding may change the timing dynamics – counterintuitively, it may make early settlement more attractive given that funding agreements often provide for a sliding payment scale – depending if the matter concludes early, middle or late in the journey towards trial. There will often be a lower percentage payable to a funder on any settlement in a mediation room compared to a win in the court or arbitration room – simply because the interplay between costs and risk changes the closer to adjudication the case gets.

Ruth Stackpool-Moore at Harbour again;

The certainty of a guaranteed return from settlement following a successful mediation is generally worth more to us than the uncertainty of what may, or may not, come through a judgment or award…

Better Informed Parties

Perhaps a surprising spin-off benefit from third-party funding is that there will inevitably be an increase in the number of better informed litigants, regardless of whether those parties actually receive funding – as Victoria Shannon Sahani from Washington and Lee University School of Law says over at the Kluwer Arbitration Blog; since funders fund only a small percentage of the cases they are asked to look at (may be less than 1% to around 5%) there are far more cases that are not funded then cases that are funded.

That means funders are providing “free” case assessments to the vast majority of parties they encounter, regardless of whether they decide to finance the case or not. Parties who are rejected and who receive a substantive explanation will be better informed to make a call on their future direction of travel.

As Victoria Shannon Sahani says “over time, an increase in the number of well-informed parties will have a very positive impact on our international system of dispute resolution”

Last Word

Mediations are often a heady cocktail of upsides, downsides and risk analysis.

In one sense, TPF changes nothing. But in another very real sense, it seats another stakeholder at the actual or metaphorical mediation table – and as all mediators know, that changes everything.

Rasputin the Mediator

We often try to identify heroes and thought leaders in the mediation community, often without success. While at first sight it may seem strange a description of the Tsarist mystic, Rasputin struck a chord with me the other day.

His story remains astonishing even after all the previous tellings…He suddenly broke with family routine embarking on several years of pilgrimage, returning home only intermittently. This period of spiritual quest and adventure honed his gift of psychological insight and persuasion: as he wandered from one set of strangers to another, he learned to assess them rapidly, speak to their fears and concerns, and exude rough-hewn sanctity [1]

Okay, not all of us have got our “rough-hewn sanctity” nailed down quite yet. But the rest of it seems on point.

Moreover, it turns out that Rasputin was in fact frequently ignored by the Romanovs who he was popularly supposed to hold in his thrall. It was probably Rasputin who advised the Tsar shortly before the revolution that he needed to regain the confidence of his people. “Nonsense”, replied Nicholas, “It is they who must regain my confidence”.

Well we have all had private sessions like that.

A new mediation thought leader?

I give you Grigori Yefimovich Rasputin.

[1] Full of Ecstasy and Fire, Stephen Lovell, Times Literary Supplement 
17th February 2017