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The Cart before the Horse

Date: November 10, 2012 Posted by Comments Off on The Cart before the Horse

Putting the cart before the horse – not so daft after all!

At an opening session of a mediation a few weeks ago, one side presented the other with two pieces of paper – settlement option one and settlement option two. What is this heresy, I thought! No argy bargy? No explanation of why complete victory was a dead cert? Just the deal. In fact a pair of deals. As mad as a box of frogs, I thought. But I was wrong. The settlement options anticipated a continuing relationship and were received, by and large, as well balanced. All except the number of course! But in a quantitative sense, because any settlement would, given the nature of the dispute and anticipated on-going relationship, inevitably be multi-faceted and complicated, we were 90% there. This meant that discussion about the all-important remaining 10% (the number), could be much more focused and positive than otherwise might have been the case.

Sometimes it can make sense to share a draft settlement agreement early on. If the parties are not that far apart on the bulk of the terms, discussion about the rest of the deal will be conducted in a much more forward looking frame of mind.

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Gordon Ramsay’s Family Feud

Date: November 8, 2012 Posted by Comments Off on Gordon Ramsay’s Family Feud

Jon Lang, The Times Online, 26 May 2011.

Relatives in dispute over their family firm can find innovative and workable solutions without going to court

The feud between Gordon Ramsay and his wife’s family took another unlikely twist this month when his mother-in-law, brother-in-law and nephew all announced their intention to sue him at an employment tribunal for wrongful dismissal. Strip away the celebrity varnish and Gordon Ramsay Holdings is merely going through what scores of family businesses go through each year: a collapse into a heap of mutual recriminations.

It is often said that commercial disputes are always about money, but never only about money. There is always something else going on, causing the parties to take the absolute and extreme (and inconsistent) positions they have. And this is no more so than when tensions arise in family businesses. It seems that the closer the relationship between parties, the greater the level of trust and attachment, the more extreme the behaviour when things go wrong. There is also a desire to punish, and to use the courts to do so to the exclusion of any alternative.

A recent report by Pricewaterhouse Coopers (PwC) based on its Family Business Survey 2010/2011 looks at how family businesses are dealing with the economic downturn and its challenges. It found that the “percentage of family firms experiencing tension has increased significantly during the past three years”. Arguments within family businesses are on the increase yet, as PwC report, fewer than a third of all businesses surveyed have any procedures for dealing with disputes between family members.

Which family members are permitted to work in the business is one source of friction – there may be agreements going back generations imposing restrictions. Other triggers include performance issues, information dissemination and, importantly, division of profits between salary/bonuses for those family shareholders employed in the business on the one hand, and the payment of dividends (i.e. proprietorial reward) to all shareholders, (including those not employed in the business), on the other. If working family members pay themselves huge bonuses, there isn’t going to be much left for distribution by way of dividends!

Family business disputes, if not brought under control, will often end up before the courts as minority shareholder actions. Those with a minority stake will argue that they have been treated unfairly by those controlling the company, and ultimately the court will have to decide who buys who out, and on what terms. What makes these types of disputes so damaging is that the business must continue to run while its owners are at war. Sometimes there is such bad feeling that the alleged “oppressed” minority shareholders (whose source of complaint may go back generations), decide that the only way of getting the attention of those in control of the business (and who arguably have more to lose) is to adopt something of a scorched earth strategy.

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The Carrot Beats The Stick

Date: November 8, 2012 Posted by Comments Off on The Carrot Beats The Stick

Published in The Lawyer Magazine 16th April 2012.

The tale of two beers and a litigation-busting libation….

The Government has recently decided to introduce automatic referral to a mediator of all claims below the current small claims limit of £5,000. One could be mistaken for thinking that this is the thin end of the wedge towards compulsory mediation, but the Government has made clear that this is not the case. This is welcome clarification. Where there is compulsory mediation, numbers rise, but that is about the only positive. Settlement rates and respect for the process usually decline. People don’t like being forced down a path other than one they have chosen, particularly at the outset of a dispute when they can be more resolute than ever. Take that old lawyer joke. A new client waiting in the reception area of ‘Bastard, Bastard and Smith solicitors’. When told that Mr Smith was ready to see him, the client replies ‘Oh, I was hoping to see one of the Bastards’.

The Government has also proposed a review of the effectiveness of mediation information. This is also welcome. For there is no shortage of information itself. It’s just a bit one dimensional – ‘go mediation – it’s less bad than court’. Parties should see mediation as a business process that can avoid long, drawn out and expensive negotiation (not just litigation). More importantly, they should see mediation as a way of maximising their chances of settlement once they decide to try and resolve matters.

If the Government’s aim is to keep more cases out of court, they should think about all those that don’t mediate but go on to trial because negotiations have failed. Take the case decided last year between two breweries, Samuel Smith and Cropton Brewery. It was noted by the judge that despite two (obviously unsuccessful) without prejudice meetings, the case should have been referred to mediation. He clearly recognised that many cases will not settle in negotiation, but will at mediation. Mediation is so much more than simply turbo-charged negotiation.

Whatever might have been in the Samuel Smith case, what we do know is that negotiation is an inherently adversarial process, with many pitfalls. A smirk too far, an insult too cutting and there they go, it’s a walk out! A stroppy without prejudice letter invites a similar response, with complete polarisation the result. Negotiation can also be an open-ended, time consuming and costs-guzzling process, often lacking that intensity of focus that mediation offers. At mediation, proposals can be analysed and dealt with in half an hour, not days or weeks. Parties’ interactions can be managed so as to help not hinder, and traction built and maintained until the job is finished.

Of course, not all parties need mediation. Avery Brewing and Russian River Brewing each developed a Belgian style beer but both called it Salvation.  Did they slug it out?  No, they decided to blend the beers and called the result …. ‘Collaboration, not Litigation Ale’ of course.  Not a name that roles off the tongue, particularly after a few, but one that captures the genesis of a no doubt fine beer.

This is the kind of story that makes a mediator go weak at the knees, even though these parties didn’t need one. However, plenty of parties do, and if negotiations are likely to prove rocky, protracted, expensive or inconclusive, why not streamline the process and increase the prospects of settlement by enlisting the help of a settlement professional? It makes sense, but it must also remain the parties’ choice!

Jon Lang is a full-time independent commercial mediator and immediate past chairman of the Mediation Committee of the International Bar Association.

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Selling Outcomes at Mediation

Date: November 7, 2012 Posted by Comments Off on Selling Outcomes at Mediation

Negotiation is all about selling outcomes.  Shorn of its trimmings, it is a process whereby one party tries to get the other to accept the terms they last tabled. There is a real art to this.

Sometimes, after moving further than they think justified, parties will dig in, however small the gap.  This happened at a recent mediation.  But then one side decided to play one last card. They amended their unseen draft settlement agreement.  They shrunk it.  Out went the boilerplates.  They also ‘balanced’ it by removing anything that could be seen as controversial by the other side.  To draft neutrally is pretty difficult.  But they managed it.  They then added their final number that had earlier been rejected.  I was asked to pass the draft to the other side who now faced a dilemma.  They had no issue with the drafting.  In fact, they positively liked some of it, but they were left with a number they had earlier rejected.  The choice was to either reject it again and have nothing tangible to show for the day, or sign a perfectly acceptable document and be out the door in no more than 5 minutes with a settlement not too far off their last settlement proposal.  They took the latter path.  One side sold their desired outcome by keeping things simple and balanced (all except the number!).

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Ethics in Mediation – the CIArb’s Mediation Symposium

Date: October 8, 2012 Posted by Comments Off on Ethics in Mediation – the CIArb’s Mediation Symposium

Ethics in mediation was the subject of a lively debate at the CIArb’s Mediation Symposium which took place on 25 October 2012.  On the ethics panel, chaired by Stephen Tester of CMS Cameron Mckenna, was Patrick Farrell of Norton Rose and Jon Lang.  The discussion opened with Jon talking about how repeat work (which most professionals, including mediators, dream of) can sometimes turn into something of a nightmare.

Mediators are used on a repeat basis as a way of reducing uncertainty in an inherently uncertain process.  But take this scenario….. ‘It’s Monday morning.  A big day for two businesses.  They have been slogging it out in the courts but have agreed to mediate.  Both parties have arrived early.  They have acknowledged one another and embarked on some small talk but are now in their ‘corners’ of the reception area of one side’s law firm (the home team).’……..click here to read the paper Jon prepared for the Symposium, from which there is a link to a transcript of the panel discussion.

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Ethics in Mediation | Repeat Work

Date: October 6, 2012 Posted by Comments Off on Ethics in Mediation | Repeat Work

Prologue

It’s Monday morning. A big day for two businesses. They have been slogging it out in the courts but have agreed to mediate. Both parties have arrived early. They have acknowledged one another and embarked on some small talk but are now in their ‘corners’ of the reception area of one side’s law firm (the home team). The other side (the away team) have been reassured by their lawyers that these days, no one feels it necessary to select a neutral venue. Its all about who has capacity, the best in-house catering and administrative support. The away team is shortly joined by its lawyers. The home team is waiting for their lawyers to descend from their offices and show them and everyone else into their respective rooms. The home team are a bit more relaxed – they have been round the block on mediation before. The away team hasn’t, although their lawyers have done a good job in telling them what to expect.

The mediator walks in. He introduces himself to the first group he comes to – the away team. They tell him the other side are here and nod towards them. The mediator walks over. “Morning Mr Mediator, nice to see you again. Hope this one doesn’t go through the night like the last one! Ho Ho Ho!” The mediator doesn’t need to look at the expressions on the faces of the away team. He knows this is a bad start. He knows there are going to be awkward questions asked of the away team’s lawyers as soon as they enter the privacy of their own party room. He knows he has work to do!

Repeat work

Solicitors like to use mediators on a repeat basis because they see it as an advantage, not in a partisan sense, but as a way of reducing uncertainty in an inherently uncertain process. The risk that a mediation fails simply because the process has not been managed properly can be reduced. If they can appoint a mediator who they know can run the process effectively, who can work well with a wide range of parties and who achieves settlements more often than not, they are off to a good start. And of course mediators, like all other professionals, love (and dream of) repeat work because it is the true acid test of success. But is there a point at which the ‘repeat’ relationship, be it between mediator/lawyer, mediator/law firm or mediator/party could become more of a nightmare than a dream, unless disclosed during the appointment process?

What do we see in other fields of dispute resolution?

Arbitrators

In the arbitration field, it is generally accepted that when the relationship between a party or law firm crosses a certain line, disclosure should be made. Take the IBA’s traffic light system. At paragraph 3 of Part II of the IBA Guidelines on Conflicts of Interest in International Arbitration (2004), it is said

The Orange List is a non-exhaustive enumeration of specific situations which (depending on the facts of a given case) in the eyes of the parties may give rise to justifiable doubts as to the arbitrator’s impartiality or independence. The Orange List thus reflects situations that would fall under General Standard 3(a), so that the arbitrator has a duty to disclose such situations. In all these situations, the parties are deemed to have accepted the arbitrator if, after disclosure, no timely objection is made. (General Standard 4(a)).

One of the many situations described in the Orange list is:

The arbitrator has within the past three years been appointed as arbitrator on two or more occasions by one of the parties or an affiliate of one of the parties.

 Another is:

The arbitrator’s law firm is currently rendering services to one of the parties or to an affiliate of one of the parties ……[without creating a significant commercial relationship and without the involvement of the arbitrator.]

Thus in these and many other situations, it is suggested by the IBA guidelines that arbitrators have a duty to disclose.

Judges and recusal

The fact that a judge has found against a party on a previous occasion does not of itself substantiate an objection to the judge sitting in a subsequent matter, even if the judge had been critical of that party in the earlier case, although if there is any room for doubt, (as to whether the judge could be bias and unable to apply an objective mind to the later case), that doubt should be resolved in favour of recusal. (Drury v BBC [2007] All ER).

The reason why doubt should be resolved in favour of recusal is probably two-fold.

First, there is the issue of appearance or apparent bias, nicely illustrated by the Pinochet case, where it was said that links between Lord Hoffmann and Amnesty International were such as to give the appearance that he might have been biased against Pinochet. Lord Browne-Wilkinson, in dealing with the question of apparent bias, referred to the famous words of Lord Hewart in Rex v. Sussex Justices, Ex parte McCarthy [1924] K.B. 256, 259), ‘Justice should not only be done, but should manifestly and undoubtedly be seen to be done’.  

Secondly, self-respecting dispute resolution professionals do not generally believe, (absent extreme circumstances), that they could be capable of bias. But as Lord Goff in R v Gough [1993] UKHL 1 (20 May 1993) commented, ‘bias is such an insidious thing that, even though a person may in good faith believe that he was acting impartially, his mind may unconsciously be affected by bias…’. (R v Gough was referred to extensively in Judge Humphrey Lloyd QC’s decision in Glencot Development and Design v Ben Barrett & Son [2001] All ER (D) 384 (Feb), a case about an adjudicator acting as a mediator during the adjudication proceedings and which was the subject of an article by the writer entitled ‘Med-Arb – an English Perspective’.1)

As for mediators….

We would all agree that judges or arbitrators, making as they do decisions which permanently affect people’s rights, must be ever conscious of the appearance of bias and take steps to head off any potential problems once an award or judgment is made or given. They disclose or recuse themselves.

But mediators don’t make decisions. They help parties arrive at their own settlements. They do so in an environment characterised by secret meetings using techniques and strategies far removed from the procedures and processes that categorise judicial or quasi-judicial proceedings. Parties do not know what the mediator is up to for much of the time. So is there any point in worrying about such matters as appearance of bias, neutrality, impartiality etc, when for much of the time the mediator is locked in a room with one party to the exclusion of the other, having secret discussions? Who knows how a mediator may be influenced, consciously or sub-consciously, by what he hears about how badly the bunch in the other room have behaved, allegations that that other bunch are unlikely to even hear made, let alone have a chance of addressing?

But it is precisely because mediators work in such an environment, an environment where, unlike judicial or quasi-judicial proceedings, mediator behaviour cannot be viewed or measured because no one sees it in its entirety, that they must function to the highest ethical standards (and be trusted by the parties without any shadow of a doubt).

The problem is, whilst all mediators would agree that they should subscribe to the highest ethical standards, no-one knows what that means, and from the albeit limited research the writer has carried out for the purposes of this Mediation Symposium, there is certainly no common view (among mediators at least) as to the issue of repeat work and disclosure. But given the fragmented nature of the mediation market, that should not be too surprising!

Ethics

Typically professional ethics are encapsulated in a set of standards adopted by a professional community, usually in the form of a code of conduct. Whilst not always black and white, they provide the boundaries within which professionals should function. Whilst mediators have no universal code, there is a high degree of similarity between the various codes that do exist. Some that the writer has looked at seem to draw a distinction between acting again as a neutral for a party (generally ok) and acting in some other capacity e.g. advisor, (usually not ok). Generally, they do not require disclosure of repeat instructions (as the IBA traffic-light system does), although all codes require the mediator to act fairly, etc. For instance, IMI’s Code of Conduct provides that ‘Mediators will not accept an appointment without first disclosing anything within their knowledge that may, or may be seen to,

materially affect their independence neutrality or impartiality.’ In the case of the CIArb, paragraph 6.2 of the ‘Practice Guideline 4:Mediation Rules’ provides ‘If, following appointment, a mediator becomes aware of any circumstances that may create a reasonable perception of bias, partiality or lack of neutrality, the mediator shall immediately so inform the parties and, where the mediator was appointed by the Institute, shall also immediately so inform the Institute. If any party objects to the continued services of the mediator, the mediator shall be disqualified.’ This generally reflects the CIArb Code of Conduct, in particular Rule 3 (conflicts of interest), which states ‘Both before and throughout the dispute resolution process, a member shall disclose all interests, relationships and matters likely to affect the member’s independenceor impartiality or which might reasonably be perceived as likely to do so’.

So, as things stand, it looks like it is left up to the mediator to exercise their judgement as to whether past involvement with one side or the other is a matter that ‘may create a reasonable perception of bias, partiality or lack of neutrality….’ But as Lord Goff in R v Gough [1993] UKHL 1 (20 May 1993) commented, ‘bias is such an insidious thing…’ should it really be left up to the mediator to decide if there is a risk of them being seen to be bias, or should there be a rule that requires disclosure of any past involvement with one of the parties or their advisors, regardless?

What do mediators think? Colleagues I have spoken to have taken differing approaches. Some disclose past involvement, some don’t unless specifically asked. Generally, past involvement with a party is regarded as requiring more thought than past involvement with a lawyer or law firm, particularly where the repeat underlying client is a small economic entity as opposed to a large corporation. But there are varying approaches! (Of course, permission is required from the party concerned before any disclosure of past involvement can be made).

As for lawyers I have spoken to, they all say broadly the same thing – mediating for the same law firm or underlying client should not be an issue, but could easily become an issue, rightly or wrongly, if not disclosed up front (or at least the opportunity for questions to be asked afforded). For this reason, it is the practice among many solicitors, that when proposing mediators they say, if it be the case, that those mediators proposed are known to them or that they have used them in the past. It is then up to the other side to ask questions. Despite this practice, most solicitors agree that it is implicit, when they propose a mediator, that they have some pre-existing knowledge of them.

Disclosure (of what)?

If there were to be a rule similar to the IBA traffic-light system requiring disclosure based on past involvement with a party or advisor, regardless of whether there was a risk of any bias, lack of neutrality etc, what would be caught?

Should a mediator, for instance, be required to disclose:

a:that he has been appointed by the same lawyer on one (or two, or five) or more occasions in the past one (or two, or five) years

b:that he has been appointed by the same law firm on one (or two, or five) or more occasions in the past one (or two, or five) years

c:that he has been appointed by the same lawyer on behalf of the same client on one (or two, or five) or more occasions in the past one (or two, or five) years

d:that he has been appointed by the same law firm on behalf of the same client on one (or two, or five) or more occasions in the past one (or two, or five) years

Other possible areas that might give rise to considerations of disclosure are where the mediator:

e:was a former partner of one of the law firms involved

f:that he is a member of a chambers which receives a large amount of work from one of the law firms involved

g:has recently run a course for one of the law firms involved on effective representation of clients at mediation (with tips on how to get the best out of the mediator and process)

h:has had a pre-mediation meeting with one side, as opposed to a telephone conversation, in the run up to the mediation

In practice

The reality is that most of the time, any issues of concern will have been brought to the surface during the appointment process. The writer has certainly seen correspondence between solicitors asking very specific questions about the number of mediations, if any, conducted by him in the past for an underlying client. But in the absence of such information being disclosed by others during the appointment process, is it simply a matter of caveat emptor, or should the mediator have a duty to disclose past involvement with a lawyer, law firm or party (or cause a disclosure to be made by the law firm or party), regardless of any concern on the mediator’s part as to his ability (or perceived ability) to act properly.

Mediators should of course ask themselves on every potential appointment whether there is anything that needs to disclosed. In the absence of a universal code or other yardstick against which to consider that question though, it is always going to be a matter of individual choice. However, what should perhaps be borne in mind is that the solicitors the writer has spoken to, whilst acknowledging that having acted previously as a mediator for one of the lawyers, law firm or party, should not be an issue, they all agree it could become an issue and put the process at risk if not disclosed, precisely the situation the solicitor proposing his tried and tested mediator was trying to avoid!

So, some observations.

Mediators must be trusted. They have a limited amount of time in which to build trust. In the example above, the mediator might have done ten mediations for the home team, or one. It wouldn’t matter – the away team would be left a little uncomfortable. Would they believe, for instance, that the mediator might not push the home team so hard on reality testing, or not take the time to fully understand and properly articulate their (the away team’s) position on a particular point, for fear of upsetting the home team and putting at risk the economic benefit of further repeat work? Probably not. That may be a little extreme. But would they be left feeling uneasy? Probably yes, and the mediator would have plenty to do to make up lost ground. He could do it, but why run the risk of doing anything that may compromise the success of the mediation?

As already mentioned a few times now, solicitors like to retain mediators they have worked with in the past to increase the chances of settlement (reducing uncertainty that an unknown mediator might bring to the process). If non-disclosure in fact reduces the chances of settlement, because that which was not disclosed becomes known at some point during the mediation and causes, at worst, mistrust and at best unease, no-one is going to be happy. And the position can in fact get a lot worse if disclosure is not made. Again, take the example above. The mediator walks over to the home team. They are discreet. They do not acknowledge they have met the mediator before. The mediator does the same. He may only have a vague recollection anyway. Later, the away team finds out the mediator and home team have met before! A throw away remark perhaps at a small joint meeting between the two lead negotiators that the mediator is chairing. It might appear in these circumstances that the mediator and home team have conspired in some charade!

Closing thoughts

Prior involvement of a mediator with one of the appointing lawyers or law firm is to be expected.  It is perhaps implicit in a mediator’s nomination and is often expressly mentioned.  Prior involvement with an underlying party is perhaps not so expected (but of course happens).  But does that really mean that mediators should routinely check and ensure that the ‘right’ disclosures have been made?  Is it not permissible for mediators to assume that those considering appointing them ask of each other questions on matters that might be of importance to them or their client?  In many cases, parties will not care at all whether a mediator has been appointed by their opponent before.  Indeed, in specialist areas, often that is not just the expectation, but the attraction!  (Of course, in matters where a mediator perceives there to be a true conflict, assumptions are not good enough.  But we are talking about matters of impression here, not true conflicts).  However, in some cases, past involvement with a mediator might be significant and, if not disclosed but later revealed, could upset the process.  In those cases, a mediator might, before the day of mediation, think about discussing the issue with the solicitors representing the party with whom there has been prior involvement and, where it is felt appropriate and consent is given, to disclose that involvement to the other party.

 

1.http://www.jonlang.com/pdf/Article%20-%20Mediation%20Arbitrationl.pdf

 

This paper was presented at CIArb’s Mediation Symposium which took place on 25 October 2012.  On the ethics panel, chaired by Stephen Tester of CMS Cameron Mckenna, was Patrick Farrell of Norton Rose and Jon Lang.  The discussion opened with Jon talking about how repeat work (which most professionals, including mediators, dream of) can sometimes turn into something of a nightmare.

A full transcript of the event can be seen here