Alternative disputes resolution: a European initiative?

The European Commission has recently published its Green Paper on alternative dispute resolution for civil and commercial law disputes. This would include ADR to resolve disputes arising on construction projects.

Why has the EC published a Green Paper on ADR?

According to the Commission, ADR is becoming a high profile means of resolving disputes. Many Member States have passed legislation to encourage the use of ADR and ADR is now a political priority, particularly in relation to the development of information technology and internet web-based cross-border disputes.

What is ADR?

The EC defines ADR as any out-of-Court dispute resolution process which is conducted by a neutral third party, excluding arbitration. The two component elements to this definition are:

• disputes resolution procedures which are conducted by a national Court or entrusted by a national Court to a third party, and
• disputes resolution procedures used by the parties to a dispute, by agreement, in an out-of-court procedure.

In the former category, some Member States encourage or permit judges to intervene in disputes in a non-judicial capacity; for example, as conciliators or as neutrals charged with the task of facilitating an amicable solution of the dispute. In addition, most Member States have regulations or draft regulations whereby ADRs can be entrusted by a Court to a neutral third party. According to the Green Paper, these range from: "the possibility of recourse to ADRs (eg, in Belgium and in France) to the encouragement (in Spain, in Italy, in Sweden and in England and Wales) and even the prior obligation to have recourse to ADRs under the law or by decision of the Judge (for example, in Germany, in Belgium and in Greece)."

As regards more conventional ADRs (ie, disputes resolution involving a neutral appointed by the parties rather than with any Court involvement) these are generally not the subject of specific regulations in Member States. Potential ADRs arise out of contractual agreements or transactional requirements negotiated between the parties at the outset or even subsequently, once a dispute has arisen. The Green Paper covers a number of specific aspects of ADR. Some of the key areas covered are:

• Should ADR be compulsory? Or, should it be an optional procedure to become a matter of contractual agreement between parties? Another approach would be to give all parties to a commercial contract the right (but not the obligation) to have a dispute resolved by ADR. Perhaps the most important consideration is that ADR is, and should remain, a consensual procedure. Hence, it may lose its attraction if it becomes a methodology imposed upon parties by statutory regulation as opposed to a consensual procedure upon which parties agree.
• Should the same approach to ADR be used for all civil and commercial disputes? There are obvious differences between a dispute under a contract for sale of goods, as opposed to a dispute under a computer software contract, as opposed to a dispute under a construction project. Should, therefore, particular approaches in relation to ADR be industry specific, or contract specific or should there be a general rule for all?
• What about statutory time periods, often known as periods of limitation. Should these periods be suspended while parties embark on an ADR process so that the Claimant is not prejudiced by losing time within which he is able to bring legal proceedings? If so, when would the suspension start? When would the suspension end? How does one define the framework within which ADR operates in the context of time periods running against a claimant?
• Issues of quality also arise, particularly in relation to those neutral third parties who take on the role of conciliators, mediators, adjudicators or whatever the particular procedure demands. An obvious solution is to have harmonised standards across Europe with all neutrals having to obtain an acknowledged accreditation of competence. That would mean training, at a consistent level, across Member States. Furthermore, issues arise as to the liability of the third parties. Further, ethical codes should ensure the independence of those who are appointed to act as neutral third parties.
• Confidentiality is a major consideration. It is important that any ADR procedure should not be abused. It must always be borne in mind that an ADR procedure may not settle a dispute and thereafter the parties may wish to turn to other more formal procedures, such as litigation or arbitration, at which issues concerning admissibility of documents and evidence will arise. Careful rules need to be agreed to ensure that information exchanged in a consensual process, which is sensitive, is not subsequently used to prejudice either party.

The Green Paper contains 21 questions. Its purpose is to ascertain the general opinion of all circles concerned and their reactions to the questions. The questions are primarily legal and concern the salient features of ADR processes. The intention is that responses be sent to the European Commission by 15 October this year. Thereafter, having considered the responses, the Commission intends to organise a public hearing on the whole question of ADR, early in the year 2003.

Over to you! Time to be creative in considering how you would like your construction disputes resolved across the European Community.

The EU's Green paper is available on the EU's website at http://europa.eu.int/eur-lex/ en/com/gpr/2002/com2002_0196en01.pdf

For further information please contact John Uwins at [email protected] or on +44 (0)20 7367 2502.