Manon Schonewille JAMS International Panelist - Result ADR Center for Businesses Neutral & IMI Certified Mediator. Trainer and negotiation consultant at TOOLKIT COMPANY, adjunct professor at UTRECHT UNIVERSITY, President of ACB Foundation & CoChair of the International Committee of the Dispute Resolution Section of the American Bar Association (ABA). Author of Toolkit Generating Outcomes. RIAD - International Association of Legal Protection Insurance Conference 30 September 2011 - Verona m.schonewille@acbfoundation.nl ACBFOUNDATION CONFLICT MANAGEMENT RESEARCH CENTER Mediation an answer to consumers needs?
+ Why Mediation? 2 2 Answer, based on more than a decade of experience mediating commercial disputes: n Generates better, more sustainable outcomes n Saves time and often money n Due to Outcome control and Process control of parties Backed up by research (e.g. AAA: Dispute Wise Companies have better P/E ration - Cornell/PERC/PWC: 83% would use mediation again due to cost and outcome control, expedition and relationship confirmed in ACB survey)
The costs of litigation (time and money) Based on the World bank doing business scenario local legal experts made an assessment: n Goods worth 200.000,- sold to Buyer who refuses to pay and due to goods allegedly being of inadequate quality. n Seller sues Buyer in Court of capital city. n Witness/independent experts give opinion on quality of goods. n Judgment100% in favor of Seller. No appeal. n Seller collects money through public sale of Buyer s moveable assets. 3 Implemented by Project ADR Center Member of European funded JAMS International Company Manon by the Schonewille EU TOOLKIT Company, all rights reserved - toolkitcompany.com Lawyers In association with Association European Association of Craft, Small and Medium-Sized Enterprises Source: The Cost of Non ADR Surveying & Showing the Actual Costs of Intra-Community Commercial Litigation 3
Time and cost of domestic litigation 4 ¾ < 4 yrs in proceedings 6,7K 65,7K costs Claim value 200,000 No appeal Positive scenario: Source: The Cost of Non ADR Surveying & Showing the Actual Costs of Intra-Community Commercial Litigation - ADR Center Italy Member JAMS International
Costs of not using mediation before court (2 step procedure) 5 Time: + 224 days on average Cost: + 32% of legal cost ( 12.471 13.738 per case) Source: The Cost of Non ADR Surveying & Showing the Actual Costs of Intra-Community Commercial Litigation chart of ADR Center Based on Meditioan success rate from 60%-75%
Time and Cost: break- even point in EU Time Savings Time Savings (days) 500 400 300 200 Time Saving 100 0 90% 75% 50% - 100 40% 25% 19.5% 9% 8% Success Rate of Media8on 19% of Success Rate Cost Savings Cost Savings 8,000.00 6,000.00 4,000.00 Cost Saving 2,000.00 0.00 90% 75% 50% 45% 44.5% 43% 40% 25% 23% 3% 2% - 2,000.00 Success Rate of Media8on - 4,000.00 24% of Success Rate www.adrcenter.com Slide used with permission
1 Mandatory 2 3 Public ADR Rigid procedure Mediator accreditation standard through public regulation 4 (Some) Sanctions 5 (Some) Public incentives 6 Structure & form mediation bodies determined by public policy or law 7 Proposals exchanged may be relevant in subsequent proceedings 8 Mediator fees are fixed (generally moderate) 9 Mediator has to be a lawyer (or University graduate) 10 Outside counsel presence obligatory 11 Mediated settlement = enforceable title 1 Voluntary 2 3 Private ADR Flexible procedure (mutual agreement, parties/mediator) Mediator accreditation standard set by market 4 No sanctions for refusal to mediate 5 Individual motivation 6 Mediation providers with several legal forms, can be an individual 7 Proposals exchanged in mediation irrelevant in subsequent proceedings 8 Mediator fees freely contracted (can be high) 9 Mediator can have various backgrounds 10 Outside counsel presence not necessary 11 Mediated settlement = contract 7 Irreconcilable Issues in regulating Mediation. 2 basic approaches
8 Aim of the Directive 2008/52/EC n To promote the use of mediation the Directive provides a predictable legal framework to facilitate access to cross-border dispute resolution. n Had to be implemented by Member States by 21 May 2011. 8
Mediation defined 9 9 The Directive 2008/52/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 21 May 2008 on certain aspects of mediation in civil and commercial matters, published on the Official Journal of the European Union L. 136/3 on May 24, 2008 a structured process, however named or referred to, whereby two or more parties to a dispute attempt by themselves, on a voluntary basis, to reach an agreement on the settlement of their dispute with the assistance of a mediator.
Mediator defined 10 The Directive 2008/52/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 21 May 2008 on certain aspects of mediation in civil and commercial matters, published on the Official Journal of the European Union L. 136/3 on May 24, 2008 10 Mediator means any third person who is asked to conduct a mediation in an effective, impartial and competent way, regardless of the denomination or profession of that third person in the Member State concerned and of the way in which the third person has been appointed or requested to conduct the mediation.
MEDIATION REGULATION IN EU: IT S LIKE PLUGS & PHONE SOCKETS Slide 11 used with permission Jeremy Lack 2011. All rights reserved. www.jeremylack.com
Mediation regulation in EU: It s like plugs & phone sockets Some regulatory highlights (definitely not complete and from a Dutch perspective) 12 Austria: Breach of confidentiality can be punished with up to 6 months imprisonment or financial penalty. Greece: Domestic cases only lawyers can be accredited mediators. All mediations require presence of a lawyer. Mediation providers formed by Bar Association and Chamber of Commerce. Netherlands: No legislation, but Specialized Disciplinary Court for Mediators. Demanding performance based assessment & theory exam. Legal mediation aid. Italy: All mediators accredited by Italian accredited provider and gone through training of Italian accredited institute. Mandatory mediation: for many disputes mediation = precondition for accessing courts. Court mandated mediation with financial consequences costs and fees if refused. Tax incentives. Phone sockets based on a slide from Jeremy Lack 2011
+ 13 Mediation concepts in Europe: What is mediation? Continental European vs. Anglo-Saxon style? Northern European vs. Southern European style? Caucus (only) or joint session? Directive or facilitative on process? (Time) Pressure? Evaluative or facilitative on substance?
Different national approaches reflect different cultures UK/US = Efficiency Time pressure Emphasis on an outcome Much caucusing (emotions?) Which system to choose for a crossborder dispute? =? AT (& DE) = Perfectionism Whatever time it takes 2 neutrals No caucusing Emphasis on process FR = Conceptualism 4 steps Confidential Little other emphasis NL = Pragmatism 4 half days on ave. Caucusing = one of the tools Process + outcome + cheap Slide 14 used with permission Jeremy Lack 2011. All rights reserved. www.jeremylack.com
+ 15 n 75% success/settlement rate (70% mandatory 80% voluntary) n 0,5% use (# Mediation / cases filed in court) Source: The Cost of Non ADR Surveying & Showing the Actual Costs of Intra-Community Paradox of Mediation in EU Commercial Litigation Manon Schonewille TOOLKIT Company, all rights reserved - toolkitcompany.com
Why is commercial mediation little in demand 1? 16 n Is it practiced poorly? Need for better education of mediators? n Have mediation centers / countries not adopted effective rules or codes of conduct? n Need for more uniformity?
Why is commercial mediation little in demand 2? 17 n Companies have poor understanding of the mediation process or mediation as a management tool (and are not really interested to learn) 50% success rate? 77% NO ADR policy 7% no idea Sources: The Cost of Non ADR Surveying & Showing the Actual Costs of Intra-Community Commercial Litigation Making profit while solving disputes ACB survey
Chicken or egg?? 18 Companies legal expenses insurance policies do not cover mediation/arbitration as a rule: Source: The Cost of Non ADR Surveying & Showing the Actual Costs of Intra-Community Commercial Litigation
Why is commercial mediation little in demand? 19 ACB: NL 3 billion p.a. CEDR-CMS: UK 33 billion p.a. >3 years managers time/case EU/ADR Center: + 224 days + 32% legal costs/case n Companies have no clue about (financial) benefits - costs Sources: The Cost of Non ADR Surveying & Showing the Actual Costs of Intra- Community Commercial Litigation - Making profit while solving disputes ACB survey - Managers and Conflict CEDR/CMS survey
Why is commercial mediation little in demand? 20 n Managers do not (care to effectively) manage conflict 63% of managers say they do not feel equipped to deal with conflict 35% parachute jump, 27% shave head rather than address problems in team Sources: Managers and Conflict CEDR/CMS survey Making profit while solving disputes ACB survey
Gate keeper position of lawyers who have impediments 21 21 n The common denominator for all impediments: n Unfamiliarity with the process and its practical implications and use, combined with fear to lose business. Source: Making profit while solving disputes ACB survey
+ ADR impediments for lawyers 22 n n ADR can mean Alarming Drop in Revenues. Process and its implications unfamiliar. n Uncertainty about role in ADR, afraid to make mistakes. n n n n n n Scared to lose the client because of having given a wrong advice in case the mediation does not lead to a solution. Fear the mediation may go on forever and will cause additional costs and time. Difficult to hand over process to third party whose added value is unclear. Apprehension to lose client to lawyermediator (still: lawyers generally engage lawyermediators ) Uncertainty about quality mediator. If referral: sometimes feeling that the judge doesn t want to deal with this case. n n n n n Anxious about possible strategic use of mediation (obtain information), uncertainty re. lack of right of refusal to testify of mediator and other confidentiality issues. Concerned confidentiality mediation is too strict (f.e. contributing incriminating information in mediation to block use during subsequent legal procedure). Mediation (and especially referral) can be perceived as admission of weakness/sign lawyer does not do good job. Lawyers tried to negotiate themselves without result and added value of 3 rd party unclear. Mediation generally ok, but not in this case/ these parties. Source: Making profit while solving disputes ACB survey
Why is commercial mediation little in demand? 23 n Habit n Mind set changes take time Do we need a fax machine? mid 1970 s Should Doctors wash their hands before seeing the next patient to reduce mortality rates? mid 1850 s Is the earth round?! End 1490 s
What do insurers do? Some examples 24 n Around the world many (legal protection) insurers are actively involved in mediation: n Mediation to maintain relationships and as a PR tool n In house trained mediators n Strategic use of ADR within the Claims Organization n Contracts with mediation providers and/or referral of cases on a regular base n Active involvement in further developing the field
What do insurers do? Some examples 25 n Message for RIAD conference attandees of Deborah Massucci VP Dispute Resolution in the Litigation Management Division of Chartis, Chair of the ABA DR Section: The ABA Section of Dispute Resolution strongly supports early DR and the strategic use of all ADR tools. The Section is the primary place where dispute resolvers throughout the world collaborate and share experiences, successes, and initiatives to use dispute resolution tools effectively. The Section is the center of sharing to support resolvers who enter the field, want to broaden their skills, and move up in their career. We build bridges to clients whether they are lawyers, insurers, corporations, or individuals. We support mediation quality by providing ethical guidance, providing educational opportunities and publishing books or periodicals for the benefit of our members and the ADR community at large. We celebrate the public service and pro bono efforts of dispute resolvers and we welcome Manon Schonewille TOOLKIT anyone Company, all rights interested reserved - toolkitcompany.com to join in the work of the Section.
What can legal Protection insurers do? Some ideas 26 n In-house training for referral to mediation and mediation techniques. n Legal expenses insurance policies cover mediation (arbitration) as a rule. n Clients adding a mediation clause to their contracts or who adopt corporate ADR policies pay a lower premium. n Clients who tried to mediate in good faith get priority treatment when the mediation fails and they are forced to litigate as a next step. n Clients who litigate pay a higher own contribution, clients who try to mediateas a first step pay a lower own contribution. n Insurers adopt a corporate or industry sector policy: mediation is the preferred method. n Clients are obliged to try to initiate mediation before they can litigate.
A flexible voluntary process, but with 27 mandatory commitment to use as the obvious first step QUESTIONS? Thank you!
Sources for more information 1 28 n The studies mentioned in this presentation: (pdf and weblinks can be found in the resource center section of www.toolkitcompany.com www.toolkitcompany.com/resources%20center/resources%20home.htm) n The Cost of Non ADR Surveying & Showing the Actual Costs of Intra- Community Commercial Litigation: ADR Center Italy, member of JAMS International: www.adrcenter.com/jamsinternational/civil-justice/survey_data_report.pdf n Managers and Conflict CEDR/CMS survey: www.cedr.com/?location=/news/archive/20060526_232.htm n Making profit while solving disputes ACB survey (in Dutch only): www.acbmediation.nl/research%20projects/research%20projects.html
Sources for more information 2 29 n Mediation rules, clauses, cross-border Dispute Resolution: JAMS International www.jamsadr.com/international/ n Mediator certification and tools: International Mediation Institute: http://imimediation.org n Commercial mediator Assessments and information for the private sector. Free online video Special Chemistry demonstrating a commercial cross border ADR and representing clients in mediation: ACB Foundation ACBFOUNDATION CONFLICT MANAGEMENT RESEARCH CENTER www.acbmediation.nl/learnership/learnership%20home.html n Mediation, conflict management, negotiation and decision analysis trainings: www.toolkitocmpany.com - info@toolkitcompany.com n Neuroawareness: knowledge & insights into how recent discoveries in neurobiology may assist professionals in gaining a better understanding of their roles in ADR processes. www.neuroawareness.com n Mediation and negotiation techniques: Toolkit Generating Outcomes, Manon Schonewille, The Hague 2009: Sdu.