Workbook

Conflict Management and Dispute Resolution

Elective Module

MSc Management of Projects

Peter Fenn

MACE

PO Box 88

Manchester

M60 1QD

Tel 01613064233

Email: [email protected]

mailto:[email protected]

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Table Of Contents And Workbook Outline

How To Use This Workbook

1. Conflict Theory

2. Introduction to the law, Contract and Tort

3. Comparison Of Dispute Resolution Techniques

4. Negotiation

5. Mediation Principles; The Mediation Process; Mediation and the Law

6. Other ADR Processes and Game Theory

7. Construction Adjudication Practice and Procedure; Arbitration Practice and

Procedure

8. Litigation and International Disputes

9. Conclusion

References And Bibliography

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How to Use this Workbook

This workbook has been specially designed and written for the elective module in Conflict

Management and Dispute Resolution on the MSc in Management of Projects. It will help you

to plan your study and to work systematically through the course. You should use this

workbook as the basis of your studies. The workbook is just part of the material which is

provided at the Blackboard Virtual Learning Environment [VLE]. There are 3 main teaching

documents:

The Workbook [available at any time on Blackboard]

The Learning Modules [available at any time on Blackboard]

The Lecture Slides [copied by me and provided to each student; and available at any time on

Blackboard]

Content

The workbook is divided into sections that reflect the syllabus. Each section begins with an

introduction, which briefly explains the topic to be studied and may suggest areas to be

focused upon. This is followed by a list of objectives that should be achieved after studying

the section.

The substantive part of the text must be read very carefully and you must ensure that you

understand the concepts before moving on to the next section. It is important that you are sure

that you have achieved the objectives identified at the beginning of the section.

Questions

In this workbook there are boxed questions in the text; and these are repeated in the web

based learning modules. These are designed to make you stop and think about the issues, and

sometimes the rules of law, you are studying. You should answer these questions before

proceeding. However, not every question will have a clear answer. This is the nature of the

subject.

After the substantive part of each section, you will find some short revision type questions.

These basic questions are a good way of checking the extent of your understanding of the

main concepts. In spite of the fact that they are basic, you are strongly recommended to do

these questions before moving on to the next section. The questions can be answered by

reference to the text and some self study. If you are unable to answer the questions you should

read the section again to identify areas that were unclear to you at the first reading.

Following the revision questions, there will normally be an essay-style question. This is the

type of question that you can expect as part of your assessment. You should attempt these

questions to see if you can identify the issues raised.

Writing an answer

It is important to understand how to write an answer to a question. When answering an essay

style question, you should try to structure your answer: start; middle and end is always a

good structure. Start your answer with a short introductory paragraph outlining your

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treatment of the topic; set the stage for the text which follows. In the middle deal with the

substantive issues; what are they? At the end make sure you have answered the question; and

reach conclusions based on your text in the middle. Questions have a command work e.g.

discuss – this requires at least two viewpoints or opposing theories; make sure you deal with

the command word..

Having determined the issues in a problem (and remember there may be more than one issue

in a question) you may have to state the law that applies to the particular issue. In Mediation

this is less likely than other areas e.g. arbitration where a statute applies. If the law is from a

statute, you will need to state which Act and which section applies. So, for example, s 11 of

the Unfair Contract Terms Act 1977. It is not necessary to memorise s 11, but you should be

able to state the effect of the section. Having done so you must then show how it relates to the

problem you are dealing with and try to come to a conclusion on that issue. Sometimes it will

not be possible to arrive at a firm decision, normally because the question does not give you

all the facts. It is permissible to say that a particular conclusion is more or less likely in the

circumstances. It is also permissible to give one or two possibilities, but you must be careful

not to lose sight of the rest of the question.

The relevant law may also be found in the decision of a case; again less likely in Mediation

but needs to carefully monitored. You will need to state the name of the case and the principle

it provides. When stating the name it is not necessary to put down the entire citation just the

name of the case is sufficient: for example, Donoghue v Stevenson. Should you be unable to

remember the entire case name, simply 'the Donoghue Case' will suffice. When you cannot

remember either part of the name, but remember some salient facts, which will identify the

case, you may state those facts very briefly. For example, in relation to the above, you may

say, 'in the case of the snail in the ginger beer bottle'. Do not panic if you do not remember the

case name, it is more important to state the principle involved. Try to remember the most

important cases in each topic, rather than all the case names in the list. Many of the cases

merely illustrate a point, rather than create new law. These illustrative cases will help you to

understand how the courts apply already established principles of law.

Having identified the issues and stated the law, you must apply the law to the particular set of

facts that you have been given. This process must be repeated for all the issues the question

raises before you can finally come to a conclusion.

Revision and assessment technique

The following are just a few suggestions on matters you might like to have in mind when

revising for and writing the assessment.

You should plan your revision in good time. Apportion enough time to each topic that you are

studying. It is a good idea to test your self after revising each topic. This should include

writing an assessment style answer to time, as explained below.

You should be careful to note mark allocations on the questions. It is pointless to spend an

excessive amount of time in producing a lengthy answer to part of a question that only merits

a few marks, whilst giving a short answer to the part meriting higher marks.

Deal with the command in a question and answer the question; that is the question posed, not

the question you wish had been posed!

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I hope that you will find this course stimulating and challenging. It is hoped that when you

have completed the course you will have a sound appreciation of the basic principles of


Good luck with your studies!

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1. Conflict Theory

This section considers the role of conflict theory in explaining commercial conflict

management and dispute resolution.

The section might be described via an overall aim and measurable objectives.

The section aim is

To consider the difference between conflict and dispute

Within the overall aim the following measurable objectives are set:

Explain the difference between conflict and dispute

Discuss the origins of Conflict Theory

Discuss the application of Conflict Theory to commercial conflict management and

dispute resolution.

Conflict and Dispute are difficult words; they are often interchanged. Some theorist take

conflict as the stronger term [i.e. dispute is all around but only occasionally does conflict

break out] and some take completely the opposite view [i.e. conflict is all around but only

occasionally does dispute break out]. This workbook takes the position that conflict is

necessary and inevitable but that disputes are to be avoided.

There exists enormous interest in commercial disputes amongst the professions, industry and

academia. The interest is mostly with the techniques used to resolve disputes; there exists

little by way of research into conflict and dispute.

Conflict and Dispute

Disputes are time consuming, expensive and unpleasant. They can destroy client/supplier

relationships which have been painstakingly built up over long periods of time. Disputes can

add substantially to the cost of a project even making a project unsuccessful, unfeasible or

nullifying any benefits. Disputes need to be avoided; if the dispute cannot be avoided then

they should be resolved as efficiently as possible to manage the ‘Problem’, negotiate a

‘Settlement’, help ‘Preserve Relationships’ and maintain ‘Value for Money’.

Is there a difference between conflict and disputes

Many people would not recognize a distinct difference between the terms conflict and dispute.

Certainly most people would not concern themselves with any definition. Academics, and

others, would usually make definition their starting point. Definition provides structure and

structure may allow explanation and understanding.

Conflict and dispute studies do form academic disciplines. Any attempt here to summarise

the various strands of academic disciplines would be doomed to failure and debate on

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definition. In an attempt to avoid this, it is suggested the following are some of the areas of

conflict and dispute studies:

Peace and Conflict Studies

Conflict Management as an Organisation Management Science


Peace and Conflict Studies

Much useful material is available on the Internet try:

http://www.cgpacs.uci.edu/

However, many scholars do draw a distinction between the two terms.

Functional and dysfunctional conflict

Early conflict theory marked all conflict as a bad thing that should be avoided. Amongst the

first to question this was Mary Parker Follett; she said that effective conflict management

ought not to conceive conflict as a wasteful outbreak of incompatibilities, but a normal

process whereby socially valuable differences register themselves for the enrichment for all

concerned. Three methods were advanced for dealing with conflict of which only integration

was strongly advocated. These included: domination, whereby there is a victory of one side

over the other (a win-lose situation); compromise, whereby each side gives up something in

the process (a lose-lose situation); and integration, whereby each side refocuses their efforts

so that neither side loses anything and in fact each gains (a win-win situation).

Follett believed that domination should be avoided at all costs. Although application of this

strategy requires little effort on the part of the parties and their agents, the long-term side

effects can be devastating. Compromise carries with it the assumption that both parties will

be happy because each will gain something, but each loses something as well and this in turn

creates the potential for further conflict. Integration was favoured simply because if both

parties can become satisfied there will remain no issue or problem – obviously an ideal

situation not easily attained.

Win-lose is often overused as a strategy for solving conflicts. It assumes the use of mental or

physical power to bring about compliance; a lose-lose approach will also leave no one entirely

happy. Compromise, side payments and submission of the issue to a neutral third party, as in

the arbitration procedure, constitute examples of this latter approach. The win-win approach

is now becoming more popular although it is still misunderstood by many parties and their

agents. This method yields solutions satisfactory to all in that each party to the conflict wins

something, and the conflict is therefore resolved constructively. It could be suggested that

important conflicts tend to be best managed with positive-sum (win-win) strategies, while

more trivial issues merit no more than zero-sum (win-lose/lose-lose) strategies, with most

situations calling for contingency or mixed modes (no win-no lose). Zero-sum and other

terms are borrowed from game theory; we will return to game theory later.

A further distinction between conflict and dispute that is particularly useful is the distinction

made by Burton (1993) which distinguishes the two are based on time and issues in

contention. Disputes, Burton suggests, are short-term disagreements that are relatively easy to

resolve. Long-term, deep-rooted problems that involve seemingly non-negotiable issues and

http://www.cgpacs.uci.edu/

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are resistant to resolution are what Burton refers to as conflicts. Though both types of

disagreement can occur independently of one another, they may also be connected. In fact,

one way to think about the difference between them is that short-term disputes may exist

within a larger, longer conflict. A similar concept would be the notion of battles, which occur

within the broader context of a war. Other theorists talk of strategy and tactics; tactics win the

battle but strategy wins the war.

From this analysis of conflict and dispute it can be argued that conflict is necessary and

inevitable but that disputes are to be avoided. The school of Western thought which maintains

that conflict (but not dispute) is inevitable (see deBono, 1985). Conflict is part of Western

societies and idioms; there is a Western dialectic argument idiom to use the academic jargon.

Conflict is part of dynamic capitalism and an integral part of commercialism; conflict might

be seen as the functional and necessary part. Dispute on the other hand only develops when

conflict is not (or cannot be) managed; dispute is the unnecessary or dysfunctional element

and logically there should be two areas for consideration:

Conflict Management: Here the emphasis is on the axiom that it must be in all

parties interests to avoid disputes by managing conflict in such a way that disputes do

not arise; this is sometimes described as dispute avoidance.

Dispute Resolution: Notwithstanding the emphasis on the desire to avoid

dispute, there must be occasions where the parties have legitimate disputes and that

the techniques of dispute resolution are employed to bring about the conclusion or

resolution of the dispute.

The distinction between conflict and dispute is shown diagrammatically in Figure 1.

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Dispute Resolution

Conflict Management

Fig 1

Figure 1: Conflict Continuum

CONFLICT

DISPUTE

Conflict

Avoidance Informal Negotiate Discussion

ADR Arbitrate Litigate

Adjudicate

Other

Action

Violence

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Conflict Theory

A theory of conflict does exist; it was founded by Karl Marx. Marx expresses the theory in

terms of a class struggle; the struggle between classes. Others took the theory forward

[notably Max Weber]. A glance at the conflict literature shows there is a great diversity of

conflict knowledge; from the everyday knowledge we all have to the sophisticated theoretical

writings of sociologists. The problem is how to present this broad range of knowledge in an

understandable manner. One way of dealing with this is to consider that the theories apply to

many different conflicts; even that they apply to all conflicts. Sociological theories apply to

commercial conflict. In addition the theories should be presented in a simple way. One

famous definition of economics is that it is a study of the allocation of scarce resources which

have alternative uses. Conflict theory might be expressed in a similar way; conflict is

inevitable as organisations seek to redistribute scarce resources. This is a classic Marxist

view.

Wikipedia provides a useful examination of Conflict Theory

http://en.wikipedia.org/wiki/Conflict_theory

The Wikipedia entry is heavily focussed on social conflicts; consider how the entry might be

edited for conflicts between organisation as opposed to conflict between classes. In

particular, on:

Basic conflicts;

Modes of conflict;

Assumptions.

http://en.wikipedia.org/wiki/Conflict_theory

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2. Introduction to law, contract and tort

This section deals with 3 things. It introduces: the law; contract and tort.

Section Aim and Objectives


Aim: To consider the relevance of the law, and the law of contract and tort to projects and

professionals.

Within the overall aim the following measurable objectives are set

The student will be able to:

Explain the relevance of the law to projects and professionals

Explain the essential requirements for a binding contract

Discuss the factors which vitiate the formation of a contract

Identify the ways in which contract may be discharged:

o by performance

o frustration

o breach

Discuss the common remedies available in the event of breach of contract

Termination; damages

Describe the development of the law of tort;

Explain the essential requirements for a claim of negligence

o a duty of care;

o a breach of that duty;

o the breach must be the cause of the loss claimed;

o the loss must be foreseeable, i.e. not too remote;

o there must an actual loss or damage;

o the absence of any of the recognised defences.

Explain the tort of nuisance

2.1. Introduction to the Law

The law is far too complex and contains far too great a variety of kinds of legal rules for it to

be reduced to a single proposition e.g. laws are commands.

1. Historical background

How then do I introduce law to project managers? One technique might be to provide an

historical background. But this is too complicated for a simple treatment; a specialist branch

of both the law and history exists. Combined the expertise rests in legal historians. You

might try anyone of several excellent texts; my favourite [or more truthfully the one I have

read]:

An Introduction to Legal History, J H Baker

More realistically Smith and Keenan [English Law, Smith and Keenan] tell us that the present

legal system began, for all practical purposes, in the reign of Henry II.

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2. Read the literature

Another technique might be to require you to read text and then answer questions; in the

traditional university sense this would take the form of books held in the library. I have made

arrangements for multiple copies of an excellent book to be held in the library; you must go

there and read section 1.

Harris, P. (2007), An Introduction to Law 7th

Edition, Cambridge University Press

Max Weber ,seen by many as the founder of sociology, wrote extensively on the law. Weber

examined the question of authority and proposed three types of authority1

1. The authority of the leader may be the result of personal characteristics or traits of the

leader: his or her charisma.

2. Obedience to the leader is sustained because it is traditional.

3. The authority of the leader or regime is legitimised through rules and procedures.

Bureaucratic [rational legal]

1 Law in Economy and Society, Max Weber

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Sources of Authority

Charismatic Authority

Traditional Authority

Bureaucratic Authority

3. Reductionism

A third technique is to try to break things down into valid representative sections and deal

with the overall issue that way. I want to make a distinction between criminal and civil law

and then to study [mostly] civil wrongs; there is one area of law which has great implications

for engineers and involves criminal law, but mostly we are going to study civil wrongs. The

area which involves criminal law, is Health and Safety.

Non lawyers often make the mistake of assuming all law is criminal law. I don’t know why

this; maybe because all the law we see on TV is criminal law. In fact the law is divided into

two great branches: criminal and civil. To further confuse things; “Civil Law” means several

things: not criminal [and this is what we are concerned with]; the law of a state; Roman Law.

England and Wales are common law countries; many other countries use the common law

system e.g. USA; many others do not and have a codified law sometimes based on Roman

Law e.g. France. France is a civil law country or jurisdiction.

The distinction between a crime and a civil wrong is not in the nature of the wrongful act but

in the legal consequences that flow from the act. If the wrongful act [or the omission to do

something] is capable of being followed by criminal proceedings then it is a crime. If it is

capable of being followed by civil proceedings then it is a civil wrong. If it is capable of

being followed by both civil and criminal proceedings then it is both a crime and a civil

wrong. Criminal and civil proceedings are easily distinguishable: the procedure is different

and the outcome is different. One useful difference is the standard of proof [wiki

http://en.wikipedia.org/wiki/Burden_of_proof] in criminal proceedings the standard is beyond

a reasonable doubt in civil proceedings the standard is the balance of probabilities. So in

civil proceedings to prevail the party bringing the action merely has to demonstrate on the

evidence that they are right on the balance of probabilities i.e. 51 plays 49.

2.2. Contract

This introduction deals with many complex topics inter alia

Law;

Regulation of economic activity;

Business and commerce

Remember that by their very nature the explanations offered here are simplistic you need to

read more than the material here. An example from elsewhere: introductory science explains

atomic structure as a nucleus circled by electrons; intermediary science includes protons and

neutrons; advanced science talks of many many sub atomic and sub nuclear particles. An

introduction to contract cannot go direct to the advanced explanation.

This introduction relies on many sources:

http://en.wikipedia.org/wiki/Burden_of_proof

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Harris, P. (2007), An Introduction to Law 7th

Edition, Cambridge University Press

Duxbury , R. (2006), Nutshells Contract Law, Thomson Sweet and Maxwell

Contract is the legal cornerstone of all transactions in business and commerce [and consumer

life, but that introduces a further dynamic which mostly is skated over here]. Contract is the

legal device which facilitates the exchange of goods or services. There is some debate about

the nature of contracts; are they promises or agreement?

Definition of contract

An agreement between two or more parties that is binding in law; the agreement generates

rights and responsibilities that may be enforced in a court. Breach of a contract normally

brings an action for damages; though a court may compel performance by specific

performance

A promise based definition is: Contract; a promise or set of promises which the law will

enforce

The promise-based definition of contract focuses on the individual promises undertaken by

the parties and the reason to hold the parties to those promises to the contract (using the

doctrine of consideration).

The agreement-based definition concentrates on the entire package of obligations and rights

that parties are understood to have agreed as governing the relationship between themselves.

Modern practice amongst lawyers as well as businessmen is to talk of contracts as agreements

rather than promises.

In England and Wales, people are given considerable freedom to make legally enforceable

agreements (or to refrain from making agreements). People can make contracts about almost

anything, provided: they are capable of entering into a contract and do not agree to anything

which is either illegal or contrary to public policy or is simply impossible.

The internet has changed the way people deal with issues; look at one of the ‘new’ web based

wiki’s [e.g http://en.wikipedia.org/wiki/Contracts] for a discussion on contracts

Classification of contracts

The normal classification of contracts [and the one followed here] is into simple contracts

and contracts by deed. For illustration a further classification is made into bilateral and

unilateral contracts.

The majority of contracts are simple in nature; they can be made orally, in writing or by the

conduct of the parties. Simple contracts are the subject of this section. You might hear or see

the term contracts under hand; simple contracts are contracts under hand.

Contracts by deed must be made in writing. You might hear or see the term contracts under

seal; but this is an old and redundant term. Contracts by deed must be in writing and must be

signed, witnessed and delivered. Contracts by deed do not need consideration; an essential of

simple contracts.

http://en.wikipedia.org/wiki/Contracts

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An alternative classification system: bilateral and unilateral contracts allows the introduction

of the terms: promisor and promissee

Bilateral contracts: here a promise by on party is exchanged for a promise by the other. The

exchange of promises is enough to render them both enforceable.

Thus in a contract for the provision of project management services the project manager

promises to provide project management services and the client promises to pay the price.

Unilateral contracts: here one party promises to do something for an act of the other, as

opposed to a promise. This allows the introduction of a very famous case: Carlill v Carbolic

Smoke Ball Co 1893. Here Carbolic Smoke Ball Co the defendants advertised that they

would pay £100 to anyone who contracted influenza after using their product [the smoke ball]

The essentials of a simple contract

There are 3 elements to a valid simple contract: agreement; intention to be legally bound and

valuable consideration.

The parties must have reached agreement via offer and acceptance. Sometimes you will hear

this expressed as consensus ad idem, or a meeting of the minds. It is not enough that they

have reached agreement; they must intend to be legally bound. Lots of agreements fall short

of a valid simple contract. You might offer to take me to dinner and I might accept but we

neither of us expect to be legally bound; if you got another dinner invitation you might stand

me up. I could not expect to bring an action for damages. Much more likely is the scenario

that I will receive a better offer and stand you up and similarly you could not expect to bring

an action for damages. Finally there must be valuable consideration. The promisor promises

to do something for the promisee; in return the promisee agrees to provide valuable

consideration; nearly always money, but it is possible to imagine something else which is

valuable, another service perhaps. The last sentence highlights the issues around promise and

agreement and why there is a debate as to why contracts might be defined as promises or

agreements.

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2.3. The Law Of Tort

The law likes clarity.

“This is a case of a barmaid who was badly bitten by a big dog". Cummings v. Granger

(1977) 1 All E.R. 104, 106. Lord Denning

Points for specific attention

The development of the law of tort via Donoghue v Stevenson

The special features of projects: many relationship often without contracts e.g. designer and

user; sub-contractor and owner/employer

Tort is an essential part of every project; while a plethora of contractual arrangements exist

there are relationships without contract and rights and obligations imposed by the law. It is

essential that professionals understand the principles behind tort. However you are reminded

that projects operate within legal frameworks and jurisdictions; this module describes the

legal frameworks under generic headings and also provides some analysis of the jurisdiction

in England and Wales. Many countries share similarities with law of England and Wales, but

many do not. It may be that the country in which you are studying or working has a different

legal system or that a particular area of the law is different; you should always consider the

effect of jurisdiction.

This section provides an analysis of the way in which the law of tort imposes rights and

obligations; the major tort is negligence which requires that a duty of care exists; that the duty

is breached and that damage is caused. A further tort of nuisance is outlined, in the

workbook.

The MSc course you are following attracts students from many nations and it would be

impossible to consider all the aspects of every contract in each country. However the issues

facing the parties to projects are generic; and by considering certain of these issues in

differing countries you will be able to analyse the effect of risk and contract conditions; no

matter what the contract or how the risk is allocated.

Until 1932 unless you had a contract with someone opportunities for redress if something

went wrong were limited. Perhaps the most famous case ever changed that [Donoghue v

Stevenson 1932 AC 562 the famous snail in the gingerbeer] . You must know the facts and

the law in this case; you can get them from any media you like but you must know them.

It is an essential feature of the law of negligence that liability does not arise for the

consequences of every careless act or omission. The law sets out various requirements which

must be met in order for a claim of negligence to succeed. These are, in summary, as follows:

the defendant must owe the claimant a duty of care;

the defendant must be in breach of that duty;

this breach must be the cause of the loss of which the claimant complains;

the claimant's alleged loss must be foreseeable, i.e. not too remote;

the claimant must actually suffer loss or damage;

the defendant must not be able to raise any of the recognised defences.

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Readings and other resources

http://www.out-law.com/ is a useful first stop and you should visit. OUT-LAW has 7,000

pages of free legal news and guidance.

http://www.accesstolaw.com/site/default.asp?s=79 identifies many other useful urls

Lyden J. (2003) Professional Negligence: The Irish and UK Case Law

Society of Construction Law, Society of Construction Law Paper D12

This reading is available at.

http://www.scl.org.uk/papers/paperserve.php?id=117

Students are allowed free access i.e. you do not have to join

http://www.out-law.com/

http://www.accesstolaw.com/site/default.asp?s=79

http://www.scl.org.uk/papers/paperserve.php?id=117

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3. Negotiation

This section introduces some of the theories of negotiation, mainly principled versus

positional negotiation; once again it is useful to think in terms of a continuum. Negotiation is

a continuum with positional negotiation and principled negotiation at either ends of the

continuum.

At the end of this section you will be able to:

Differentiate between the theories of negotiation:

o Positional

o Integrative

o Principled

Identify key factors in negotiation

o Positional Bargaining/Negotiation

o Principled Bargaining/Negotiation

Evaluate methods for closing the deal

o Getting to Yes

o Negotiation Tactics/Strategy

3.1. Introduction

A character in Molière; Monsieur Jordain was delighted to learn that he had been speaking

prose all his life; he thought that prose was something special. Equally most people negotiate

throughout their lives without realising that they are negotiating and without any training.

There are three commonly perceived attributes that most men claim to do, and do well,

without any training:

Drive

Make Love

Negotiate

It appears strange that most countries require men to pass a test only to be allowed to drive,

the others need no training and no licence!

This section considers some aspects of negotiation; unfortunately, or predictably, negotiation

suffers the same fashions and fads as many management areas. Be wary of the fads and

fashions; or in academic terms demonstrate organised scepticism. A glossary is provided.

The internet revolution has touched negotiation; for a useful starting point for web-based

negotiation try:

http://www.ists.dartmouth.edu/library/54.pdf

The most used buzz words are BATNA and WATNA.

http://www.ists.dartmouth.edu/library/54.pdf

18

Glossary of Negotiation Terms

Anchoring and Adjustment: An opening position, from which a negotiator incrementally

moves away from (gains or losses) during a negotiation. The choice of an anchor may be

based on faulty or incomplete information, and can potentially be misleading.

Agenda: A plan for how a negotiation will progress.

Aspiration Point: Optimal settlement point that a negotiator hopes to achieve.

Bargaining Zone: The gap between the respective resistance points of each party.

BATNA (Best Alternative To a Negotiated Agreement): This is your back-up plan.

Consistency Principle: The need to appear consistent in beliefs, feelings and behaviours.

Distributive Negotiation: A negotiation technique and/or type that seeks to gain at the

opponent's loss. Any situation in which one person's gain is exactly equal to the opponent's

loss is considered distributive.

Dyadic Negotiation: A negotiation between two persons, as opposed to negotiations in which

more parties are involved.

Expanding the Pie: Finding resources to include in a negotiation that fulfil

both party's needs.

Golden Bridge: A strategy by which a negotiator makes his or her opponent's positive

decision as easy as possible.

Kinesics: The study of body movements, including posture.

Inaction Anxiety: Self-imposed pressure to achieve an agreement at any cost. Often leads a

negotiator to strike a deal when s/he should have walked away and chosen his/her BATNA.

Integrative Negotiation: A negotiation technique and/or type that seeks to expand the pie,

finding a win-win settlements. In an integrative negotiation, one person's gain is not

necessarily another person's loss.

Interests: The concerns underlying a position.

Issues: Negotiable items that will be included in the formal agreement.

Limited Authority: A negotiating gambit whereby a negotiator says he cannot make a decision

and must resort to a higher authority.

Linkage Effect: When one deal point of a negotiation is attached to another.

Negotiating Gambit: A strategy in negotiating that should be avoided because it damages

relationships.

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Negotiating Roles: Different people in a negotiating team can have different roles such as

primary negotiator, Kinesics and paralanguage expert, etc.

Non-verbal cues: Body language that gives away how a person is feeling and what s/he is

thinking. This is closely related to kinesics.

Package: An offer which has many elements.

Paralanguage: Variations in speech : pitch, loudness, tempo, tone, duration, laughing , crying

-- how things are said.

PATNA (Probable Alternative To a Negotiated Agreement)

Position: Statement of what a person/party wants in a negotiation.

Positional negotiation: Positional negotiation strategy is, essentially, a manipulative approach

designed to intimidate the other party to lose confidence in their own case and to accept

demands.

Principled negotiation: this grew from alternatives to positional negotiation, a famous book

Getting to Yes, Fisher and Ury sets out a concept of "Principled Negotiation" with the main

points being:

Separate the People from the Problem

Focus on Interests, Not Positions

Invent Options for Mutual Gain

Select from Among Options by Using Objective Criteria

Reciprocity Principle: Occurs when a negotiating party feels obligated to return in kind what

the other side has offered or given them. This principle might result in on side making a

concession because the other side has done the same.

Resistance Point (RP): The point beyond which a person/party will not go. The lower limit of

the range of acceptable negotiation outcomes.

WATNA (Worst Alternative To a Negotiated Agreement)

Winner's Curse: Occurs when your aspiration point is too low. You accept a deal, and

wonder whether your opponent would have given you a better deal had you been more

persistent.

20

3.2. Negotiation Theory and Skills

It is common for theorists talk of two negotiation theories or strategic approaches to

negotiation:

Positional negotiation; and

Principled negotiation.

The terms positional and principled negotiating are not exclusive and in other reading material

you may find them replaced with any of the following:

Positional = competitive; compromise; Principled = interest-based; co-operative; collaborative

Also note that negotiations may be divided into two types:

Dispute negotiation, focused on resolving past facts; and

Transaction negotiation, focused on reaching agreement for the future.

While it is often helpful to appreciate this difference between dispute negotiation and

transaction negotiation, it is also beneficial to appreciate that many negotiation situations

involve the resolution of both past issues as well as planning future relations. The theories

and strategic approaches are generic and can be applied to either disputes or transactions.

Mediation often involves past dispute negotiation linked to future transactions.

3.2.1. Distinguish Strategic Approach from Personality

There may be some correlation between negotiation approaches and personality style, but the

two do not necessarily go together. A positional negotiator may be very pleasant to work with

in terms of demeanour, but can utilize extremely competitive tactics. Negotiator's pleasantries

may themselves be part of an overall manipulative approach. A principled negotiator may be

rather difficult or awkward in terms of personality, yet effectively utilize interest-based,

problem-solving strategies in negotiation.

It is often argued that the most effective negotiators will have a wide array of negotiation

skills, both positional (competitive) and principled (problem-solving), and will effectively

mix and match these approaches depending upon what the negotiator believes will work best

with a particular "negotiating partner" depending on the specific issue being negotiated and

depending on the nature of the overall negotiating relationship (one-time transaction or

continuing relations). This approach might be likened to the contingency approach to

mediation described in Section 4.

Another view of negotiation is that certain strategies and behaviours are intended to create

value (integrative and principled approaches) whereas other strategies and behaviours are

intended to claim value (positional and competitive approaches).

21

3.3. The Positional Approach

Positional negotiation strategy is, essentially, a manipulative approach designed to intimidate

the other party such that they lose confidence in their own case and are pressurised to accept

the other side’s demands. This approach is characterized by the following:

High opening demands;

Threats, Tension and Pressure;

Stretching the facts;

Sticking to positions;

Being tight lipped;

Desire to outdo, outmanoeuvre the other side; and

Desire for clear victory.

When a Positional negotiator is asked how they will know that they have reached a good

agreement, they may reply that the agreement is better than fair.

3.3.1. What is positional negotiating?

A positional approach involves adopting a position and aiming to negotiate an agreement

whilst remaining as close to that position as possible. Most people are familiar with positional

negotiating but it allows for only limited and fairly predictable negotiating. Negotiators

adopting a positional style will assume that only one party can emerge from the negotiation a

clear winner. This is often termed the "WIN/LOSE" approach. Positional negotiating is

characterised by:

Extreme opening positions

Emphasis on rights

Aggression

Predictable negotiating positions

3.3.2. Assumptions of the Positional Approach

There are certain assumptions, that lie behind the Positional approach to negotiation. This

"distributive" world view includes the following assumptions:

Negotiation is the division of limited resources;

One side's gain is the other's side's loss; and

A deal today will not materially affect choices available tomorrow.

3.3.3. Risks of the Positional Approach

While Positional negotiation tactics are often effective in "claiming" already defined value,

there are also certain risks. Foremost among these risks are damage to the negotiating

relationship and a lessened overall likelihood of reaching agreement. The disadvantages of the

Positional style include:

Confrontation leads to rigidity;

There is limited analysis of merits of dispute and relevant criteria for resolving

issues;

22

There is limited development of solution alternatives;

Difficulty in predicting the outcome of the competitive approach or control the

process;

Competitors are generally blind to joint gains;

Competitors threaten their future relations;

Competitors are more likely to have impasse and increased costs.

3.4. The Integrative Approach and The Harvard Negotiation Project

Before considering Principled Negotiation it is worth examining integrative negotiation and

the Harvard Negotiation Project (HNP) since Principled Negotiation is a result of both

integrative negotiation and the (HNP).

The integrative, collaborative or problem-solving approach to negotiation has been described

as "enlightened self-interest," rather than the "egocentric variety." This approach consists of

joint problem-solving, where gains are not necessarily viewed as at the expense of the other

party.

3.4.1. Assumptions of the Integrative Approach

There is a different view behind the integrative approach to negotiation. The primary

assumptions of the integrative approach are the following:

Some common interests exist between parties;

Negotiation is benefited by a full discussion of each participant's perspective

and interests; and

We live in an integrated and complex world and our problems can be best

resolved through application of our best intelligence and creativity.

3.4.2. Risks of the Integrative Approach

Risks of the integrative approach are based upon the common sense observation that "it takes

two to collaborate." If one party is unwilling to participate in integrative, problem solving

negotiation, the more collaborative negotiator may put themselves at risk in the following

ways:

The negotiator will be forced to either "give in" or adopt a competitive stance;

The negotiator may see themselves as a failure if they do not reach

agreement; and

The negotiator lays themselves open by honestly disclosing information that is

not reciprocated.

23

3.4.3. The Harvard Negotiation Project

The Harvard Negotiation Project's mission is to improve the theory, teaching, and practice of

negotiation and dispute resolution, so that people can deal more constructively with conflicts

ranging from the interpersonal to the international.

The Project, or HNP as it is commonly known, was created in 1979 and was one of the

founding organizations of the Program on Negotiation consortium. The work of HNP

routinely moves back and forth between the worlds of theory and practice to develop ideas

that practitioners find useful and scholars sound. In general, HNP's work can be grouped into

four categories: theory building; education and training; real-world intervention; and written

materials for practitioners. A sampling of HNP activities in each category follows.

3.4.4. Theory Building

HNP is perhaps best known for the development of the theory of "principled negotiation," as

presented in Getting to YES: Negotiating Agreement Without Giving In, by Roger Fisher, Bill

Ury, and Bruce Patton. First published in 1981, and revised and expanded in a tenth

anniversary edition (Penguin 1991), Getting to YES outlines a commonsense approach to

negotiation that has been read by millions of people in 25 different languages. In clear,

straightforward writing, Getting to YES shows negotiators how to separate relationship issues

from substance and deal with the latter by focusing on interests, not positions; inventing

options for mutual gain; and using independent standards of fairness to avoid a bitter contest

of will.

3.4.5. Real-World Intervention

HNP frequently tests its theories in practice, often in the heat of some of the world's most

intransigent conflicts. From South Africa to Latin America, the Mideast to the Balkans, HNP

works with individuals and governments on initiatives ranging from injecting a single idea at

a crucial time to initiating and framing an entire process for dealing with a conflict.

Recently an HNP technique called "facilitated joint brainstorming" was tested with a high-

level but unofficial group from Ecuador and Peru to generate new options that both sides

could jointly present to their superiors. The conference led to a peace initiative that ultimately

settled a highly contentious border dispute that had persisted for 50 years and resulted in

numerous armed conflicts.

Of course you can find more at http://www.pon.harvard.edu/

3.5. Principled Negotiation

Principled negotiation was a product of HNP and grew from the alternatives to positional

bargaining offered by the integrative approach. In their book, Getting to Yes, Fisher and Ury

set forth their concept of Principled Negotiation. A brief summary of the main points of

principled negotiation includes:

Separate the People from the Problem

Focus on Interests, Not Positions

Invent Options for Mutual Gain

http://www.pon.harvard.edu/

24

Select from Among Options by Using Objective Criteria

3.5.1. Separate the People from the Problem

Fisher and Ury suggest that we are all people first and that there are always substantive and

relational issues in negotiation and mediation. They describe means of dealing with relational

issues, including considering each party's perception (for example by reversing roles);

seeking to make negotiation proposals consistent with the other party's interests; making

emotions explicit and legitimate; and through active listening.

3.5.2. Focus on Interests, Not Positions

Positions may be thought of as one dimensional points in a space of infinite possible

solutions. Positions are symbolic representations of a participant's underlying interests. To

find out interests, you may ask questions like: "What is motivating you here?" "What are you

trying to satisfy" or "What would you like to accomplish?" You may also ask: "If you had

what you are asking for (your position), what would that experientially get you - what

interests would that satisfy?"

In negotiation, there are multiple, shared, compatible, and conflicting interests. Identifying

shared and compatible interests as "common ground" or "points of agreement" is helpful in

establishing a foundation for additional negotiation discussions. Principles can often be

extrapolated from "points of agreement" to resolve other issues. Also note that focusing on

interests tends to direct the discussion to the present and future, and away from the difficulties

of the past. If we have learned anything about the past, it is that "we can not change it." The

past may help us to identify problems needing solution, but, other than that, it does not tend to

yield the best solutions for the future.

3.5.3. Invent Options for Mutual Gain

Before seeking to reach agreement on solutions for the future, Fisher and Ury suggest that

multiple solution options be developed prior to evaluation of those options. The typical way

of doing this is called brainstorming. In brainstorming, the parties, with or without the

mediator's participation, generate many possible solution before deciding which of those best

fulfil the parties' joint interests. In developing options, parties look for mutual gains.

3.5.4. Select from Among Options by Using Objective Criteria

Using objective criteria (standards independent of the will of any party) is where the label

"principled negotiation" comes from. Fisher and Ury suggest that solution selection be done

according to concepts, standards or principles that the parties believe in and are not under the

control of any single party. Fisher and Ury recommend that selections be based upon such

objective criteria as precedent, tradition, a course of dealing, outside recommendations, or the

flip of a coin.

3.5.5. The advantages of principled negotiating

The main advantages of principled negotiation are that it:

Maintains relationships

25

Achieves satisfactory / efficient agreements

Is Flexible

Can redress power imbalances

Principled negotiation can be seen unlikely to provoke the aggression that may be shown in

positional negotiating; the emphasis is on mutually beneficial agreements and there is no need

for undue competitiveness. Parties can negotiate in an atmosphere conducive to ending on

good terms with each other.

Principled negotiating can achieves satisfactory and efficient agreements since the parties are

not limited to the narrow confines of rights based arguments. The agreement can meet as

many of the parties needs as they have been prepared to reveal.

The nature of principled negotiating means that there can be flexibility over what and who is

included in the negotiation..

Where a significant power imbalance exists, principled negotiating may establish that

interests of the powerful party make their dependence upon the less powerful party

surprisingly strong.

3.6. The disadvantages of principled negotiating

Of course there exists potential for disadvantage. Principled negotiating can take time to reach

a settlement. The ultimate result should justify the time spent but parties engaged in

principled negotiating may need to be prepared to exercise patience. Principled negotiating is

often far more complex than its positional counterpart. More effort will be required of parties

both in preparing for and during the negotiation. It may take a number of attempts before

people feel comfortable negotiating in this way, especially for those people who regard

themselves as having a good track record with their positional bargaining approach. Since it

can take longer and is likely to demand, overall, more man hours, it may be seen as being the

more expensive option. However, the cost should be looked at in the context of the whole

negotiation and, we have seen that the end result should be a much better agreement than

would otherwise have been achieved.

3.7. Some Issues in Principled Negotiating

3.7.1. What if the other party is more powerful? - Developing a BATNA

In the event that the other party has some negotiating advantage, Fisher and Ury suggest that

the answer is to improve the quality of your "best alternative to a negotiated agreement" (your

BATNA). For example, if you are negotiating for a job and want to make a case for a higher

wage, you improve your negotiating power by having another job offer available, or at least as

a possibility.

3.7.2. What if They Won't Play or Use Dirty Tricks

Fisher and Ury's answer to the resistant competitive negotiator is to "insist" on principled

negotiation in a way that is most acceptable to the competitor. The principled negotiator might

ask about the competitor's concerns, show he or she understands these concerns, and, in

return, ask the competitor to recognize all concerns. Following the exploration of all interests,

26

Fisher and Ury suggest inducing the competitive negotiator to brainstorm options and to think

in terms of objective criteria for decision-making.

Another way of thinking about encouraging principled or integrative bargaining is to think in

terms of matching, pacing, leading and modelling. To get a negotiator to shift orientations, it

is critical that they first experience themselves as fully heard in terms of content, intensity and

emotion. By so matching and pacing with a negotiator (asking a few clarifying questions), the

negotiator will become more open to your lead and modelling of productive means of

negotiating.

3.7.3. Converting Positions to Interests to Positive Intentions

Negotiating parties tend to come to negotiation with well-rehearsed positional statements

about the truth of the situation. As wise negotiators, we know that we want to assist all parties

to get below their positions to achieve a full understanding of their respective interests. If you

view negotiating parties as, essentially, survivors, wanting to improve their situations, you

may be able to assist negotiating parties to recognize that even the most difficult interests, like

revenge and anger, can be understood in terms of positive intentions, such as a desire for

acknowledgment and respect. So reframed, the mediation effort can become a joint search for

mutually acceptable solutions to the parties identified positive intentions. This reframing of

the entire mediation effort can dramatically shift the entire atmosphere of your negotiation.

3.8. Some Negotiation Basics and Negotiation Tactics

Important areas in negotiation and negotiation tactics include:

Negotiation Power

Preparation for Negotiation

Opening Offers

Stages of Negotiation

3.8.1. Negotiation Power

Negotiation power might be defined as an ability of the negotiator to influence the behaviour

of another. Commentators have observed a variety of aspects and qualities of negotiation

power. It is important to take note of these various aspects and qualities of negotiating power:

a number of aspects and qualities of negotiating power that have been identified include:

Negotiating power is relative between the parties;

Negotiating power changes over time;

Negotiating power is always limited;

Negotiating power can be either real or apparent;

The exercise of negotiation power has both benefits and costs;

Negotiating power relates to the ability to punish or benefit;

27

Negotiating power is enhanced by legal support, personal knowledge, skill,

resources and hard work;

Negotiating power is increased by the ability to endure uncertainty and by

commitment;

Negotiating power is enhanced by a good negotiating relationship;

Negotiating power depends on the perceived BATNA; and

Negotiating power exists to the extent that it is accepted

3.8.2. Preparation

There are only three things which matter in negotiation: preparation, preparation and

preparation.

To facilitate that preparation a framework of questions which skilled negotiators ask includes:

What are the (hypothesised) causes of conflict?

What range of interventions may be helpful?

What are the Parties Needs, Concerns and Goals

o What are each party's needs, concerns and goals?

o Which of these need urgent attention?

o Rank needs, concerns and goals from “vital” to “desirable”,

o What needs, concerns, and goals are apparently shared; independent; or

in conflict?

o What is WATNA; BATNA and PATNA for each party?

Facts

o What are the alleged facts?

o What is the evidence supposedly supporting the alleged facts?

o What facts are agreed upon?

o What degree of clarity on agreed, disputed and missing facts is

necessary for advice/negotiations to begin?

Rules and Objective Criteria

o What range of rules and precedents may apply to this situation ?

o What are the standard arguments to and fro arising from these

o precedents?

Outcomes

o What range of outcomes are possible -best to worst? Lateral thinking?

o What is client's targeted or preferred outcome?

o What outcomes will be resisted (the resistance point)?

Dynamics

o Who should engage in preliminary meetings (for example, lawyers,

parties, experts)?

o Who should be present at the negotiation; who should not be present?

28

o What is known about the preferred negotiation style of all parties

involved?

o What authority to settle does each party have? What influential people

exist in the background?

o What are past patterns of interaction? What fears exist about a

negotiation meeting?

o What documents need to be prepared/submitted/read by whom? By

what deadlines'?

o To what extent can complex alleged facts, evidence, arguments pro and

con, precedents, interests and needs and agreements be summarised visually?

3.8.3. Opening Offers

Two vital and interrelated questions for practising negotiators and for students seeking to

understand, systematise and measure negotiator behaviour are: Who should make the first

offer? And What form should the first offer take?

3.8.3.1. Who should make the first offer

Anecdotally, many negotiators predictably try to avoid making the first offer; or begin with

offers or respond to offers with an exaggerated ambit claim. This is a natural feature of

positional negotiation and is greatly alleviated by principled negotiation

3.8.3.2. What form should the first offer take

There are three classic ways to open negotiations:

soft high (the maximalist opening);

firm reasonable (the "equitable" opening);

problem solving.

Each opening has a number of predictable and well documented advantages and

disadvantages. It is essential that skilled negotiators:

know how to open by anyone of these three methods.

even thought they may have a preferred style, are able to use all three openings

with confidence.

practise in damage-free simulations using alternative methods.

negotiate with the "opposition", before the first offers are made, about which

of the three forms of opening is most appropriate. (This may require considerable

education of "the opposition".)

be able to articulate openly the well-known advantages and disadvantages of

each form of opening.

openly or by known coded messages identify to the other side which of the

three openings appears to have been used. For example, negotiators use a number of

codes to indicate a high soft opening:

On the current facts, our client would be prepared to settle for...

Our client is claiming ...

3.9. Stages of Negotiation

29

Studies of negotiation behaviour suggest that there are predictable stages through which most

negotiations pass. Although there are many variables which affect the timing of each stage.

Thee four stages are summarised as:

Stage One: Orientation and positioning

Working relationship established

Initial negotiating positions adopted

Stage Two: Argument, compromise and search for alternative solutions

Argument and persuasion

Search for alternative solutions

Concession making

Stage Three: Emergence and crisis;

Pressure for agreement or deadlock builds

Crisis occurs

Stage Four: Agreement or final breakdown

Deadlock or basic agreement occurs

Wrap up details

These four observed stages are worthy of further thought:

What factors speed up or slow down the stages?

How can the third (crisis) stage be managed?

What management styles appear to be more or less effective?

3.10. Online Negotiation

As one might expect there are opportunities presented by the use of negotiation via the

Internet. There are many companies offering their services as intermediaries and their servers

as space for negotiation; these are often secure negotiation rooms. Try a search engine

Online teaching of negotiation is also widely available see what you can find, Harvard PON

has many good resources.

30

4. Comparison Of Dispute Resolution Techniques

Introduction

This section introduces the difference between conflict, disputes and the concepts of conflict

management and dispute resolution. A continuum of conflict and disputes and the techniques

of dispute resolution are outlined. The techniques predominantly practised by the members of

the Chartered Institute of Arbitrators: Construction Adjudication; Arbitration and Mediation

are introduced, and a comparative analysis is made.


Explain the difference between conflict and dispute

Explain and evaluate the spectrum of conflict management and dispute

resolution techniques.

Outline the following conflict management and dispute resolution techniques:

o Negotiation;

o Mediation/conciliation;

o Med/Arb;

o Dispute Resolution Advisers;

o Dispute Review Boards;

o Construction Adjudication;

o Expert determination;

o Arbitration;

o Litigation

Evaluate the process and strategies of:

o Construction Adjudication;

o Arbitration;

o Mediation.

Compare and contrast the key dispute resolution techniques of Construction

Adjudication, Arbitration, Mediation with Litigation in the areas of:

o Formality

o Speed

o Flexibility

o Cost

o Confidentiality

o Relationships

o Control and Choice

o Solutions

31

Dispute Resolution

Conflict Management

Fig 1

Figure 1: Conflict Continuum

CONFLICT

DISPUTE

Conflict

Avoidance Informal Negotiate Discussion

ADR Arbitrate Litigate

Adjudicate

Other

Action

Violence

Q. Do you agree with the distinction between conflict and dispute?

32

Conflict management and dispute resolution techniques

The range of conflict management and dispute resolution techniques include:

Conflict avoidance: a variety of techniques some used consciously and some subliminal to

avoid the escalation from normal conflict into dispute. Examples might include: risk

management to ensure that risks are identified; analysed and managed; procurement strategies

to ensure that risks are appropriately allocated and contractual arrangements to allow sensible

administration.

Negotiation: this is easily the most common form of dispute resolution, carried out in many

forms every day by just about everybody. In negotiation the parties themselves attempt to

settle their differences using a range of techniques from concession and compromise to coerce

and confront.

Mediation: a private and non-binding form of dispute resolution where an independent third

party [neutral] facilitates the parties reaching their own agreement to settle a dispute.

Mediation is often a structured process where the settlement becomes a legally binding

contract.

Conciliation: a process of mediation where the neutral proposes a solution. In the same way

that we distinguished between a continuum of conflict and dispute; a continuum of mediation

and conciliation shows mediation at one facilitative end and conciliation at the other

evaluative end of the continuum. See Figure 2.

Med-arb: is a combination of mediation and arbitration where the parties agree to mediate

but if that fails to achieve a settlement the dispute is referred to arbitration. The same person

may act as mediator and arbitrator in this type of arrangement.

Dispute Resolution Adviser (DRA): The concept of DRA is the use of an independent

intervener. This independent intervener is paid for equally by the employer and the contractor

to settle disputes as they emerged; rather than wait until the end of the contract.

Dispute Review Boards (and Dispute Review Panel): Dispute Review Board is a process

where an independent board evaluate disputes.

Neutral evaluation: a private and non-binding technique where a third party neutral (often

legally qualified, gives an opinion on the likely outcome at trail as a basis for settlement

discussions.

Expert Determination (Submission to Expert, Reference to an Expert, Expert

Adjudication): these are long-established procedures in English law and have been used

across a number of industries. Examples include - accountants valuing shares in limited

companies, valuers fixing the price of goods, actuaries carrying out valuations for pension

schemes, certifiers of liability for on-demand performance bonds, and Adjudicators who are

said to be acting “as expert and not as arbitrator”.

Mini-Trial (or Executive Tribunal): This is a voluntary non-binding process. The parties

involved present their respective cases to a panel comprised of senior members of their

organisation. The panel is assisted by a neutral facilitator and has decision making authority.

33

After hearing presentations from both sides, the panel ask clarifying questions and then the

facilitator assists the senior party representatives in their attempt to negotiate a settlement.

Adjudication: this refers to Statutory Adjudication in Construction Disputes as set out in the

Housing Grants, Construction Regeneration Act 1996. Here decisions of an adjudicator are

binding on the parties at least until a further process is invoked (Arbitration or Litigation).

Arbitration: a formal, private and binding process where disputes are resolved by an award

of independent tribunal [third party or parties, the arbitrator or arbitrators]. The tribunal is

either agreed by the parties or nominated by a further independent body: e.g. a court or a

professional institution The Chartered Institute of Arbitrators.

Litigation: the formal process whereby claims are taken through court and conducted in

public; judgements are binding on the parties subject to rights of appeal.

This is by no means an exhaustive or exclusive list; you will undoubtedly find others, the

references in the reading list contain many other examples. Indeed one definition of ADR is

Appropriate Dispute Resolution and there may be a ‘killer application’ yet to be devised. You

will see from Figure 1 that at the dispute end of the continuum lies violence, hopefully we

will not have to consider this option.

The techniques of: Construction Adjudication; Arbitration and Mediation are the subject of

the Workbook. This section provides an introduction to the techniques and a comparative

analysis.

34

Increasing facilitation by neutral Increasing evaluation by neutral

Mediation Conciliation

Figure 2: Conciliation and Mediation Continuum

Conciliation and Mediation Continuum

Facilitative

Evaluative

35

4.1. The Stages of Conflict Management and Dispute Resolution

The stages of conflict management and dispute resolution are usefully described in a

document produced by the Office of Government Commerce: Dispute Resolution Guidance

which can be viewed and downloaded from the internet at

http://www.justice.gov.uk/downloads/courts/mediation/drc-guidance-may2011.pdf. The

stages are:

Stage 1: Negotiation

Stage2: Non Binding Techniques and Processes

Stage 3: Binding Techniques and Processes

The Principal Stages and The Dispute Resolution Options are shown at Figures 3 and 4.

http://www.justice.gov.uk/downloads/courts/mediation/drc-guidance-may2011.pdf

Principal Stages of Conflict Management and Dispute Resolution

Figure 3 36

Stage 1 Stage 3 Stage 2

Negotiation

Mediation

Conciliation

Neutral Evaluation

DRA’s etc

Adjudication

Expert

Determination

Arbitration

Litigation

37

METHOD COMMON

LAW/

STATUTE

BASIS

FREQUENCY

OF USE

SPEED COST CONFIDENTIALIT

Y

BINDING ADVERSARIAL SPECIAL

FEATURES

Stage 1

Negotiation No Very Common

Ubiquitous

Varies Low Yes No No Can continue

throughout

the dispute

Stage 2

Mediation No Common Fast Low Yes No (unless

agreed)

No

Conciliation No Fairly

Common

Fast Low Yes No (unless

agreed)

No Often

included

with

mediation

Neutral

Evaluation

No Infrequent Fast Low Yes No No

Adjudication Yes Common Fast Low Yes Yes (until

completion

or Arb/Lit)

Yes Statutory

adjudication

is

construction

specific

Stage 3

Arbitration Yes Common Contingent Contingent Yes Yes Yes

Expert

Determination

No Fairly

Common

Fast Moderate Yes Yes Yes

Litigation Yes Common Slow High No Yes Yes

4.2. Three ‘core’ processes of dispute resolution and a spectrum of dispute

resolution

It is useful to consider the problem from a different angle, Authors talks of three core

techniques, which may be employed in the resolution of disputes. Firstly, negotiation, which

refers to the problem solving efforts of the parties. Second, third party intervention, which

does not lead to a binding decision being imposed on the parties, finally the adjudicative

process, the ultimate outcome of which is an imposed binding decision. Such an approach

has been adopted by Green and Mackie (1995), who refer to the “three pillars” of dispute

resolution. The discrete techniques may be introduced under one of the three pillars,

depending upon the main characteristics of the particular technique; see Figure 5 below:

Q. Can negotiation continue when arbitration or litigation has

commenced?

38

Figure 5: 'The Dispute Resolution Landscape'

Negotiation Mediation Adjudication

Facilitative Evaluative mediation mediation

Mini-trial or executive tribunal

Med-Arb Consensus- building

Variations on 'neutral expert’ types of process

Conciliation Litigation Arbitration

Expert determination Adjudication Ombudsmen

Dispute Review Boards

Neutral fact-finding Expert appraisal

Early neutral evaluation

Source: Mackie, K. Miles, D. and Marsh, W. (1995)

Arguably, all dispute resolution techniques are built upon three basic principal methods:

negotiation, mediation/conciliation, and some form of adjudicative umpiring process.

39

4.3. Outline Of The 3 Dispute Resolution Techniques

This section provides an outline of the 3 dispute resolution techniques predominantly offered.

Construction Adjudication

Arbitration

Mediation

What follows is a simple introduction to each technique, followed by a comparison.

40

4.3.1. Construction Adjudication (under the Housing Grants

Construction and Regeneration Act 1996)

The Housing Grants Construction and Regeneration Act received Royal Assent on 24th July

1994. Those parts relating to construction (Part II of the Act) commenced on 1 May 1998.

The Act sets out a framework for a system of adjudication; all construction contracts must

meet minimum criteria and if they fail the Scheme for Construction Contracts will apply.

Statutory Adjudication - The Process

Under Part II of the Housing Grants, Construction and Regeneration Act 1996 a party to a

construction contract is unilaterally given the right to refer a dispute arising under the contract

to adjudication. The Act only applies to "construction contracts" which fall within the

detailed definition of Section 104 For example, "architectural design, surveying work or to

provide advice on building, engineering, interior or exterior decoration or the laying out of

landscape in relation to construction operations" are included within the scope of the Act,

whilst contracts of employment are expressly excluded. In addition, a construction contract is

defined to include an agreement to carry out "construction operations". Construction

operations are further defined in Section 105 to include a wide variety of general construction

related work together with a list of notable exceptions. A further notable exception is a

construction contract with a residential occupier. The provisions only apply where the

construction contract is in writing.

Section 108 sets out the minimum requirements for an adjudication procedure. These may be

summarised as follows:

Notices: A party to a construction contract must have the right to give a notice at any time of

his intention to refer a particular dispute to the adjudicator.

Appointment: A method of securing the appointment of an adjudicator and furnishing him

with details of the dispute within seven days of the notice is mandatory.

Time scales: The adjudicator is then required to reach a decision within 28 days of this

referral. It will not be possible to agree in advance of any dispute that additional time may be

taken for the adjudication. There are only two exceptions to this rule. First the adjudicator

may extend the period of 28 days by a further 14 days if the party referring the dispute

consents. Second, a longer period can be agreed by consent of all the parties. Such

agreement can only be reached after the dispute has been referred

Act impartially: The adjudicator is required to act impartially.

Act inquisitorially: The Act requires that the adjudicator "takes the initiative in ascertaining

facts and the law". This gives the adjudicator power to investigate the issue in whatever

manner he or she deems appropriate given the short time scale available.

Binding nature: The decision of the adjudicator is binding until the dispute is finally

determined by legal proceedings, by arbitration or by agreement. Phillip Capper (1997)

suggests that "the 'until' formulation gives an unfortunate interim air to the decision almost

inviting the view that it ought to be reopened at a later stage" The Act does, however, go on

to say that the parties may agree to accept the decision of the adjudicator as finally

determining the dispute.

Immunity: The adjudicator cannot be held liable for anything done or omitted in the

discharge of his function as an adjudicator unless acting in bad faith. This protection is

extended to any employee or agent of the adjudicator.

41

In addition to this basic procedural framework the Act further requires that any construction

contract complies with the provisions of the scheme for construction contracts.

42

4.3.2. Arbitration

Arbitration is a process, subject to statutory controls, whereby formal disputes are determined

by a private tribunal of the parties’ choosing. According to Stephenson, Lord Justice Sir

Robert Raymond provided a definition some 250 years ago which is still considered valid

today (Stephenson, D. A: 1998)

"An arbitrator is a private extraordinary judge between party and party, chosen by their

mutual consent to determine controversies between them, and arbitrators are so called because

they have an arbitrary power; for if they observe the submission and keep within due bounds,

their sentences are definite from which there lies no appeal."

The Arbitration Act 1996

The Aim of the Arbitration Act

Five main objectives underlie the Act:

1. To ensure that arbitration is fair, cost-effective and rapid.

2. To promote party autonomy, in other words to respect the parties choice.

3. To ensure that the courts’ supportive powers are available at the appropriate

times.

4. To ensure that the language used is user friendly and clearly accessible.

5. To follow the model law wherever possible.

The first of these objectives is included in section one of the Act:

"The provisions of this part are founded on the following principles, and shall be construed

accordingly -

a) The objective of arbitration is to obtain the fair resolution of disputes by an

impartial tribunal without unnecessary delay or expense;

b) The Parties should be free to agree how their disputes are resolved, subject

only to such safeguards as are necessary in the public interest;

c) In matters governed by this part of the Act the court should not intervene

except as provided by this part."

4.3.3. Mediation

Mediation is a way of settling disputes in which a third party, known as a mediator, helps

both sides to come to an agreement which each considers acceptable. Mediation can be

‘evaluative’, where the mediator gives an assessment of the legal strength of a case, or

‘facilitative’, where the mediator concentrates on assisting the parties to define the issues.

When a mediation is successful and an agreement is reached, it is written down and forms a

legally binding contract, unless the parties state otherwise.

The Chartered Institute teaches a facilitative model in its training courses on the basis that this

is considered the most successful of the techniques. Any settlement, which occurs, is the

parties' own and the analogy of chemical catalysts is often made. A catalyst makes a reaction

take place between two or more chemicals; the catalyst is not affected or changed by the

43

reaction. Sometimes the reaction will take place without the catalyst and the effect is to speed

reaction and sometimes the reaction will not take place without the catalyst. The analogies

with mediation are obvious.

Mediation is the most widely used and accepted ADR technique. Whilst there is no

prescriptive mediation process, the typical stages in a mediation might be:

1. A brief written summary of the matter in dispute is presented in advance to the

mediator;

2. The parties meet with a mediator for an initial joint meeting including perhaps

a brief oral presentation by the parties;

3. Caucus sessions, where the mediator has private meetings with the party in

turn. During the caucuses the mediator often shuttles backwards and forwards to

clarify issues and search for settlement possibilities. This process is often termed

shuttle diplomacy;

4. Plenary sessions are called to either continue negotiations directly, to conclude

agreement, or where the process is unsuccessful to conclude a mediation.

Most mediators agree to a contingency approach to mediation; that is there is no set procedure

but the procedure is tailored to suit the parties and the dispute in question. This often means

that mediation is conducted without joint meetings and the mediators play a variety of roles.

The mediator may act as a mere facilitator, there purely to assist communications.

Alternatively the mediator acts as a deal maker, to assist the parties in finding overlap in their

bargaining positions or encouraging concession and compromise. Perhaps the mediator acts

more as a problem solver assisting the parties in designing and searching for creative

solutions. The mediator may act as transformer transforming the dispute by allowing the

parties a fresh in-sight into the issues and their positions. The final role of the mediator maybe

as an adjudicator or assessor to provide the parties with an appraisal of the merits of the cases

on a legal, technical or even common sense standpoint.

44

4.4. Comparison of Litigation, with Construction Adjudication, Arbitration

and Mediation

It is useful to compare and contrast the major dispute resolution techniques in areas where the

characteristics of each technique are highlighted. Litigation, Construction Adjudication,

Arbitration and Mediation are compared in the areas of:

Formality

Speed

Flexibility

Cost

Confidentiality

Relationships

Control and Choice

Solutions

Formality

Mediation is an informal process; the parties may agree to certain mediation rules but they are

at liberty to amend any rules. There is no requirement to produce specified information

before the mediation can commence neither is there are requirement to spend resources filing

and serving documents. Mediation in informal and uncomplicated.

Adjudication is an informal process and the procedure is, within the bounds of natural justice,

at the discretion of the adjudicator.

Arbitration has been criticised for mimicking litigation; many steps have been taken to redress

this and arbitrations are less formal, nevertheless arbitration may be considered formal and

complicated when compared with mediation.

Litigation is, properly, a highly formalised process with specialised rules; non-compliance

may prevent litigation proceeding. Resources have to be committed in filing and serving

documents. Litigation is a highly formal and complicated process.

Speed

In mediation the timing is within the control of the parties; subject to the availability of

suitable and acceptable mediators mediation may take place as quickly as the parties desire.

The length of the mediation is similarly in the control of the parties; they can agree to stay as

long, or as briefly, as required. The great majority of mediations are restricted to one working

day or less.

Adjudication operates under very tight timescales laid down by the Act; see above the

maximum time from notice to decision is 35 days which may be extended by agreement to 49

days.

Speed is often claimed as a feature of Arbitration; however the reality is that the availability

of all the parties involved, not least the arbitrators, dictate that the process is often protracted.

45

Litigation is often an infuriatingly slow process; in many jurisdictions advisors talk in terms

of years rather than months as the timescale for trial dates. Although many great strides have

been taken in many countries to address this, in the UK the Civil Procedure Rules following

the Woolf Review of Civil Justice is a particular example, time continues to be an issue.

Flexibility

Mediation is a flexible process; all arrangements can be changed if necessary if it becomes

apparent that this is necessary. Arbitration can share much of this flexibility and the 1996

Arbitration Act has given arbitrators wide ranging powers to achieve flexibility. Adjudicators

too have much scope for flexibility

Litigation is an inflexible process, specific steps must be taken to initiate and progress

matters.

Cost

Mediation is an inexpensive process; this is achieved and facilitated by the informality and

speed of the process. The amount of lawyer involvement can be reduced if the parties agree

and in many cases the cost of preparing for mediation is marginal to the other preparation.

The parties can share the mediator’s costs and the cost of the venue in an agreed fashion.

Adjudication can be an inexpensive process as a result of the tight timescales.

Arbitration can certainly help in reducing costs and dealing with a dispute in a proportionate

manner. In comparison to litigation it must be remembered that while the state pays for the

judge, and rooms in many cases, in arbitration the parties must pay the arbitrators costs.

Litigation is an expensive process, this is dictated by the formality and slowness of the

process. There are many, many examples of the disproportionate costs of litigation amongst

the most famous is the Dickens example of Jaryndyce v Jarndyce where the parties disputing

a will expended the entire legacy in legal costs when they disputed the terms of the will!

Confidentiality

Here things are clear; in adjudication, arbitration and mediation all matters are confidential.

This is an important issue for commercial disputes where the parties often wish to avoid

publicity and to keep commercial confidentialities. There is an issue often where arbitration

awards are the subject of appeal or referral to the courts; then all matters will become public.

Litigation is a public matter and though civil commercial litigation seldom attract tabloid

press interest; it is clear that litigation can expose confidential issues.

Relationships

Again a clear difference. Mediation is a non-adversarial process while litigation and

arbitration are both adversarial. Adjudication may avoid the dysfunctional aspects of

adversarialism.

46

In mediation the parties do not seek to convince the neutral that they are in the right; or that

others are in the wrong. The emphasis of facilitative mediation is on the parties’ interests as

opposed to parties’ rights. As a result mediation need not affect working relationships in an

adverse manner. Often mediation can improve relationships as parties achieve an improved

understanding of underlying interests and concerns.

Litigation and Arbitration on the other hand are not conducive to even maintaining

relationships let alone improving them. Opposing parties aim to convince the tribunal that the

law and the facts support their argument to the detriment of the other side; this seldom helps

relationships and often destroys them.

Adjudication allows the power imbalance in relationships to be dealt with in that weaker sub-

contractors have a clear route to deal with more powerful contractors.

Control and Choice

In mediation the control of the dispute always remains with the parties and the choice is

theirs. Who will be the mediator; where will the mediation take place; when will it take

place; and who will attend. Mediation is a voluntary process and the parties remain in

control. This control means that the parties have to ‘buy in’ to the settlement and any

resolution becomes their own settlement.

Litigation, Adjudication and Arbitration hands over the dispute to the lawyers and the judge

or arbitrator or adjudicator. The process passes control and choice in a similar fashion.

Solutions

The essential difference is that mediation allows for creative solutions to disputes; during a

mediation a wide range of issues can be addressed or uncovered. These issues can include

past unresolved matters and even future intentions. The solutions to the issues can take many

forms, and are not restricted to payment of money, they can be as creative as the parties to the

dispute. Mediated agreements have included:

Apologies

Future Business Arrangements

Revamped Commercial Arrangements

Litigation and Arbitration cannot allow for creative solutions but must be limited to legal

remedies available.

Adjudication is similarly restricted by legal remedies but does allow prompt solutions which

permit the project to be completed.

The comparison is shown in outline in Table 1

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Dispute

Technique

Mediation Adjudication Litigation Arbitration

Area

Formality Informal Informal Formal Formal

Speed Fast Fast Slow Contingent

Flexibility Good Good Poor Contingent

Cost Inexpensive Inexpensive Expensive Contingent

Confidentiality Yes Yes No Yes

Adversarial No Contingent Yes Yes

Party Control Yes No No No

Party Choice Yes No No Contingent

Creative Solutions Yes No No No

Table 1: Litigation Compared With Construction Adjudication, Arbitration and

Mediation

48

4.4.1. Mediation Principles

Introduction

This section introduces the history of mediation and the types of mediation commonly

encountered. These are Facilitative; Evaluative; Settlement and Transformative. The styles

are compared and again the concept of a continuum is used to explain the different styles and

models of mediation. The position of the Chartered Institute of Arbitrators is explained: a

facilitative model of Mediation in favoured since this is the most successful and robust of the

mediation types and mediators trained and experienced in facilitative models can apply other

techniques and models on an ad-hoc basis. The use of mediation styles and models must be

contingent on the dispute.


Explain the different mediation styles and models

o Facilitative

o Evaluative

o Settlement

o Transformative

Discuss the arguments for and against the different mediation styles and

models

o Facilitative

o Evaluative

o Settlement

o Transformative

Evaluate the use of the different mediation styles and models

o Facilitative

o Evaluative

o Settlement

o Transformative

o Discuss the contingent model of the mediation

4.5. Mediation History and Types

Early mediation theory recognised only one type of mediation. The mediator or neutral,

whilst remaining in control of the process, merely facilitated the parties’ negotiation in an

attempt to assist the parties to create their own solution. This became known as Facilitative

(or Interest Based) Mediation.

Following from facilitative mediations some parties, and some mediators, recognised that in

certain situations there would have to be consideration of parties’ rights and that parties

unable to reach a facilitated solution would require some help via an evaluation. This

developed Evaluative (or Rights Based) mediation. In a similar vein a Settlement Based

mediation model developed.

49

In the 1990’s mediation developed further the initial facilitation when mediators and theorists

developed a school of Transformative Mediation. Here the mediator by empowering the

parties allows all parties or their relationships to be transformed during the mediation.

The Chartered Institute of Arbitrators teaches a facilitative model of Mediation in training

courses for mediators. It is the opinion of the ADR committee, and this is supported by

mediation research, that the facilitative model is the most successful and robust of the

mediation types. Further mediators trained and experienced in facilitative models can apply

other techniques and models on an ad-hoc basis. The experience of the Chartered Institute is

that mediators trained in settlement models and evaluative models are not as able to apply

facilitative models. Therefore; facilitation first and then the mediator may choose to proceed

with other techniques and types

4.6. Facilitative Mediation (Interest Based)

In facilitative mediation, the mediator structures a process to assist the parties in reaching a

mutually agreeable resolution. The mediator asks questions; validates and normalizes parties'

points of view; searches for interests underneath the positions taken by parties; and assists the

parties in finding and analyzing options for resolution.

The facilitative mediator does not make recommendations to the parties, give advice or

opinion as to the outcome of the case, or predict what a tribunal would do in the case. The

mediator is in charge of the process, while the parties are in charge of the outcome.

Facilitative mediators want to ensure that parties come to agreements based on information

and understanding. They hold joint sessions with all parties present so that the parties can hear

each other's points of view, but hold private meeting (caucuses) regularly with the parties

where they explore options and test the parties’ positions. Facilitative mediators seek for the

parties to have the major influence on decisions made, rather than the parties’ advisors; legal

or otherwise.

4.7. Evaluative Mediation (Rights Based)

In evaluative mediation the mediator assists the parties in reaching resolution by pointing out

the weaknesses of their cases, and predicting what a tribunal would be likely to do. Based on

the parties’ rights an evaluative mediator makes formal or informal recommendations to the

parties as to the outcome of the issues. Evaluative mediators are concerned with the rights of

the parties rather than needs and interests, and evaluate based on concepts of fairness.

Evaluative mediators meet most often in separate meetings with the parties and their advisors,

practicing "shuttle diplomacy". They help the parties and advisors evaluate their legal position

and the costs versus the benefits of pursuing a legal resolution rather than settling in

mediation. The evaluative mediator structures the process, and directly influences the

outcome of mediation.

4.8. Settlement Mediation

Settlement mediation (compromise mediation) takes as its main objective encouragement of

incremental bargaining, towards a compromise a central point between the parties positional

demands. Mediators employing the settlement model control both the parties and the process;

50

the mediator seeks to determine the parties’ bottom line. Then through persuasive

interventions the mediator moves the parties off their initial positions to a compromise point.

4.9. Transformative Mediation

Transformative mediation is the newest concept based on the values of "empowerment" of

each of the parties as much as possible, and "recognition" by each of the parties of the other

parties' needs, interests, values and points of view. The potential for transformative mediation

is that any or all parties or their relationships may be transformed during the mediation.

Transformative mediators meet with parties together, since only they can give each other

"recognition".

In some ways, the values of transformative mediation continue and expand those of early

facilitative mediation, in its interest in empowering parties and transformation. Modern

transformative mediators want to continue that process by allowing and supporting the parties

in mediation to determine the direction of their own process. In transformative mediation, the

parties structure both the process and the outcome of mediation, and the mediator follows

their lead.

4.10. Arguments for and Against

Proponents say facilitative and transformative mediation empower parties, help the parties

take responsibility for their own disputes and the resolution of the disputes. Critics say that

facilitative and transformative mediation takes too long, and too often ends without

agreement. There are legitimate worries that outcomes can be contrary to standards of fairness

and that mediators in these approaches cannot protect the weaker party.

Proponents of transformative mediation say that facilitative and evaluative mediators put too

much pressure on clients to reach a resolution. They believe that the clients should decide

whether they really want a resolution, not the mediator.

Proponents of evaluative mediation say that clients want an answer when they are unable to

reach agreement, and they want to know that their answer is fair. Critics of evaluative

mediation say that its popularity is due to the lawyers and advisors who choose evaluative

mediation because they are familiar with the process. They believe that the clients would not

choose evaluative mediation if given enough information to make a choice. They also worry

that the evaluative mediator may not be correct in the evaluation of the case.

Mediators tend to feel strongly about these styles of mediation and there is a healthy and

useful debate. The opinion of The Chartered Institute of Arbitrators is reiterated: facilitation

is a robust and effective model and from that basis mediators can proceed on a contingency

basis. There is no one model rather a selection of techniques which can be employed

depending on the circumstances. There appear to be more concerns about evaluative and

transformative mediation than facilitative mediation. Facilitative mediation appears

acceptable to almost everyone, although some find it less useful or more time consuming.

However, much criticism has been levelled against evaluative mediation as being coercive,

top-down, heavy-handed and not impartial. Transformative mediation is criticized for being

too idealistic, not focused enough, and not useful for business or court matters.

51

Another concern is that many lawyers and clients do not know what they may get when they

end up in a mediator’s office. Some people feel that mediators ought to disclose prior to

clients appearing in their offices, or at least prior to their committing to mediation, which style

or styles they use. Other mediators want the flexibility to decide which approach to use once

they understand the needs of the particular case.

4.11. Styles versus. Continuum

Section 2 shows conflict and dispute in terms of a continuum and this is used again to

differentiate between conciliation and mediation. Again the differences in mediation styles

and models might be seen as more a continuum than distinct differences, from least

interventionist to most interventionist. It would seem that in general mediators are on a

continuum from transformative to facilitative to evaluative mediation, but are not squarely

within one camp or another.

4.12. The Mediation Process

Civil And Commercial Mediation

Background

This section provides a history of ADR and introduces civil and commercial mediation. This

workbook is concerned with Civil and Commercial Mediation and procedures that are

generally thought to be recent and alternative forms of dispute resolution. As with many

developments there are problems with definition, the workbook defines ADR, distinguishes

between conflict and dispute and outlines the history of ADR.


Describe and explain the history of ADR

Describe the process of mediation

Discuss the frequently asked questions (FAQs) about mediation

Discuss how to work with a mediator

4.13. Definitions

There are many definitions of ADR

Alternative Dispute Resolution

Amicable Dispute Resolution

Appropriate Dispute Resolution

Another Disappointing Result

Another Damn Rip-Off

In the UK because of the long history of arbitration; the term ADR has normally been taken to

those techniques alternative to litigation and arbitration i.e. arbitration is not ADR. This has

52

caused confusion since arbitration in the USA is considered ADR! The water has been further

muddied by the Lord Chancellor's Department Current Consultation Paper Alternative

Dispute Resolution - a Discussion Paper which states:

The phrase Alternative Dispute Resolution now covers a variety of processes that

provide an alternative to litigation through the courts, and can be used to resolve

disputes where those involved would be unlikely to resort to the courts.

ADR processes include arbitration, early neutral evaluation, expert determination, mediation,

and conciliation. A description of how these processes work is included at the glossary. At

least for some, negotiation within the processes of litigation forms part of the ADR repertoire,

with important links to existing litigation practice.

Other more formal mechanisms for resolving disputes such as the private sector ombudsman

schemes, utility regulators, trade association arbitration schemes in certain trade sectors, and

even tribunals can also provide alternatives to the courts in some circumstances.

The various processes have very different characteristics. It can, sometimes be unhelpful and

confusing to group them together under one heading. A useful distinction is that between

processes in which a neutral third party makes a decision and those where the neutral offers

an opinion, and/or seeks to bring to the parties to an agreement. Here the term "alternative

adjudication" is used to encompass decision-making processes other than litigation through

the courts, such as arbitration, and expert determination, ombudsmen and regulators.

"Assisted settlement" is used to encompass processes designed to help the parties come to an

agreement, such as mediation, conciliation, and early neutral evaluation. Of course, it is

possible to have hybrid processes. "Med-arb", for example, describes a process where there is

an initial agreement to mediate the dispute and, if that fails to achieve settlement, to submit

outstanding issues to arbitration. In addition, some ombudsman schemes incorporate

mediation into their procedures.

In this context, the word "alternative" conveys only that these are methods of dispute

resolution which are not those in general use in litigation (which is why, for some, negotiation

does not fall within the ADR territory). It does not imply that the use of ADR techniques is in

some way second-best to going to court. A case has been made for referring instead to

appropriate dispute resolution, to reflect the arguments that some ADR techniques are better

suited to the needs of some cases or litigants than court proceedings. The term "Alternative

Dispute Resolution" is, however, probably now so well established that there is little prospect

of changing it.

Of course some of the procedures now considered as ADR are considered elsewhere in this

course; and discussing what constitutes ADR is one of life’s more meaningless and pointless

activities. This workbook is mainly concerned with Commercial Mediation but the next

Section also considers:

Med-Arb

Mini-trial (Executive Tribunal)

Early Neutral Evaluation

Expert Determination


Dispute Review Advisers

53

4.14. History Of ADR

There exists a widely held belief that ADR is a recent development, and that the techniques

referred to as ADR came from the USA. An interesting variant, variously quoted, is that

society and culture may affect dispute resolution; the most common manifestation of this

being that ‘Eastern’ cultures are less attracted to confrontation and therefore ADR came form

the East. Evidence for the first belief is contained in just about every section of Fenn and

Gameson (1992) and the second belief is widely alluded to in the same book.

Of course the widely held belief that ADR is a modern development is simplistic but the fact

that the American Bar Association (ABA) noted in 1985 a dearth of scholarship on the

historical aspects of ADR (See Sanchez 1996), indicates that a revival in interest in ADR took

place in the mid 1980’s. This is often the date ascribed by many of the ADR advocates when

recounting the widely held belief on the development of ADR.

From the ABA note of the lack of research into the history of ADR came a research

programme. That research considered dispute processing in Anglo-Saxon England, one of the

earliest stages on English legal history. The central findings of the research are that the

Anglo-Saxons used an array of dispute resolution processes. The array included processes,

which might be compared with:

Negotiation

Adjudication

Arbitration

Mediation

Further these processes were available to the parties during the life of an action on a dispute-

processing continuum. The processes and the inter-relationships of the dispute-processing

continuum were aimed at fostering respect for the legal processes and effecting the peaceful

and enduring resolution of disputes and promoting the reconciliation of the parties.

It could be argued that the recent interest in ADR shares many of these sentiments. Perhaps

not the fostering of respect for the law and legal processes since business, commerce and

industry have become more sophisticated. Many people would argue that commercial people

have no interest in the majesty of the legal process; their concern is for the effective resolution

of disputes; both peaceful and enduring. At the heart of the ADR philosophy has been the

reconciliation of the parties in order that they might have continuity in their commercial

affairs.

ADR is not a recent development and although it suits many people to claim truth in the

‘widely held belief’ the history of ADR can be reliably traced to 5th

Century England.

4.15. Commercial Mediation

Facilitative mediators are reluctant to provide decisions or recommendations, indeed some

mediators will not. Mediation lies at the facilitative end of the spectrum. Any settlement,

which occurs, is the parties' own and the analogy of chemical catalysts is often made. A

catalyst makes a reaction take place between two or more chemicals; the catalyst is not

affected or changed by the reaction. Sometimes the reaction will take place without the

54

catalyst and the effect is to speed up and sometimes the reaction will not take place without

the catalyst. The analogies with mediation are obvious.

Mediation is the most widely used and accepted ADR technique. Whilst there is no

prescriptive mediation process, the typical stages in a mediation might be:

A brief written summary of the matter in dispute is presented in advance to the

mediator;

The parties meet with a mediator for an initial joint meeting including perhaps

a brief oral presentation by the parties;

Caucus sessions, where the mediator has private meetings with the party in

turn. During the caucuses the mediator often shuttles backwards and forwards to

clarify issues and search for settlement possibilities. This process is often termed

shuttle diplomacy;

Plenary sessions are called to either continue negotiations directly, to conclude

agreement, or where the process is unsuccessful to conclude a mediation.

Most mediators agree to a contingency approach to mediation; that is there is no set procedure

but the procedure is tailored to suit the parties and the dispute in question. This often means

that mediation is conducted without joint meetings and the mediators play a variety of roles.

The mediator may act as a mere facilitator, there purely to assist communications.

Alternatively the mediator acts as a deal maker, to assist the parties in finding overlap in their

bargaining positions or encouraging concession and compromise. Perhaps the mediator acts

more as a problem solver assisting the parties in designing and searching for creative

solutions. The mediator may act as transformer transforming the dispute by allowing the

parties a fresh in-sight into the issues and their positions. The final role of the mediator maybe

as an adjudicator or assessor to provide the parties with an appraisal of the merits of the cases

on a legal, technical or even common sense standpoint.

4.15.1. Frequently Asked Questions: Mediation

How does it work?

Mediation involves a third party neutral taking the role of facilitator, evaluator or transformer

in helping parties to reach a settlement to a dispute

What is the process at a mediation?

There is no set procedure but the typical stages in a mediation could be:

A brief written summary of the dispute submitted in advance by the parties to

the mediator ;

An initial joint meeting where the parties make an oral presentation;

The mediator holds private meetings with the parties; this is often likened to

shuttle diplomacy with a mediator shuttling back and forward to clarify issues and

clarify settlement possibilities. Sometimes these sessions are known as caucuses;

55

Further joint meetings either to continue negotiations directly or draw up an

agreement or to conclude the mediation.

What is the role of the mediator?

Mediators play a variety of roles:

Facilitator - assisting communications and negotiations;

Dealmaker - assisting the parties by comparing bargaining positions or outlining

concessions;

Problem solver - assisting the parties by suggesting creative alternatives, options and

solutions;

Transformer - transforming the dispute by allowing the parties to develop a fresh in-

sight into the issues and their positions.

Evaluator - an adjudicator or an assessor providing the parties with an evaluation

either: legal; technical; or commercial, by way of an appraisal of their cases and

positions.

Does the mediator produce an enforceable award?

Most mediators act as facilitator and any settlement is the parties' own settlement, it is unusual

for mediators to produce awards. The process is thought to be non-binding, consensual and

non-adjudicative.

How can it work if it is not enforceable?

Mediation works because the presence of an independent third party neutral helps all parties

concentrate on reaching a settlement. Once a settlement is agreed it can be converted into an

enforceable contract like any other settlement agreement. Mediators can help in the process

of formalizing in the settlement.

How are mediators trained?

A variety of organizations provide training for mediators. The leaders in commercial

mediation are:

International: The Chartered Institute of Arbitrators www.arbitrators.org and the Centre for

Effective Dispute Resolution (CEDR)

USA: the American Arbitration Association

Formal training for mediators has historically been a two-stage process. The first stage is an

academic treatment of mediation practice and procedure followed by assessment during role-

play and scenarios. After successful completion of the first stage mediators then go on to

undertake a pupillage, where they take part in a number of mediation under the supervision of

http://www.arbitrators.org/

56

an experience mediator. The pupil mediators are again assessed by the experienced mediators

for entry on to a panel of mediators when they can then take referrals in their own right.

Who are the mediators?

One school of thought says that good mediators are trained in dispute resolution, and

therefore need not necessarily know or understand the details of the dispute. Proponents of

this school point to America where undergraduate and postgraduate courses in dispute

resolution and in mediation exists. In the UK most mediators are drawn from a broad range of

disciplines and will have received a special training in mediation. Mediators can therefore

bring with them the specialisms of architecture, construction, the law, surveying etc to help

with construction disputes.

What about confidentiality?

It is normal for mediation providers and the mediators to require the parties and the mediator

to sign a confidentiality agreement. This ensures the process is treated as a without prejudice

negotiation on a strictly confidential basis. The mediator cannot be called afterwards to give

evidence of what took place. Where parties are particularly concerned about confidentiality in

joint meetings, the mediation can be conducted by means of separate meetings between the

mediator and each party.

An example of the confidentiality clause common in mediation agreements is shown below:

The mediation is to be conducted on a confidential basis and on a without prejudice

basis unless and until, and to the extent that, the parties otherwise jointly agree.2

Proposing mediation indicates a negotiating weakness?

Proposing mediation is not a sign of weakness but a suggestion of confidence on the

proposing party's ability to put their cards on the table and negotiate a positive commercial

solution. The effect a neutral third party mediator has on dispute negotiations is often

underestimated. However the initiation of getting mediation going can be difficult because

parties are often unfamiliar with mediation. This can be alleviated by including mediation

clauses in commercial contracts, and or allowing the first approach for mediation to come

from an ADR provider.

When is the best time to suggest mediation?

As there is no single process of mediation there is no single correct time in the dispute to

suggest mediation. However the earlier the process can begin the more likely the parties are to

achieve savings in costs and time; and notably the less likely is that the parties will have

become entrenched in their positions and into the adversity of dispute. It might be appropriate

to delay suggesting mediation where one party suspects that the other party is not seriously

interested in reaching a solution, or if a party still needs time to gather information for its

case. The following points are worth considering

2 JCT 98, PN 28/95.

57

A mediator may be able to help the parties in managing the information

gathering and case evaluation process;

Mediation does not ordinarily involve the examination or cross-

examination of witnesses, but takes an overall commercial approach given the

need to arrive settlement;

Mediation can be used not only for the initial attempt settlement but it

can be tried again later when circumstances change;

There are few risks in attempting mediation and the parties can always

abandon the process if it proves unproductive;

Most mediations, and most mediators, will only last a day at very most

three days to assess settlement possibilities.

How much does mediation costs?

How long is a piece of string. The service of trained experience mediators can be secured

from the leading ADR providers at reasonable commercial costs (starting at £50 per party per

hour). It is normal that the parties bear their own costs of the mediation proceedings and

share the fees of the mediator. There are often few additional costs in preparing for mediation,

and mediation can assists in the information gathering process so that any costs are marginal.

4.15.2. The benefits of mediation

The benefits of mediation are often summarised under the six C's

Consensual - parties agree to seek business solutions assisted by their advisers and a neutral

mediator.

Control - the parties agree a timetable, procedure, and the agenda. The outcome is a

contractual agreement or consent award.

Cost savings - the emphasis is on key issues not on exhausting every avenue to substantiate a

case or to refute the other side's evidence before the tribunal.

Continuing business relations - the emphasis is on the communication of interests between the

parties, on solving the problem, and on commercial business solutions.

Confidentiality - ADR meetings are private, and should be used to explore creative solutions

and agree pragmatic settlements.

Creative - in ADR commercial and business solutions are not limited by legal rules. Current

and future interests and any other aspects can be explored to achieve a solution.

4.15.3. How to work with a mediator

Prepare

58

Prepare your case in sufficient detail to allow you to negotiate effectively while concentrating

on essentials. Mediation is not a binding adjudicative process, you do not need to explore

every eventuality in case it might be relevant.

Summarise the core issues

Prepare a brief written summary of the dispute and your case, summarised the core issues and

evidence. Include documents which are essential to the case, if there are tricky legal or

technical question as part of the dispute agree upon an independent assessment by a third

party. The Mediator a can help in appointing the independent assessor, or by using the parties'

expert reports point the parties towards a settlement.

Recognise the various roles mediators may have to play

Mediators play a variety of roles to assist the parties:

Facilitator - there to purely assist communication;

Deal maker - helping parties find overlap in their bargaining positions or

encouraging concessions;

Problem solver - assisting in the search for creative options;

Transformer - to transform the dispute and open up creative avenues for

settlement;

Adjudicator assessor - providing the parties with legal technical appraisal of

the merits of their case.

It is important to the parties work closely with a mediator in private sessions in order to make

best use of the mediator's skills.

Confidentiality

Indicate clearly which information you expect a mediator to keep confidential in discussions

with other party. The mediator will normally assume that communications in a caucus; are

confidential unless otherwise indicated.

Limit those attending

Limit the numbers of staff and representatives attending the mediation; to those decision-

makers and professional advisers who can contribute to the settlement of the dispute. If

evidence or input from others is required, particularly experts, they can be brought in as and

when necessary.

Complex issues

If the case involves many parties or complex technical and legal issues, considering agreeing

with the other party to the use co-mediators or to an assessor working with mediator.

Flexibility

Be prepared to be flexible. The mediation will only reach a settlement if the parties bring a

genuine willingness on for new solutions take and give concessions, in the interests of

59

achieving a settlement. Argue your best case to protect your rights but do so with an open

mind and a view towards pragmatic alternatives by a mediated settlement. If you're looking

for a third party to adjudicate or give an award you should not be in mediation.

4.16. Mediation And The Law

This section introduces the relationship between the law and Mediation. In the UK the

concept of caucusing (private meetings between the neutral and the parties) is unique to

mediation; in that in the mainstream processes of arbitration and adjudication such an

approach would inevitably bring about a breach of natural justice invalidating any award or

decision. The attitude of UK judiciary and government in examined and it is shown that there

has been a strong recent move towards supporting ADR and therefore Mediation.


Consider ADR and Mediation in terms of national laws

Discuss the special features of mediation in relation to the law

Discuss the UK judiciary and government attitude towards supporting

Mediation and ADR

Introduction

In June 1991 the Master of the Rolls delivered a speech to the London Common Law and

Commercial Bar Association in which he maintained:

ADR is a PR man’s dream. It conjures up visions of a factor ‘X’ which will do for

dispute resolution what it is said to have done for washing powder. The truth is that

there is no factor ‘X’. Indeed, I doubt whether there is any such thing as ADR. It

simply an umbrella term or a ‘buzz’ word covering any new procedure or

modifications of old procedures which anyone is able to think up

That there has been a sea change in opinion amongst the senior members of the judiciary and

the Lord Chancellor can be seen when this 1991 view is considered against The Lord

Chancellor's Department Current Consultation Paper Alternative Dispute Resolution - a

Discussion Paper 3.

In determining the role of ADR, it is important to consider the principles on which the

reforms to the civil court procedures were based. In his interim report, Lord Woolf set

out the basic principles, which should be met by a civil justice system so that it

ensures access to justice. These are that the system should be just in the results it

delivers, procedures should be fair and, together with cost, proportionate to the

nature of the issues involved. The system should deal with cases with reasonable

speed, be understandable to those who use it, be responsive to the needs of those who

use it, and should provide as much certainty as the nature of particular cases allows.

And the system should be effective, i.e. adequately resourced and organised so as to

give effect to the previous principles.

3 See http://www.open.gov.uk/lcd/consult/civ-just/adr/indexfr.htm

60

The Lord Chancellor believes that these principles should also be used in examining

ways of dealing with disputes outside the court system.

The result of this consultation was a pledge to use ADR.

4.17. Mediation and National Laws

The use of mediation, or ADR, does not remove the need for the parties to know the legal

system within which they are operating. The legal system is vital to their rights and

obligations. It is important therefore that a mediator knows the legal system within which the

mediator operates. This begs the question; does the mediator need to be a lawyer? There is

no easy answer to the question; but some might argue that where specific and vulnerable

rights and obligations exist and need protecting, then a specialist lawyer mediator is required.

The obvious example is family disputes involving children.

In litigation and other adjudicative processes e.g. Arbitration and Adjudication the tribunal

obtains authority from legislation; Arbitration Act 1996 and Housing, Grants Construction

and Regeneration Act 1996 respectively. Mediation depends on the agreement of the parties

for authority. There are initiatives where courts encourage mediation, these might be

described as court annexed; and in some jurisdictions, notably the USA, mandatory schemes

exist. You might check the position in your jurisdiction, the attitude of UK judiciary and

government has been to support ADR without providing for mandatory ADR. A

comprehensive review of ADR schemes can be found in Brooker and Lavers (2001).4

4.18. Special Features Of Mediation In Relation To The Law

There are many features of mediation which involve aspects of the law; in terms of England

and Wales one of the most pertinent, and certainly one at the heart of mediation, is the use of

private meetings between the mediator and the parties. These meetings are often known as

caucuses and their central role in mediation is widely acknowledged. Caucuses and caucusing

present special problems because of natural justice; the principles of natural justice were

derived from the Romans who believed that some natural principles of law were self-evident

or natural and did not require a statutory basis. One thing is certain that the use of caucuses

by a tribunal would be a clear breach of natural justice. This separates mediation from

Adjudication and Arbitration; and provides a powerful tool for mediators which is not

available for Judges; Arbitrators and other tribunals.

4.19. The Government’s Pledge To ADR

On 23 March 2001 the Government made a pledge that government departments will only go

to court as a last resort. Instead, they will settle their legal disputes by mediation (or

arbitration) whenever possible. Government departments and agencies will settle legal cases

by ADR techniques in all suitable cases whenever the other side agrees. The pledge is worth

repeating in full:

Government Departments and agencies make these commitments on the

resolution of disputes involving them:

4 Brooker, P. and Lavers, A. (2001), Commercial and Construction ADR: Lawyers Attitudes and Experience,

Civil Justice Quarterly, 20, October , p327-346.

61

Alternative Dispute Resolution will be considered and used in all

suitable cases wherever the other party accepts it.

In future, Departments will provide appropriate clauses in their

standard procurement contracts on the use of ADR techniques to settle

their disputes. The precise method of settlement will be tailored to

the details of individual cases.

Central Government will produce procurement guidance on the

different options available for ADR in Government disputes and how

they might be best deployed in different circumstances. This will

spread best practice and ensure consistency across Government.

Departments will improve flexibility in reaching agreement on

financial compensation, including using an independent assessment of

a possible settlement figure.

There may be cases that are not suitable for settlement through

ADR, for example cases involving intentional wrongdoing, abuse of

power, public law, human rights and vexatious litigants. There will

also be disputes where, for example, a legal precedent is needed to

clarify the law, or where it would be contrary to the public interest

to settle.

Government departments will put in place performance measures to

monitor the effectiveness of this undertaking.

The principle that litigation should be a last resort has the approval of the courts; in Frank

Cowl & other v Plymouth City Council, Lord Woolf said:

insufficient attention is paid to the paramount importance of avoiding litigation

whenever this is possible5

Following the Cowl case came Dunnett v Railtrack which emphasised the costs sanctions

likely to flow from a blunt refusal to consider ADR. The Claimant appealed against the

original judgment. At the hearing at which permission to appeal was granted the court told

the parties that they should attempt alternative dispute resolution. The defendant simply

refused to consider ADR and the matter proceeded to the hearing of the substantive appeal.

The appeal was dismissed, that is the defendant won, but received no costs award.6 It is

important here to remind that the matter of parties’ costs in the UK is dealt via the so-called

English rule; here the loser pays the winners costs. This of course has a special tactical effect

on the arguments for the use of ADR as a cost-saving device.

5 http://www.arbitrators.org/Institute/LawRep.htm

6 http://www.consensus.uk.com/mediationnews.html#cases

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5. Other ADR Processes

This section provides a outline of other ADR processes than civil and commercial mediation.

The forms of ADR considered are:

Med-Arb






Contracted Mediation


Describe

Med-Arb






Contracted Mediation

5.1. MED-ARB

Med Arb is a process that has been much debated in recent times, where if the Mediation fails

to produce settlement then the Mediator might take the role of Arbitrator. However, although

the idea is attracting interest there remains some fundamental matters of principle, which may

affect the validity of a binding award for such a tribunal. These include the argument that such

an award would be against the rules of natural justice in that a party to the process is unaware

of what is being said in one of the private caucusing sessions and is therefore unable to reply.

There is little evidence of the adoption of this method of dispute resolution but no doubt the

debate is likely to continue for some time.

No other ADR technique attracts the same debate as Med-Arb. As the name suggests Med-

Arb is essentially a two-stage hybrid ADR process. During the first stage the parties attempt

to settle their dispute amicably using mediation, if settlement cannot be found then the parties

move to the second stage of arbitration. The essential characteristics, and the one that causes

all the debate, of this technique is that mediator in the first stage becomes the arbitrator for the

final and binding stage.

Med-Arb arises either through a contractual provision or by a party agreement once the

dispute has arisen. The proponents of Med-Arb argue the advantage that it combines the

benefits impossibility of a mediated settlement with the finality of arbitration.

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Med-Arb recognizes that arbitration may not resolved all the issues between the parties but

limits the arbitration solely to the intractable disputes, thereby bringing the cost and time

saving to the parties.

Conversely the detractors of Med-Arb express concerns over such a procedure, claiming that

it compromises the neutrals capacity to act initially as facilitator and then as the adjudicator,

without restricting the flow information. The fundamental objection to such an approach is

that the parties will not wish to reveal confidential information during caucuses with a

mediator which may then influence the arbitrators view of them during arbitration.

Notwithstanding the wide-ranging debate on Med-Arb, few seem to have any real experience

of the technique being used.

5.2. Executive Tribunal Or Mini-Trial

These are management based mediation assisted processes, the term mini-trial is favoured in

the USA and in the UK Executive Tribunal has been adopted. The procedure being a

structured settlement procedure combining negotiation, mediation and adjudication. Lawyers

for each party are given a limited time to make a presentation on the dispute, in the presence

of senior executives from each company. The executives are required to have the authority to

settle the dispute, and following the presentations they hold a meeting moderated by a neutral.

The neutral acts as facilitator towards a settlement and can if required offer either a binding or

non-binding opinion.

The mini-trial procedure in the USA developed from a large dispute involving Telly Credit

and TWR who had been in dispute over a period of 3 years and had exchanged over 100,00

documents. In an attempt to settle the dispute an alternative was suggested. The alternative

was developed from the observation that often disputes develop a self fulfilling dimension

within organisations; in that the time involved and committed becomes so large that the

parties loose sight of the commercial reality of the dispute. Often senior executives are

appalled when they see the extent of the dispute.

The major benefits which are proposed are:

Senior executives become involved and realise the nature and severity of the

dispute;

Senior executives are given an opportunity to hear the arguments from both

sides;

Senior executives are able to meet and discuss settlement;

Senior executives are not constrained by legal min / lose remedies

Gould et al (1999) claim that few experiences have been documented and the few have been

on major projects. They report in a UK survey that many in construction are confused about

the process, believing that it relates to site negotiations which have reached the point where

company executives become involved.

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5.3. Early Neutral Evaluation (ENE)

ENE is one of a number of forms of adjudicative and binding dispute resolution. These forms

might be though of running from an adjudicative neutral type of conciliation through to a

system of minitrial. There has been considerable interest in ENE due to a series of court

initiatives. There are few reports that the systems of ENE have been used in practice; but the

evidence supports the wider contention that the parties their advisors, and the dispute

resolvers: adjudicators; arbitrators; conciliators; judges and mediators now have a continuum

of techniques to use depending on the dispute in hand. A useful statement might be one

applied to every dispute technique described in this workbook:

ENE (insert any other technique) is simply one tool in the toolbox of dispute

resolution.

ENE and the courts7

A Commercial Court Practice Statement of 10th

December 1993 encouraged the parties to

disputes in the Commercial Courts to consider the use of ADR8. From then the judges in the

Commercial Court adopted a practice at the first interlocutory hearing when Directions were

to be given, of evaluating the action. If any of the issues were appropriate then attempts

would be made to settle the dispute by ADR. The judges considered if the parties had

attempted ADR, and if not they invited the parties to take positive steps to set in motion ADR

procedures. As a result of this Practice Statement changes were made to the standard

questions to be answered by the parties in preparation for the Summons for Directions.

Similar changes were also made as part of the pre-trial checklist. Cynics suggested that

solicitors merely included the necessary changes in order to comply with the letter of the

Practice Statement; that they had no intention of complying with or entering into the spirit.

A further Practice Direction issued by the Commercial Court9; stated that the judges of the

Commercial Court in conjunction with the Commercial Court Committee had considered

whether it was desirable that further steps should be taken to encourage the wider use of

ADR. The Practice Direction proposed that if after discussion with the parties’

representatives an Early Neutral Evaluation is likely to assist in the resolution of the matters

in dispute; then the Judge may offer such ENE himself. Alternatively the Judge could arrange

that another Judge carry out the evaluation. Where the ENE was to be carried out by a Judge

it was stated that the Judge would, unless the parties agreed otherwise, take no further part in

the proceedings.

Guidance notes published by the Commercial Court described ENE as:

The function of this procedure is to provide the parties to a dispute with a non-binding

assessment by a neutral of their respective chances of success were the litigation to be

pursued.

7 This section draws heavily on a paper to the Society of Construction Law 4th May 1999. HHJ J Toulmin and

Robert Stevenson, Early Neutral Evaluation in the Technology and Construction Court.

8 Mr Justice Cresswell, The Times 10th December 1993.

9 Mr Justice Walker, The Times 7th June 1996.

65

The initiative in the High Court might at first sight seem surprising, but as Judge Toulmin

points out those who are surprised will be equally surprised to discover that ENE is done as a

matter of course in Israel and New Zealand. Further the procedures in both countries are

similar to the UK and reports that the system appears to work well in both jurisdictions.

The procedure in ENE will necessarily vary in each case, but for the dispute put before the

TCC in June 1998 the following procedure was initiated in the Case Management Conference

in April 1998:

Agreed Statement of Issues and Chronology to be lodged at court by 1st June;

Pleadings; Scott Schedule and Defendant’s Response to be lodged at court by 1st June;

Case outline (10 pages maximum) to be lodged at court by 1st June;

ENE to be held in court 8th

June;

Each side 30 minutes to open and respond;

60 minutes for Judge to question parties;

Period of reflection before Judge delivers assessment;

Nothing said at the ENE would be used in litigation or for any other purpose;

The Judge would be disqualified from any other involvement in the proceedings;

Each party to bear their own costs.

The Report of the Commercial Court Committee Acting Party on ADR February 1999

The report warned that only four such ENEs had been conducted in the Commercial Court

(this has been doubted by others10) and explained the low number by the lack of familiarity

of the parties and their advisors. The report considered that ENE could only assist parties in

cases where there few distinct issues on which preliminary views could be readily expressed

without substantial presentations on the merits from either party. ENE could be a useful tool

for the Judge to encourage or persuade settlement.

ENE application

At the stage of the Case Management Conference the parties may apply for ENE; the

problems are that issues may not be sufficiently clarified, or developed, to allow ENE. ENE

may be more appropriate where the parties’ position on particular issues have been defined

and hardened such that they are only likely to change on the authoritative view of a third

party. For the neutral to be able to give a view, and for that view to carry the necessary

weight, all or most of the evidence, statements, reports and documentation must be available

to the neutral.

Timing of ENE is crucial. Too early and the parties have not had sufficient time to exchange

and appraise the evidence and may retain feelings that their position could be improved. Too

late and there will be little by way of cost savings.

10 Genn, H. (1999), The Central London Count Court Pilot Mediation Scheme, LDCD 9/58.

66

5.4. Expert Determination (Submission to Expert, Reference to an Expert,

Expert Adjudication)11

Note that Statutory Adjudication under the Scheme for Construction Contracts and the

Housing Grants, Construction and Regeneration Act is dealt with separately.

These are long-established procedures in English law and have been used across a number of

industries. Examples include - accountants valuing shares in limited companies, valuers

fixing the price of goods, actuaries carrying out valuations for pension schemes, certifiers of

liability for on-demand performance bonds, certifiers under construction contracts and,

Adjudicators who are said to be acting “as expert and not as arbitrator”.

The law governing the extent to which the Courts may interfere in expert determination has

been reviewed in a number of recent cases. Jones v. Sherwood Computer Services Plc

(1992)12

held that where parties had agreed to be bound by the report of an expert, the report,

whether or not it contained reasons for the conclusion in it, could not be challenged in the

Courts on the ground that mistakes had been made in its preparation unless it could be shown

that the expert had departed from the instructions given to him in a material respect.

Jones was followed in Nikko Hotels (UK) v MEPC (1991)13

held that if parties agree to refer

to the final and conclusive judgment of an expert an issue that either consists of a question of

construction or necessarily involves the solution of a question of construction, the expert’s

decision will be final and conclusive and, therefore, not open to review or treatment by the

Courts as a nullity on the ground that the expert’s decision on construction was erroneous in

law, unless it can be shown that the expert has not performed the task assigned to him. If he

has answered the right question in the wrong way, his decision will be binding.

Jones was also approved in the House of Lords in Mercury Communications Ltd v Director

General of Telecommunications (1996)14

.

In British Shipbuilders v VSEL Consortium plc (1997)15

, the principles were summarised:

Five principles govern the status of decisions of a person occupying the role of the expert:

Questions as to the role of the expert, the ambit of remit (or jurisdiction) and the character of

remit (whether exclusive or concurrent with a like jurisdiction vested in the Court) are to be

determined as a matter of construction of the agreement.

If the agreement confers upon the expert the exclusive remit to determine a question, the

jurisdiction of the Court to determine that question is excluded because for the purposes of

ascertaining the rights and duties of the parties under the agreement the determination of the

expert alone is relevant and any determination by the Court is irrelevant. It is irrelevant

whether the Court would have reached a different conclusion or whether the Court considers

11

See generally Kendall, J Dispute Resolution: Expert Determination (2nd

Ed., 1996) 12

[1992] 1 W.L.R. 277 13

[1991] 28 EG 86, itself approved by the Court of Appeal in The “Glacier Bay” [1996] 1 Lloyds Rep 370, 377

col. 2 14

[1996] 1 WLR 48 15

[1997] 1 Lloyd’s Rep 106

67

that the expert’s decision is wrong, for the parties have in either event agreed to abide by the

decision of the expert.

If the expert in making his determination goes outside remit e.g. by determining a different

question from that remitted or in determination fails to comply with any conditions which the

agreement requires compliance with in making determination, the Court may intervene and

set the decision aside. Such a determination by the expert as a matter of construction of the

agreement is not a determination which the parties agreed should affect the rights and duties

of the parties, and the Court will say so.

The Court may set aside a decision of the expert where (as in this case) the agreement so

provides if determination discloses a manifest error.

The salient features of the various processes, summarised as Expert Determination, are as

follows:

The expert is not bound by the Arbitration Acts, in particular there is no

statutory right of appeal or determination of a preliminary point of law;

The Court has no statutory powers to make interlocutory orders in aid of an

expert;

An expert’s determination is not enforceable as a judgment in the same way as

an Arbitrator’s award;

The expert makes a decision on own expertise and investigations, and is not

bound to receive evidence or submissions from the parties, but is not in control of

procedure, and must comply with the terms of the underlying contract from which

authority is derived;

The expert is not bound to act judicially, but merely to avoid fraud or collusion

and He may also be liable to the parties for negligence;

The expert’s fees are only recoverable as a debt in the absence of an express

term conferring on the expert the ability to award costs against a party.

Expert determination is a private means of commercial dispute resolution. The parties to a

contract jointly instruct a third party to decide a dispute. Fernyhough (1997) has described the

essentials of the role of the expert as:

No requirement to act judicially but may carry out investigation;

No requirement to receive submissions or evidence;

No legislation to cover process;

No statutory right of appeal or review;

No statutory right of registration of and enforcement of decision.

However the expert must act in accordance with the terms of his appointment (which may have

implied terms or incorporate parts of the contract) if his award is to be valid.

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There is nothing new about expert determination, Kendal reports that it has been a feature of

English commercial and legal practice for at least 250 years. It is:

A process by which parties instruct a third party to decide a particular issue

A creature of contract

The third party is selected for particular expertise

Courts are reluctant to intervene, and have restricted to jurisdiction (Jones v

Sherwood); or where the expert has answered the wrong question

5.5. Dispute Review Boards And Dispute Review Panel

Dispute Review Board develop into in the USA as a process where an independent board

evaluate disputes as they arise during the project being constructed or manufactured, and

makes settlement recommendations to the parties. The board is normally constituted at

commencement of the project and a typical scenario is where one board member is selected

by each party and they agree on an independent third; the referee or umpire. Failure by the

parties to agree on the umpire normally requires that the two board members then select the

third member. The board periodically visit the site and receive project information to ensure

familiarity with the project and the parties. The board meets regularly to discuss problems or

disputes, hears presentations from parties and suggests solutions.

Dispute Review Boards derive their authority from the underlying contract and may be

conferred with the power to produce advisory, interim binding or finally binding decisions. It

is difficult to distinguish a binding award by a DRB from that of a Board of Arbitration.

There will however be important differences relating to the judicial control and enforceability,

particularly internationally. The principal difference between a DRB and an Executive

Tribunal will be the constitution of the board/tribunal - the former will usually be independent

of the parties, the latter will include representative of each party.

The concept of DRB is usefully explained at the Dispute Resolution Board Foundation

http://www.drb.org/index.htm

There are nine essential elements necessary for a DRB to be successful. If any of these

elements are missing, success is jeopardized. These elements are:

1. All three members of the DRB are neutral and subject to the approval of both

parties.

2. All members sign a Three-Party Agreement obligating them to serve both

parties equally and fairly.

3. The fees and expenses of the DRB members are shared equally by the parties.

4. The DRB is organized when work begins, before there are any disputes.

5. The DRB keeps abreast of job developments by means of relevant

documentation and regular site visits.

6. Either party can refer a dispute to the DRB.

7. An informal but comprehensive hearing is convened promptly.

8. The written recommendations of the DRB are not binding on either party but

are admissible as evidence, to the extent permitted by law, in case of later arbitration

or litigation.

9. The members are absolved from any personal or professional liability arising

from their DRB activities.

http://www.drb.org/index.htm

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5.5.1. Dispute Resolution Adviser (DRA)

The concept of DRA was developed by many commentators independently; a useful

description of the many and varied techniques can be found in Wall (1992). Colin Wall is a

dispute specialist in Hong Kong who has used the technique to run complicated and difficult

construction projects with many problems and complete with few major disputes. The system

of DRA run in Hong Kong will be described after the general themes common to the DRA

concept have been introduced.

The concept

Colin Wall suggests that the idea of a Dispute Resolution Adviser (DRA) came from Clifford

Evans who in 1986 suggested the use of an independent intervener. This independent

intervener would be paid for equally by the employer and the contractor to settle disputes as

they emerged; rather than wait until the end of the contract. Any decision would be binding

until the end of the project and then either party could commence arbitration proceedings.

Wall converted the independent intervener into the DRA who does not make interim binding

decisions but advises on the means by which a settlement could be achieved. Power to settle

rests with the parties.

The DRA’s first action is to deal with disagreements a site level, so that these can be

addressed before they develop into full blown disputes. This avoids the breakdown in working

relationship has which often takes place and then effects the rest of the protect, and it allows

the issues to be dealt with while they are fresh in the party's mind. Neither the parties or the

DRA are limited to legal decisions and commercial settlements could encompass wider

solutions which are mutually beneficial to all.

The DRA system

The system developed by Wall in Hong Kong became the DRA system and was used on

Hong Kong Government Projects; notably the Queen Mary Hospital. The system is described

as:

DRA system draws upon the independent intervener concept as modified by the dispute

adviser but provides a more flexible approach. It embodies the dispute prevention techniques

of the Dispute Review Board and Project Arbitration, it uses a partnering techniques to re-

orient the parties' thinking and encourages negotiation by using a tiered dispute resolution

process. It is based on giving parties maximum control by the use of mediation techniques

but also includes prompt short form arbitration which encourages voluntary settlement and if

necessary provides a final and binding resolution to a dispute.

DRA system has distinct stages as shown in Figure 6. At the commencement of the project

the DRA undertakes partnering styled activities focused on building relationships with the

parties and that the same time encouraging teamwork. During the period of the project the

DRA visit the site on a regular basis in order to maintain a level of familiarity with the project

and the parties. At this stage the DRA also assists on the settlement of any disagreements,

which may have arisen between visits. During any formal disputes that occur the DRA

attempts to facilitate their settlement using a variety of techniques from mediation to expert

determination in particular areas. The DRA attempts to maintain a purely facilitative role in

70

order to sustain the impartial and neutral position, which has developed, therefore any

evaluation is carried out by another neutral third party and not the DRA.

If disputes proceed beyond settlement at site level, the DRA produces a report outlining the

nature of the dispute has and the parties' cases. This report may contain a non-binding

recommendation or an evaluation of the dispute. Parties are given opportunities to check the

accuracy of the report and comment providing an important chance for them to review their

position before the report is passed to senior management. Senior Management will then be

able to obtain a clear picture of the dispute and hopefully bring an unemotional perspective to

the problem. Again at this level the DRA may continue to facilitate the resolution of the

dispute by assisting the senior managers.

If the matter remains unresolved 14 days after the DRA report then a short form of arbitration

may be employed. This takes place within 28 days of the end of the senior management

efforts, and the arbitrator is selected by the parties, perhaps assisted by the DRA. The rules of

the short form arbitration include the following key elements:

One issue or a limited number of issues, conducted in one day per issue

Each party is given the opportunity to present

Each party is given equal time to be present

The arbitrator produces an award in a very short period which is final and

binding

Dispute concerning time or money are resolved using final offer arbitration

where the arbitrator must select one or the other picture

The Queen Mary Hospital project raised numerous problems yet there were no dispute which

proceeded to short form arbitration, producing a large savings in time and money

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Disagreement

↓

Partnering and informal resolution activities

↓

Formal dispute

↓

Good faith negotiations with the site personnel without the DRA

↓

Notice of dispute

↓

The DRA and site personnel attempt to resolve a dispute

↓

DRA's report

↓

Senior management meeting

↓

Short form of arbitration

↓

Arbitration award

An Outline of the DRA system

72

5.6. Contracted Mediation

King’s College London and University College London are collaborating in order to collect

and analyse data on contracted mediation. Contracted mediation attempts to fuse team

building, dispute avoidance and dispute resolution in one procedure. The impartial contracted

mediation panel, consisting of one lawyer and one commercial expert who are both trained

mediators, is appointed at the outset of the project. The panel attends site meetings and

conducts workshops. The panel members should therefore have a working knowledge of the

project and the individuals working on that project. This knowledge allows the panel to

resolve contractual differences before they escalate, and provides an immediate medium for

the confidential, mediated resolution of disputes.

However, experience of its actual use in practice is limited and evidence supporting the

benefits of contracted mediation is anecdotal 1

. For example, it could provide an economic

dispute management technique for the majority of the industry’s projects that cannot justify

the cost of a dispute review board. But is there a real demand for contracted mediation in the

industry? In other words; does it offer real benefits, is there a need for contracted mediation

and is there a willingness to pay for it?

Recently, some major players in the supply side of the industry have started to actively

encourage the use of contracted mediation for future projects. Further, the Government’s

“Dispute Resolution Guidance” pledges a commitment to ADR and states that its policy is to

avoid disputes and “to ensure that the relationships between the client and supplier are non-

adversarial… litigation should usually be treated as the dispute resolution method of last

resort”. 2

It is therefore possible that we will see some use of this process on several new

developments in the next few years.

Notes:

1. Contracted mediation was used on Jersey Airport, see “Stopping disputes before they start”

Commercial Lawyer Special Report, February 2001.

2. Office of Government Commerce, “Dispute Resolution Guidance”


What is Contracted Mediation?

"Our objective is to become the preferred partner to funders, insurers and property clients in

their common quest for the prevention, mitigation and resolution of contract difference."

Contracted Mediation is the mediation service that aims to change the culture of confrontation

that threatens successful project delivery. The name Contracted Mediation reflects the fact

that the mediation framework is in place throughout a project. The parties agree at the outset

to manage and resolve any differences that may arise with the assistance of a Contracted

Mediation Panel which follows the project through. The Panel consists of two specialists, one

legal, one commercial, who have access to the contract documents and the parties involved.

Today mediation is normally only considered as a last-minute alternative after costly and

time-consuming forays into adjudication, arbitration or litigation. By contrast, Contracted

Mediation (Co-Med for short) provides the parties with a much better chance to resolve

differences as they arise, before they become disagreements and ultimately disputes. The

Panel is in place and actively helping to prevent or avoid disputes from the beginning. The

disincentives to open communication inherent in other forms of dispute resolution are absent

in this process. It offers all parties access to immediate mediation in a safe and pre-

determined structure using expert help.

http://www.oxfordinform.com/scl/news/nls/#1

http://www.oxfordinform.com/scl/news/nls/#2


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Contracted Mediation has been pioneered by ResoLex Limited, a company created by

Symonds Group, a leading international firm of project managers and engineers, and

barristers in the Chambers of Roger Henderson QC at 2 Harcourt Buildings, Temple,

London, specialising in commercial law and dispute resolution. ResoLex will be

drawing on the expertise of both.

October 12, 2000 - CONTRACTED MEDIATION GETS JERSEY AIRPORT LIFT-

OFF A TAXIWAY civil engineering project at Jersey Airport will be the first contract undertaken

with a Contracted Mediation Panel in place from the outset to help prevent, mitigate and

resolve disputes.

Jersey Airport's appointment of ResoLex comes just a week after the company, formed by a

set of chambers of London barristers and a leading project management consultancy, launched

its innovative Contracted Mediation service to broad acclaim from all sides of the

construction industry.

Its prestigious first commission has been awarded by an experienced client, keen to engage

the best management system to bring its £15 million Alpha taxiway project to a successful

outcome.

The contract involves replacing the existing surface with a new taxiway which provides a

rapid exit from the runway and complies with international air safety standards. The work,

due to start on site in February, with completion in mid-April 2002, is currently out to tender.

The contractor will be selected in December. A partnering workshop is due to be held in

January, in which the two specialist members of the Co-Med Panel, one legal, one

commercial, will participate.

Contracted Mediation has been pioneered by ResoLex, a company created by Symonds

Group, a leading international firm of project managers and engineers, and barristers in the

chambers of Roger Henderson QC at 2 Harcourt Buildings, Temple, London, specialising in

commercial law and dispute resolution. ResoLex draws on the expertise of both.

Speaking at the launch reception held on October 3 at the Bank of England, Lord Browne-

Wilkinson, the former senior Law Lord, hailed the initiative as bringing a new dimension to

mediation, itself already proving successful as a cure in bringing long-standing disputes to

quick and amicable settlements.

Commenting upon its value in the early stages of preventing differences escalating, and how

much he had hated construction disputes, he said: "Anything capable of keeping construction

litigation out of my court would have been most welcome."

74

5.7. What is Game Theory

5.8. Game Theory?

It’s human behaviour; it’s mathematics; it’s economics; it’s philosophy; it’s computer

science; it’s logic; it’s all things to all men. For our purposes we are going to consider game

theory in terms of the behaviour of firms under conflict and dispute.

There has been considerable recent interest in the use of game theory to explain firms’

behaviour; one measure is the Nobel Prizes awarded for work in the area. Thomas Schelling

was awarded a Nobel Prize in 2005; others include William Vickrey in 1996.

Current thinking tries to combine the efficiency of competition with the benefits of co-

operation. [See Co-opetition by Brandenburger and Nalebuff]

5.9. Examples and sources

Game theory is a distinct and interdisciplinary approach to the study of human behavior.

http://william-king.www.drexel.edu/top/eco/game/game.html

Game theory is a branch of applied mathematics. http://en.wikipedia.org/wiki/Game_theory.

Game Theory seeks to analyse strategic behaviour between firms Game theory is now a

major research field in academic economics.

http://www.tutor2u.net/economics/content/topics/monopoly/game_theory.htm

Game theory is a branch of applied mathematics that studies strategic situations where

players choose different actions in an attempt to maximize their returns. First developed as a

tool for understanding economic behavior, game theory is now used in many diverse

academic fields, ranging from biology to philosophy. Game theory saw substantial growth

and its first formalization by John von Neumann before and during the Cold War, mainly due

to its application to military strategy, most notably to the concept of mutual assured

destruction. Beginning in the 1970s, game theory has been applied to animal behavior,

including species' development by natural selection. Because of interesting games like the

prisoner's dilemma, in which mutual self-interest hurts everyone, game theory has been used

in political science, ethics and philosophy. Finally, game theory has recently drawn attention

from computer scientists because of its use in artificial intelligence and cybernetics.

In addition to its academic interest, game theory has received attention in popular culture. A

Nobel Prize-winning game theorist, John Nash was the subject of the 1998 biography by

Sylvia Nasar and the 2001 film A Beautiful Mind. Several game shows have adopted game

theoretic situations. Although similar to decision theory, game theory studies decisions that

are made in an environment where various players interact. In other words, game theory

studies choice of optimal behavior when costs and benefits of each option are not fixed, but

depend upon the choices of other individuals.

http://en.wikipedia.org/wiki/Game_theory


http://www.tutor2u.net/economics/content/topics/monopoly/game_theory.htm

75

An introduction to game theory by Martin J. Osborne

http://www.chass.utoronto.ca/~osborne/igt/

Roger A. McCain


Co-opetition by Brandenburger and Nalebuff

http://en.wikipedia.org/wiki/Coopetition

5.10. The Prisoners' Dilemma

1. The game got its name from the following hypothetical situation: imagine two

criminals arrested under the suspicion of having committed a crime together.

However, the police does not have sufficient proof in order to have them convicted.

The two prisoners are isolated from each other, and the police visit each of them and

offer a deal: the one who offers evidence against the other one will be freed. If none of

them accepts the offer, they are in fact cooperating against the police, and both of

them will get only a small punishment because of lack of proof. They both gain.

However, if one of them betrays the other one, by confessing to the police, the

defector will gain more, since he is freed; the one who remained silent, on the other

hand, will receive the full punishment, since he did not help the police, and there is

sufficient proof. If both betray, both will be punished, but less severely than if they

had refused to talk. The dilemma resides in the fact that each prisoner has a choice

between only two options, but cannot make a good decision without knowing what the

other one will do. http://pespmc1.vub.ac.be/PRISDIL.html

2. Tanya and Cinque have been arrested for robbing the Hibernia Savings Bank

and placed in separate isolation cells. Both care much more about their personal

freedom than about the welfare of their accomplice. A clever prosecutor makes the

following offer to each. "You may choose to confess or remain silent. If you confess

and your accomplice remains silent I will drop all charges against you and use your

testimony to ensure that your accomplice does serious time. Likewise, if your

accomplice confesses while you remain silent, they will go free while you do the time.

If you both confess I get two convictions, but I'll see to it that you both get early

parole. If you both remain silent, I'll have to settle for token sentences on firearms

possession charges. If you wish to confess, you must leave a note with the jailer before

my return tomorrow morning."

The "dilemma" faced by the prisoners here is that, whatever the other does, each is

better off confessing than remaining silent. But the outcome obtained when both

confess is worse for each than the outcome they would have obtained had both

remained silent. A common view is that the puzzle illustrates a conflict between

individual and group rationality. A group whose members pursue rational self-interest

http://www.chass.utoronto.ca/~osborne/igt/


http://en.wikipedia.org/wiki/Coopetition

http://pespmc1.vub.ac.be/PRISDIL.html

76

may all end up worse off than a group whose members act contrary to rational self-

interest. More generally, if the payoffs are not assumed to represent self-interest, a

group whose members rationally pursue any goals may all meet less success than if

they had not rationally pursued their goals individually. Puzzles with this structure

were devised and discussed by Merrill Flood and Melvin Dresher in 1950, as part of

the Rand Corporation's investigations into game theory (which Rand pursued because

of possible applications to global nuclear strategy). The title "prisoner's dilemma" and

the version with prison sentences as payoffs are due to Albert Tucker, who wanted to

make Flood and Dresher's ideas more accessible to an audience of Stanford

psychologists. Although Flood and Dresher didn't themselves rush to publicize their

ideas in external journal articles, the puzzle attracted widespread attention in a variety

of disciplines. Christian Donninger reports that "more than a thousand articles" about

it were published in the sixties and seventies. A bibliography (Axelrod and

D'Ambrosio) of writings between 1988 and 1994 that pertain to Robert Axelrod's

research on the subject lists 209 entries. Since then the flow has shown no signs of

abating. http://plato.stanford.edu/entries/prisoner-dilemma/

http://plato.stanford.edu/entries/prisoner-dilemma/

77

Construction Adjudication Practice and Procedure. Arbitration Practice and Procedure

This section considers two specific dispute resolution techniques. Firstly the ‘special’ case of

construction is considered and the ‘solution’ of construction adjudication. Secondly the use

of arbitration via the 1996 Arbitration Act. A later section considers International disputes

where arbitration is again favoured, but of course there is a difference between arbitration via

the 1996 Arbitration Act and International Arbitration.

You should re-read Section 6 Comparison Of Dispute Resolution Techniques.

Aim and Objectives


The section aim is:

To consider the techniques of construction adjudication and arbitration via the 1996

Arbitration Act


1. To detail the background to the introduction of construction adjudication in the UK

via Housing Grants Construction and Regeneration Act 1996

2. To explain the process of construction adjudication in the UK via Housing Grants

Construction and Regeneration Act 1996

3. To explain the process of arbitration in England and Wales via Arbitration Act 1996

The Construction industry in the UK [and worldwide]

For many years the construction industry in the UK has suffered a poor reputation. These

problems have intrigued, one might say obsessed, the industry and government for 50 years.

Government reports on construction are nothing new and a list (incomplete) of reports since

the Second World War makes depressing reading:

1944 Report on the Management and Placing of Contracts (The Simon Report)

1949 British and American Productivity Council

1950 Report of the Working Party on the Building Industry (The Phillips Report)

1962 Survey of the Problems before the Construction Industries (The Emmerson

Report)

1964 The Placing and Management of Contracts for Building and Civil Engineering

Works (The Banwell Report)

1965 Higgin and Jessop, Communications in the building industry, Tavistock

publications

1967 A Survey Of The Implementation Of The Recommendations Of The

Committee Under The Chairmanship Of Sir Harold Banwell On The Placing

And Management Of Building And Civil Engineering Works (Action On The

Banwell Report).

1975 The Public Client and the Construction Industries (The Wood Report).

78

1980’s Faster Building for Commerce/Industry

1992 The Building Employers Confederation (BEC), Building Towards 2001, BEC,

London.

1993 Trust And Money: Interim Report Of The Joint Government Industry Review

Of The Procurement And Contractual Arrangements In The United Kingdom

Construction Industry (The Latham Report)

1994 Constructing The Team The Final Report Of The Joint Government Review Of

The Procurement And Contractual Arrangements In The United Kingdom

Construction Industry (The Latham Report)

1998 Rethinking Construction: The Report of the Construction Task Force, DETR

(The Egan Report)

2001 Modernising Construction: The National Audit Office

2002 Rethinking Construction : DTLR

2003 Accelerating Change: Strategic Forum for Construction

The consensus of all these reports was that the construction industry produced products which

were of poor quality, over budget and often late. There was a further worry, more pronounced

recently [since Latham in 1993], that the industry suffered from widespread dispute. This

resulted in legislation the Housing Grants Construction and Regeneration Act 1996 which

produced a statutory right for all those involved in construction contracts to refer disputes to

adjudication.

The Housing Grants Construction and Regeneration Act received Royal Assent on 24th July

1994. Those parts relating to construction (Part II of the Act) commenced on 1 May 1998.

You can find the legislation

http://www.opsi.gov.uk/ACTS/acts1996/ukpga_19960053_en_1

The Act sets out a framework for a system of adjudication; all construction contracts must

meet minimum criteria and if they fail the Scheme for Construction Contracts will apply.

Statutory Adjudication - The Process

Under Part II of the Housing Grants, Construction and Regeneration Act 1996 a party to a

construction contract is unilaterally given the right to refer a dispute arising under the contract

to adjudication. The Act only applies to "construction contracts" which fall within the

detailed definition of Section 104 For example, "architectural design, surveying work or to

provide advice on building, engineering, interior or exterior decoration or the laying out of

landscape in relation to construction operations" are included within the scope of the Act,

whilst contracts of employment are expressly excluded. In addition, a construction contract is

defined to include an agreement to carry out "construction operations". Construction

operations are further defined in Section 105 to include a wide variety of general construction

related work together with a list of notable exceptions. A further notable exception is a

construction contract with a residential occupier. The provisions only apply where the

construction contract is in writing.

Section 108 sets out the minimum requirements for an adjudication procedure. These may be

summarised as follows:

http://www.opsi.gov.uk/ACTS/acts1996/ukpga_19960053_en_1

79

Notices: A party to a construction contract must have the right to give a notice at any time of

his intention to refer a particular dispute to the adjudicator.

Appointment: A method of securing the appointment of an adjudicator and furnishing him

with details of the dispute within seven days of the notice is mandatory.

Time scales: The adjudicator is then required to reach a decision within 28 days of this

referral. It will not be possible to agree in advance of any dispute that additional time may be

taken for the adjudication. There are only two exceptions to this rule. First the adjudicator

may extend the period of 28 days by a further 14 days if the party referring the dispute

consents. Second, a longer period can be agreed by consent of all the parties. Such

agreement can only be reached after the dispute has been referred

Act impartially: The adjudicator is required to act impartially.

Act inquisitorially: The Act requires that the adjudicator "takes the initiative in ascertaining

facts and the law". This gives the adjudicator power to investigate the issue in whatever

manner he or she deems appropriate given the short time scale available.

Binding nature: The decision of the adjudicator is binding until the dispute is finally

determined by legal proceedings, by arbitration or by agreement. The Act does, however, go

on to say that the parties may agree to accept the decision of the adjudicator as finally

determining the dispute.

Immunity: The adjudicator cannot be held liable for anything done or omitted in the

discharge of his function as an adjudicator unless acting in bad faith. This protection is

extended to any employee or agent of the adjudicator.

In addition to this basic procedural framework the Act further requires that any construction

contract complies with the provisions of the scheme for construction contracts.

What is Adjudication

Adjudication is a way of resolving disputes in construction contracts. Section

108 of the Act provides parties to construction contracts with a right to refer

disputes arising under the contract to adjudication. It sets out certain minimum procedural

requirements which enable either party to a dispute to refer the matter to an independent party

who is then required to make a decision within 28 days of the matter being referred.

If a construction contract does not comply with these requirements, a statutory default

scheme, called the Scheme for Construction Contracts (referred to in this document as the

‘Scheme’) will apply.

Adjudication does not necessarily achieve final settlement of a dispute because either of the

parties has the right to have the same dispute heard afresh in court (or where the contract

specifies arbitration, in arbitration proceedings).

Nevertheless, recent experience shows that the majority of adjudication decisions are accepted

by the parties as the final result. The legislation provides that adjudication can be used at any

time. For example, provided the parties have a contractual relationship it can be used to

decide contractual disputes with designers before construction begins; it can be used to

resolve contractual disputes with and between designers, contractors and subcontractors

during construction; and with or between them after completion.

Once a dispute has arisen between the parties either party may seek adjudication. The

adjudicator is selected within a week and must decide the dispute within a further four weeks

80

(subject to any agreed extension). Once the adjudicator has made his decision, the other party

must comply with it: if he does not, a court hearing to compel compliance can usually be

obtained in a matter of days.

Adjudication is thus very quick in comparison with other methods of dispute resolution such

as arbitration or litigation and it can also be used during the currency of a contract.

Adjudication can be a simple procedure, so in many cases there is no need to involve lawyers.

You can find more on the background and introduction of adjudication at

http://www.adjudication.gcal.ac.uk/. This research initiative includes a useful review.

Introduction to Arbitration

Definition

Arbitration is a procedure for the settlement of disputes, under which the parties agree to be

bound by the decision of an arbitrator whose decision is, in general, final and legally binding

on both parties. It is governed by both statute law and the common law. The principal

legislation in England and Wales are the Arbitration Acts 1950 - 1996 as amended. Different

provisions apply in Scotland and Northern Ireland.

As a dispute resolution procedure arbitration is the only means of dispute resolution which is

an alternative to litigation because an arbitrator's award is final, binding and enforceable

summarily in the courts.

Arbitrator

An arbitrator is independent and impartial and is selected by the parties or on their behalf (by

an Institute [e.g the Chartered Institute of Arbitrators]) on the basis of their arbitral/technical

expertise, reputation and experience in the field of activity from which the dispute stems.

Disputes

Almost any dispute which can be resolved by litigation in the courts can be settled by

arbitration, the exceptions being matters where crimes are involved or injunctions are required

(owing to the powers needed for enforcement) and other matters which may result in the

imposition of a fine or term of imprisonment and matrimonial matters such as divorce,

custody and so on. Furthermore an arbitrator's award is a private matter and cannot therefore,

be effective against anyone who is not party to the dispute. This means that arbitration cannot

be used in a dispute which necessarily involves parties outside the arbitration agreement, thus

an arbitration agreement cannot bind third parties.

Areas where arbitration has proved especially effective include: building and civil engineering

contracts, shipping, rent review clauses in commercial leases, partnership disputes, insurance,

manufacturing generally, computer applications, imports and exports, process industry,

general trading, commodities and the engineering industry.

http://www.adjudication.gcal.ac.uk/

81

Features of Arbitration

Privacy

In some cases the whole arbitration process will be considered private and confidential, but

there are differences of opinion in this respect.

Flexibility

The parties may control the manner of the proceedings having regard to the nature of the

dispute and to their precise needs. The parties indicate the degree of formality or informality

of the procedure, unless there are pre-ordained rules or the parties are uncertain as to the

procedure to adopt in which case the arbitrator will direct an appropriate procedure. There is

no need for arbitration procedures to follow those of the courts; the parties may choose

documents-only and expedited hearing procedures. However, it should be borne in mind that

in some instances the mandatory provisions of the 1996 Act will preclude any agreement of

the parties to the contrary.

Expertise

The parties or a 'nominating body' may appoint an arbitrator who is an expert in the matter

under dispute.

Costs

Arbitration may be less costly than litigation as the use of the expert as arbitrator can save

time on explanations of a technical nature. In addition, an arbitrator will normally be able to

attend the hearing at a location to suit the convenience of the parties.

The costs of an arbitration are primarily time-related and will depend upon the matters in

dispute, the procedure chosen by the parties and their choice of representative.

Finality

The award of the arbitrator is final and binding upon the parties. It may only be challenged in

the High Court on limited grounds:

1. Lack of substantive legislation;

2. Serious irregularity;

3. Error of law arising out of an award made in the proceedings (in this respect see the

Arbitration Act 1996 - sections 66 to 71.

Enforceability

The arbitrator's award is enforceable summarily in the courts. A court will treat the award as

if it were one of its own judgments.

ARBITRATION ACT 1996

You can find the legislation at:

http://www.opsi.gov.uk/ACTS/acts1996/ukpga_19960023_en_2#pt1-pb1-l1g1

Reports recommended against England, Wales and Northern Ireland adopting the

UNCITRAL Model Law on International Commercial Arbitration [see

http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration.html]. Instead, there was a

http://www.opsi.gov.uk/ACTS/acts1996/ukpga_19960023_en_2#pt1-pb1-l1g1

http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration.html

82

recommendation that there should be a new and improved Arbitration Act for England, Wales

and Northern Ireland, with the following features:

It should comprise a statement in statutory form of the more important principles in

English law of arbitration, statutory and (to the extent practicable) common law.

It should be limited to those principles whose existence and effect are uncontroversial.

It should be set out in a logical order, and expressed in language which is sufficiently clear

and free from technicalities to be readily comprehensible to the layman.

It should in general apply to domestic and international arbitrations alike, although there

may have to be exceptions to take account of treaty obligations.

It should not be limited to the subject-matter of the Model Law.

It should embody such of our proposals for legislation as have by then been enacted:

New Provisions Introduced by the Act

Part 1 of the Act attempts to restate the basic principles of our law of arbitration, as it relates

to arbitration arising from an agreement to adopt this form of dispute resolution.

Section 1 of the Act is unique in that it is an introductory clause setting out basic principles.

As such, it sets out the principles upon which that part of the Act is founded. It clearly

indicates that there are three principles that permeate through the Act, these are: arbitration is

to be a fair resolution of disputes without undue expense or delay (the object of arbitration),

party autonomy (reflecting the basis of the Model Law) and that the courts will play a

supportive role, rather than interventionist, in arbitration matters. This latter principle reflects

Article 5 of the Model Law, which provides that:

"In matters governed by this Law, no court shall intervene except where so provided

in this Law."

This latter principle is viewed as a most important inclusion in the Act since in the past, the

courts were quick to intervene in the arbitral process, thereby tending to frustrate the choice

the parties made to use arbitration rather than litigation. The result was that internationally,

and certainly amongst the American legal profession, the view taken was that arbitration in

London was to be avoided.

Section 3 of the Act sets forth a definition of the 'seat of arbitration', and also appears in

respect of the definition of 'domestic arbitration' in Section 85. The concept of 'seat ' as the

juridical seat of the arbitration is known to English law but may be unfamiliar to some users

of arbitration. The purpose of including this section was to make the Act more user friendly to

foreign users.

Section 5 indicates that the Act applies to arbitration agreements that are in writing. This has

always been a requirement, but the new Act now seeks to give a far wider definition to the

meaning 'in writing' then was previously the case. Indeed, the meaning is far wider than that

found in Article 7 of the Model Law, but is consonant with Article II.2 of the English text of

the New York Convention. In addition, this section takes cognisance of the fact that

technology is developing very rapidly.

Section 6 defines what is meant by an 'arbitration agreement'.

83

Section 7 of the Act includes an express provision to the effect that an arbitration clause is

separable from the main contract in which it exists.

Section 9 provides that a stay to legal proceedings can be sought in respect of a counterclaim

as well as a claim. The existing legislation could be said not to cover counterclaims, since it

required the party seeking a stay first to enter an 'appearance', which a defendant to

counterclaim could not do.

Section 12 amends the Court's powers in respect of granting extensions of time for

commencing arbitration proceedings. In accordance with the spirit of the Act, party autonomy

is given superiority and as a result it means that any power given to the Court to override the

bargain that the parties have made must be fully justified. The idea that the Court has some

general supervisory jurisdiction over arbitration has therefore been abandoned.

There are therefore three cases in which the Court can intervene and grant an extension of

time:

a. where the circumstances are such as were outside the reasonable contemplation of

the parties when they agreed the provision in question;

b. where the conduct of one of the parties has made it unjust to hold the other to the

time limit; and

c. where the respective bargaining position of the parties was such that it would again

be unfair to hold one of the parties to the time limit.

Section 24 deals with the power of the Court to remove an arbitrator. The old

wording of Section 23 of the 1950 Act and the reference to "misconduct" has been replaced

with wording that is largely compliant with Article 12 of the Model Law, which specifies that

a Court can remove an arbitrator where there are justifiable doubts as to his/her independence

and impartiality.

Section 25 sets out the consequences arising from an arbitrator's resignation. Generally an

arbitrator cannot unilaterally resign if this conflicts with the express or implied terms of his

engagement. However, in certain circumstances, an arbitrator may make application to Court

to be granted relief from incurring liability from his resignation. Usually the Court will have

the power to grant the arbitrator relief if, in all circumstances, the resignation was reasonable.

To this end, Section 33 of the Act is to be borne in mind. This section will be discussed

below.

Section 29 finally clarifies the law relating to the immunity of arbitrators. This section

therefore provides that arbitrators will be immune from suite unless the act or omission by

that arbitrator is shown to be in bad faith.

Section 30 makes provision for the competence of the tribunal to rule on its own jurisdiction.

This is traditionally called the doctrine of "Kompetenz-Kompetenz", which is an

internationally recognised doctrine and is set out in Article 16 of the Model Law. The value of

this doctrine is that it avoids delays and difficulties when a question is raised as to the

jurisdiction of the tribunal. Clearly the tribunal cannot be the final arbiter of a question of

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jurisdiction, but failure to include this power would result in a recalcitrant party completely

disrupting the arbitral proceedings.

Section 31 sets out how a challenge to the jurisdiction of the Tribunal can be made, and the

circumstances in which it must be made. This section reflects most of Article 16 of the Model

Law, with some small exceptions. This Section allows the tribunal to make an award as to its

own jurisdiction, either as an interim award or as part of its award on the merits. Section 67

provides the mechanism for challenging the jurisdiction rulings in such awards.

Section 33 sets out the general duties of the Tribunal, which is one of the central proposals of

the Act and based upon Article 18 of the Model Law. This is a mandatory provision. This

section sets out in the simplest of terms the manner in which the Tribunal should approach

and deal with its task, which is to do full justice to the parties.

Section 33 not only instructs the arbitrators to "act fairly and impartially as between the

parties", but it also compels them to "adopt procedures suitable to the circumstances of the

particular case, avoiding unnecessary delay or expense, so as to prove a fair means for the

resolution of the matters falling to be determined."

Section 35 provides that the parties may agree to consolidate their arbitration with other

arbitral proceedings or to hold concurrent hearings. As such this section protects the parties

autonomy.

Section 38 significantly redefines the relationship between arbitration and the Court.

Wherever a power could be properly exercised by a tribunal rather than the Court, provision

has been made to this effect, thereby reducing the need to incur the expense and

inconvenience of making application to Court during arbitral proceedings.

Section 41 (6) of the Act provides a sanction for failure to comply with the tribunal's order for

security for costs, whereby the tribunal can follow the practice of the English Commercial

Court. As a consequence, the tribunal is now empowered to make an award dismissing the

claim, should one of the parties fail to provide the security the tribunal orders. This ensures

that the matter is finally disposed with, not left dormant, which would be the natural result

should the proceedings be stayed.

Section 39 gives the tribunal, upon agreement by the parties, the power to make temporary or

provisional orders regulating financial arrangements between the parties, but which will be

subject to reversal when the underlying merits are finally decided by the tribunal. In the

absence of agreement, the tribunal is not so empowered. It is important to note that the

tribunal does not have extended powers to issue Mareva or Anton Piller relief. This is the sole

jurisdiction of the Courts.

Section 40 provides that the parties have a general duty to do all things necessary for the

proper and expeditious conduct of the arbitral proceedings. This is a mandatory provision.

Section 41 sets out the tribunals powers in case of a party's default. There are elements of the

present law that are maintained in this section (such as the power of the tribunal to strike out

for want of prosecution) however there is an expansion of the present law, since this section

does give the tribunal increases powers. So, for example, the tribunal now has the power to

proceed ex parte in the face of continued recalcitrance as stipulated.

85

Section 42 sets out that the Court has the power to order compliance with the tribunal's

peremptory orders as set out in Section 41. This section is subject to the parties agreeing

otherwise.

Section 44 redefines the relationship between the Courts and arbitration by virtue of the fact

that it sets out the powers that can be exercised by the Court in support of the arbitral

proceedings. This provision corresponds with Article 9 of the Model Law. The powers given

to the Court are only those necessary when the tribunal cannot act effectively.

Section 46 provides that the parties have the freedom to decide that the tribunal will make a

decision not in accordance with a recognised system of law but under "ex aequo et bono", that

is to say, generally recognised principles of fairness and justice. However the Act does not use

this Latin term. In agreeing to this term, the parties also exclude any right to appeal to the

Court.

Section 47 provides that the arbitral tribunal may make awards on different issues.

Section 49 provides that the arbitral tribunal has the power to award compound interest. The

Drafting Committee noted that the absence of such a power merely adds to the delays and

expense of arbitration and causes injustice.

Section 52 re-enacts Article 31 of the Model Law, which provides what form the award is to

take. This section therefore provides that awards must be reasoned unless both parties have

indicated otherwise. The remainder of the section is self explanatory.

Section 53 provides that any award made in the proceedings of an arbitration whose seat is in

England, Wales and Northern Ireland will be treated as having been made at that seat,

regardless of where it was signed, dispatched or delivered.

Section 57 provides that the tribunal has the power to correct an award.

Section 59 to 65 provides a code dealing with how the costs of an arbitration should be

attributed between the parties. The question of the right of the arbitrators to fees and expenses

is dealt with earlier in Section 28.

Section 59 starts off by defining costs.

Section 62 provides that unless the parties agree otherwise the right to claim costs extends

only to the recoverable costs.

Section 63 provides that the tribunal may determine the recoverable costs of the arbitration on

a basis it thinks fit. However, if the tribunal does not determine the recoverable costs of the

arbitration, a party may make application to the Court for it to decide upon the recoverable

costs of the tribunal.

Section 64 provides that only reasonable costs and expenses as are appropriate in the

circumstances are recoverable.

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Section 65 gives the tribunal a new power to limit in advance the amount of recoverable costs.

This could be used to reduce unnecessary expenditure. This also represents a facet of the duty

of the tribunal in Section 33. This will also discourage a financial giant from intimidating a

lesser opponent.

Section 66 sets out the powers of the Court in relation to arbitration awards.

Section 67 provides in what instances a party may seek to challenge an award based upon the

jurisdiction of the tribunal. This is a mandatory section. This section also provides a

mechanism for challenges to the jurisdiction by someone who has taken no part in the arbitral

proceedings. Finally, in order to avoid unnecessary delays, the tribunal is empowered to

continue with the arbitral proceedings in the face of a Court challenge to its jurisdiction.

Section 68 provides in what instances a party may seek to challenge an award based upon a

serious irregularity affecting the tribunal, the proceedings or the award. This section has

therefore replaced the old challenge on the grounds of misconduct.

Section 69 sets out the instances upon which an appeal on a point of law is allowed. .

Section 70 sets out the provisions that are to apply to an application or appeal under Section

67, 68 or 69. The time limit for lodging an application or appeal is 28 days of the date of the

award, or when the applicant was notified of the result of the process.

Section 72 sets out the savings for rights of persons who take no part in the proceedings.

Section 73 is also vital since it provides that recalcitrant parties or those who have had an

award made against them cannot seek to avoid honouring the award or delay proceedings by

raising points on jurisdiction etc. which they could and should have discovered and raised at

an earlier stage of the proceedings. Failure to raise the necessary objection at the time it

becomes apparent results in waiver of the right to object at a later stage. In this way, a

recalcitrant party cannot avoid the effects of a final and binding award that goes against them.

This reflects Article 4 of the Model Law. However the Drafting Committee have gone further,

and require a party to arbitration proceedings who has taken part, or continued to take part,

without raising the objection in due time, to show that at that stage he neither knew nor could

with reasonable diligence have discovered the grounds for his objection.

Section 74 is novel in that it provides that arbitral institutions are immune from suit in respect

of anything done or omitted in the discharge of their function unless the act or omission is

shown to have been in bad faith. Part II of the Act sets out the difference between domestic

arbitration agreements and international arbitration agreements. A differentiation is

maintained because the rules for obtaining a stay of legal proceedings differ. The New York

Convention applies to international arbitral awards, and domestic enforcement provisions

relate to domestic awards.

Part III of the Act re-enact the substance of the 1975 Arbitration Act which gave effect to the

New York Convention. As a consequence, the1975 Act has been repealed.

Part IV of the Act merely sets out the administrative elements to its enactment and

application.

87

Self-Appraisal Questions

1. Am I able to demonstrate that I can now meet the objectives set out at the start of this

section.

Looking at my responses to the text, can I :

2. detail the background to the introduction of construction adjudication in the UK via

Housing Grants Construction and Regeneration Act 1996

3. explain the process of construction adjudication in the UK via Housing Grants

Construction and Regeneration Act 1996

4. explain the process of arbitration in England and Wales via Arbitration Act 1996

88

Litigation and International Dispute [International Arbitration]

This section is concerned with the binding resolution offered by the court system in the UK

and how that is translated into International Arbitration in international scenarios.

Projects operate within legal frameworks and jurisdictions; this section describes the legal

frameworks under generic headings and also provides some analysis of the jurisdiction in

England and Wales. Many countries share similarities with law of England and Wales, but

many do not. It may be that the country in which you work/study/operate has a different legal

system or that a particular area of the law is different; you should always consider the effect

of jurisdiction.

Projects need not be bound by the law of the country in which they are physically situated or

the law of the countries from which the parties are drawn. Imagine the common situation:

An infrastructure project in an African country:

funded by the World Bank;

designed by engineers from Scotland (United Kingdom but NOT English law);

project management by an organisation from the USA;

procurement arranged by quantity surveyors from Australia;

construction management by an organisation from England;

sub-contractors from Holland, Malaysia and the African country;

subject to the law of England;

disputes to be dealt with a variety of procedures culminating in International

Arbitration in Switzerland.

It would be difficult, perhaps not impossible, to include in any course detail of all these

arrangements and all the jurisdictional issues; and it is not attempted here.

This module considers aspects of Conflict Management and Dispute Resolution under generic

headings it would be useful if you made reference to a textbook which supports the module:

Uff, J. (2002), Construction Law, 9th

Edition, Sweet and Maxwell.

This is a seminal text in the area and you should refer to it [sections 2 and 3]; multiple copies

have been made available in the library. None of the resources you are asked to study include

a detailed study of the law or project law; they attempt to describe how projects operate

within legal frameworks.

89

Module Aim

The module might be described via an overall aim and measurable objectives.

The module aim is

To consider the binding resolution offered by the court system in the UK and how that is

translated into International Arbitration in international scenarios.


1) To describe Litigation procedure in England and Wales.

a) Starting an action

b) Proving a case

c) Evidence

(1) Factual

(2) Opinion

d) Judgement or appeal

2) To describe International Arbitration

a) Lex Mercatoria

b) Delocalisation or Territoriality

90

Litigation procedure in England and Wales

Litigation procedure is governed by the Civil Procedure Rules 1998 (CPR)

Government site

http://www.justice.gov.uk/civil/procrules_fin/index.htm

Wiki

http://en.wikipedia.org/wiki/Civil_Procedure_Rules_1998#The_Overriding_Objective

The Civil Procedure Rules 1998 (CPR) are the rules of civil procedure used by the Court of

Appeal, High Court of Justice, and County Courts in civil cases in England and Wales. They

apply to all cases commenced after April 26, 1999, and largely replace the Rules of the

Supreme Court and the County Court Rules.

The CPR were designed to improve access to justice by making legal proceedings cheaper,

quicker, and easier to understand for non-lawyers. Unlike the previous rules of Civil

procedure, the CPR commence with a statement of their Overriding Objective, both to aid in

the application of specific provisions and to guide behaviour where no specific rule applies

These Rules are a new procedural code with the overriding objective of enabling the court to

deal with cases justly. Dealing with a case justly includes, so far as is practicable:

(a) ensuring that the parties are on an equal footing;

(b) saving expense;

(c) dealing with the case in ways which are proportionate –

(i) to the amount of money involved;

(ii) to the importance of the case;

(iii)to the complexity of the issues; and

(iv) to the financial position of each party;

Starting an action

The action is begun by the Claimant issuing and serving a claim form, historically this was

known as a writ. Before this the CPR provides that the Claimant must issue a letter before

action, an example can be found at:

http://www.justclaim.co.uk/index.php?page=lba

Following receipt of the claim form, the defendant must file a defence, or acknowledgment of

service; the defendant also has the right to file a counterclaim. If you like the defendant says

not only is your claim wrong [or I accept your claim but] I have suffered a loss and I am suing

you!

http://www.justice.gov.uk/civil/procrules_fin/index.htm

http://en.wikipedia.org/wiki/Civil_Procedure_Rules_1998#The_Overriding_Objective

http://www.justclaim.co.uk/index.php?page=lba

91

Proving a case

It is the Claimant’s job to prove the case alleged; the Defendant could simply deny and put the

Claimant to prove the case; this is a ‘high risk’ strategy and although not unheard of the

Defendant will normally produce evidence to deny the allegations. In Civil cases the proof

required is described as on the balance of probabilities [the American term is: the

preponderance of the evidence]

Wiki http://en.wikipedia.org/wiki/Burden_of_proof] in criminal proceedings the standard is

beyond a reasonable doubt in civil proceedings the standard is the balance of probabilities.

So in civil proceedings to prevail the party bringing the action merely has to demonstrate on

the evidence that they are right on the balance of probabilities i.e. 51 plays 49.

Two related, but very different, concepts must be differentiated.

Burden of proof

The party bringing the action, normally the Claimant, has the burden of proof. The Claimant

must prove his case; the defendant need do nothing. This is the burden of proof and the

maxim is: he who alleges must prove. There are occasions where the burden of proof shifts,

normally where there is a strict liability; but for our purposes the burden of proof lies with the

Claimant..

Standard of Proof

The party with the burden of proof must extinguish that burden to a certain degree; the

standard of proof. In commercial civil disputes that standard is the balance of probabilities.

Be aware that most non-lawyers are only aware of the criminal burden [beyond a reasonable

doubt].

Evidence

The Claimant proves his case by adducing evidence. We need to make a distinction between:

Evidence of fact and evidence of opinion

Evidence of fact and evidence of opinion

The general rule in England and Wales is that the only evidence which can be given is

evidence of fact; that is a witness can give evidence of those things experienced by the

traditional five senses: sight, hearing, touch, smell, taste [wiki

http://en.wikipedia.org/wiki/Sense] . Thus a witness can say I saw the drawings. The witness

cannot say the drawings were good [or bad] because that would be an opinion. However the

law recognises that judges [and arbitrators] are not polymaths; and they require help on

specialist issues; in such cases expert evidence may be permitted [wiki

http://en.wikipedia.org/wiki/Expert_evidence].

The procedure at trial or arbitration

http://en.wikipedia.org/wiki/Burden_of_proof

http://en.wikipedia.org/wiki/Expert_evidence

92

The general procedure is shown below; although that modern procedure is flexible and

alteration may be made.

• Claimant opens

– Claimant calls evidence [fact before opinion]

• Respondent cross examines

• Respondent opens

– Respondent calls evidence [fact before opinion]

• Claimant cross examines

• Respondent closes

• Claimant closes

• Judge or arbitrator considers

• Judge or arbitrator determines [judge judgement, arbitrator award]

• Enforcement or appeal

93

International Arbitration

– Lex Mercatoria

– Delocalisation or Territoriality

International Arbitration is selected by many of the world's leading international companies;

they insert an arbitration clause into their agreements with trading partners, and opt to have

disputes in connection with the contract decided by private tribunals ('arbitral tribunals') rather

than litigating them in national courts.

The most common reasons for opting for arbitration are:

that arbitration awards (broadly equivalent to a court judgment) are easier to enforce

internationally and cannot so easily be dragged to appeal for years;

that neither party is willing to have disputes decided by the other party's national

courts;

that the parties are keen to have their disputes resolved privately.

International arbitration allows parties to have their disputes decided by a neutral tribunal,

which can be made up of legal and/or industry experts of the parties' own choosing, using

procedures which they can influence. The normal procedure is for the tribunal to be

composed of three arbitrators. One from each party and one neutral umpire.

http://www.hoganlovells.com/PracticeAreas/areas_resources.aspx?op=&firmService=351

wiki http://en.wikipedia.org/wiki/International_arbitration

Lex Mercatoria

Literally the Law Merchant; some argue that international disputes should not be subject to

any national law but to international concepts of commercial law. These concepts are

collectively known as Lex Mercatoria

Wiki: http://en.wikipedia.org/wiki/Law_Merchant

Delocalisation or Territoriality

The proponents of delocalisation argue that international commercial arbitration should be

completely independent of any form of state control, except perhaps at award enforcement.

The courts are not to become involved in any way with the arbitration. The delocalisationists

have not found widespread acceptance.

The proponents of territoriality [the generally accepted view] argue that arbitration cannot be

conducted in a vacuum and some things cannot be left to the parties:

Appointment of the tribunal [e.g. when the parties cannot agree];

Removal of an arbitrator [e.g. for bias or other misconduct]

Provide assistance [e.g. enforcing attendance of witness]

Establish if an award is valid and final

http://www.hoganlovells.com/PracticeAreas/areas_resources.aspx?op=&firmService=351

http://en.wikipedia.org/wiki/International_arbitration

http://en.wikipedia.org/wiki/Law_Merchant

94

The use of international commercial arbitration

International commercial arbitration is a complex and important topic, you can find more

details in a PriceWaterHouseCooper report: International Arbitration: Corporate Attitudes and

Practices 2008 at: http://www.pwc.co.uk/eng/publications/international_arbitration_2008.html

http://www.pwc.co.uk/eng/publications/international_arbitration_2008.html

95

6. CONCLUSION

There has been a change in society’s attitude to dispute resolution; not least that there has

been a shift from confrontation to problem-solving. ADR techniques, and in particular

facilitative mediation, provide the parties, their advisors and the specialist in dispute

resolution with a portfolio of approaches to use where appropriate. At the same time

commerce and industry is seeing a move from the old transactional approach to business;

where one party sells a good or service to the other, towards a relationship approach. The

current fashion is one for long term relationships and so called win-win approaches. Critics

would say that business and commerce cannot be win-win; by their very nature there will be

winners and losers. Perhaps they are both right and what is required is win-not lose or

winners and not losers? ADR again offers all the actors the opportunity to use a toolbox of

techniques when appropriate. The ADR zealots would have us believe that ADR offers a

panacea; the truth is nothing of the sort but ADR does offer alternatives. Using all the

definitions quoted earlier ADR offers alternatives when appropriate to forge amicable

solutions.

ADR is not the cause but a product of significant changes in society, it is the beneficiary of

the trend towards problem-solving and away from confrontation. There is widespread

evidence that disputants prefer ADR processes and the opportunity for significant

participation. Phillips (1997) provides compelling empirical evidence of the benefits ADR

brought to the USA construction industry to back up the commonplace anecdote.

The benefits of ADR are:

Business relationships are preserved in constructive negotiation as opposed to

adversarial battles;

Disputes are resolved much quicker, days rather than months;

Cost and Time savings can be made;

Confidentiality is preserved;

More and better options for settlement are developed;

Management time is better used;

The procedures are flexible and the parties retain control.

96

REFERENCES AND BIBLIOGRAPHY

Note: There are many excellent books on this subject, Brown and Marriot give a

comprehensive treatment while Mackie provides an excellent synopsis. Fisher, Ury, and

Patton, is perhaps the best overall book for the workbook and the most readable.

Bibliography

Burton, J. W. (1993) Conflict Resolution as a Political Philosophy. In: Conflict Resolution

Theory and Practice: Integration and Application (eds H. van der Merwe, D. J. D. Sandole),

Manchester University Press

Brown, H and Marriot A., (1994) ADR Principles and Practice, Sweet and Maxwell, London.

De Bono, E. (1985) Conflicts, Penguin

Dispute Resolution Guidance Office of Government Commerce at


Fenn, P and Gameson, R (Eds) (1992), Construction Conflict: Management and Resolution,

Chapman Hall, London.

Fenn, P. O'Shea, M. and Speck, C. (1995) “Scientific Witness of Opinion (Expert Witness) in

Civil Litigation” in Nature, Vol 378 No 6558.)

Fisher, R., Ury, W. and Patton, B. (1991) Getting to Yes: Negotiating an Agreement without

Giving In, Second Edition, Century Business, London.

Gould, Capper, Dixon and Cohen, (1999) Dispute Resolution in the Construction Industry,

Thomas Telford, London.

Kendall, J Dispute Resolution: Expert Determination (2nd

Ed., 1996)

Mackie, K,. (1989), ADR Route map, CEDR, London

Mackie, K. Miles, D. & Marsh, W. (1995) Commercial Dispute Resolution, Butterworths,

London.

McGaw, M. (1991) “Adjudicators, Experts and Keeping out of Court”, in Current

Developments in Construction Law, Fifth annual conference the Centre of Construction Law

and Management, Kings College, London.

Martin, J. (1999), 'KPIs: key opportunities for chartered surveyors', CSM, September 1999.

Phillips, B. (1997), “Mediation Did We Get It Wrong”, Williamette Law Review, 13, 33,

USA.

Sanchez, V. (1996), “Towards a History of ADR: The Dispute Processing Continuum in

Anglo Saxon England and Today”, The Ohio State Journal on Dispute Resolution, 11 1996 1,

p1-39.

Wall, C (1992), The Dispute Resolution Adviser in the Construction Industry in Fenn, P and

Gameson, R (Eds) (1992), Construction Conflict: Management and Resolution, Chapman

Hall, London.


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