Andrew Miller QC is QC mediator with over 25 years of experience of dealing with and resolving commercial disputes. He mediates in a wide range of commercial sectors both domestically and internationally and has been involved in mediation since 1996. Andrew is head of the ADR practice group at 2 Temple Gardens.

Sulman Iqbal is a junior barrister at 2 Temple Gardens who specialises in commercial work and whose practice includes international cross border disputes.

Cross border disputes are invariably complex, multifaceted and multi-layered. By their very nature they will inevitably involve individuals or organisations based in different countries using different legal jurisdictions. These international disputes present the parties and those acting on their behalf with an array of complex legal and procedural issues, which are often overlain with equally significant cultural issues. As such arbitration has usually been seen as the appropriate means of dispute resolution, with mediation taking more of a back seat.

The Choice of Dispute Resolution Forum

Arbitration is a well-established form of ADR in the context of cross border disputes, with bespoke centres adopting institutional procedural rules located globally and laws designed to respect the finality and enforceability of arbitral awards. However, increasingly arbitration has become a more expensive and cumbersome method of dispute resolution. An “International Arbitration Survey” conducted by White and Case and Queen Mary University in 2015 found that whilst there was a general increase in the number of cases referred to international arbitration, there was dissatisfaction with several key aspects of the process.

In respect of improvements to the arbitral process many of those surveyed whilst continuing have strong support for certain fundamental characteristics of arbitration called for improvements and innovations to address issues concerning, most of all, the cost and speed of arbitrating. High cost was ranked as the worst characteristic of international arbitration. Concern was also expressed over the reluctance by many tribunals to act decisively in certain situations, which ultimately led to delay, and therefore greater cost. The survey showed that whilst there was strong support for many of the characteristics of arbitration there was concern over the nature of a process that failed to incentivise efficiency by those in control of the process, namely the lawyers and arbitrators.

Mediation in cross border disputes – the obvious choice

Mediation presents an increasingly attractive alternative to arbitration as a form of ADR in cross border disputes. Mediation has the potential to resolve issues efficiently and at substantially lower costs. The introduction of the Cross Border Mediation Directive 2008/52/EC has helped to solidify mediation’s status as a method of resolving international disputes. Given the attitudes of those involved in the arbitral process and the rise of the awareness of mediation in general, there are several reasons to think that mediation will play a bigger role in cross border disputes in the future.

Firstly, the purpose of mediation is to bring parties together on issues and to resolve them by consent. A focus on narrowing issues generally helps to reduce the time and associated expense of litigation or arbitration. The latest report by CEDR on mediations within England and Wales suggests that in 2016 the commercial mediation profession saved business £2.8 billion in “wasted management time, damaged relationships, lost productivity and legal fees.” (The Seventh Mediation Audit – 2016). Second, the non–adversarial nature of mediation makes it highly flexible, which is particularly suited to cross border disputes which by its nature often involve parties from different customs and varied perspectives. Finally, significant developments have been made following the Cross-Border Mediation Directive 2008/52/EC in disputes involving a party domiciled in a Member State. In particular, Article 6 addresses enforceability, Article 7 ensures confidentiality and Article 8 prevents parties being prejudiced by limitation periods in choosing to mediate.

Therefore, the prospects of cross border mediation playing a big part in international dispute resolution look increasingly bright. The effect of Brexit on international mediation remains to be seen.

What is holding back the use of mediation in cross border disputes?

Given the above, mediation should therefore be ascendant as a method of ADR in cross border disputes. However, as cited in the International Arbitration Survey some attitudes within the legal profession threaten to hold back the progress of cross border mediation.

A recent study of the effectiveness of the Cross Border Mediation Directive, by the European Commission, showed some positive results. For example in Denmark, it was reported that 65-75% of mediation cases concluded with an agreement. However, the study also found that generally there was a low rate in the use of mediation. For example in Germany in 2010 there were 40-50,000 mediations out of 1,586,652 judicial proceedings.

What is the reason for the relatively low uptake in mediation? The study suggests that key factors include a lack of information, variations in the quality of mediation and the relatively recent transposition of the Directive in some countries. However, the key problem with uptake was found to be by reason of the widespread dispute management procedures in various jurisdictions which followed an adversarial approach as opposed to the compromise approach. The compromise approach of course characterises mediation. The reluctance to move from the adversarial approach, where matters are dealt with by adjudication and a final determination, to a compromise approach where matters are resolved by the parties, was said to be impeding the smooth application of the Directive.

Responsibility for engendering an adversarial approach lies, in part, with legal professionals. Indeed, it is striking that only 5% of respondents to the International Arbitration Survey listed mediation as the preferred method of resolving cross border disputes. It is to be noted that the respondents to the survey were defined as “stakeholders in international arbitration”. Even so, it perhaps reflects a general reluctance on the part of legal practitioners dealing with cross border disputes to contemplate mediation as a primary dispute resolution process.

There are of course many reasons for this including perceptions, perhaps as to applicability and efficiency of mediation to international cross border disputes. However, there are reasons to suggest that an element of self-interest or self-preservation might also feature. It is and has always been the case that the quicker a case is resolved the less costs are incurred, which translates into reduced fees for the legal professionals involved in the dispute. It remains a live issue and on-going debate as to whether this creates a disincentive against recommending mediation as a form of ADR in both national and cross border disputes. However, in the case of arbitration what is definitely lacking is any incentive or obligation on the part of arbitrators to encourage the parties to enter into mediation. The contrast between an arbitrator’s and a judge’s obligation in the UK legal process, in respect of encouraging mediation is self-evident.

Whether it is entrenched views about how to resolve disputes or whether there is an element of self-interest, or a lack of incentive to encourage arbitration, it is clear that there is a need for a shift in attitude towards mediation on the part of the legal profession and arbitrators.

The future is bright

Significant investment has been made to make cross border mediation a viable and effective tool in cross border dispute resolution. Combined with the relative expense and delay of other forms of dispute resolution, there is no reason why mediation should not form a core part of resolving international disputes in the future. There may need to be a shift in attitudes within the legal profession in order for mediation to achieve its full potential. However, ultimately commercial disputes are driven by commercial considerations and the commercial case for mediation will not be difficult to prove.

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