CEDR Mediation Audit 2021: What it means for the Construction Industry

The Ninth Mediation Audit has been published by CEDR, following its latest survey of civil and commercial mediators in the UK. We look at what the Audit reports about growth and trends in mediation and what those mean for the construction industry.

CEDR Audit May 2021

CEDR (the Centre for Effective Dispute Resolution) has published its Ninth Mediation Audit. The Audit is an important insight into the state of civil and commercial mediation in the UK. CEDR, a leading mediation body, has a bank of data to benchmark against, having carried out audits biennially since 2003.

There are some impressive figures, showing the continuing momentum of mediation in civil and commercial disputes. CEDR reports for the year to 31 March 2020 (i.e. immediately pre-pandemic) that cases worth £17.5 billion were mediated; £4.6 billion of savings were made by businesses and individuals from the “quicker and more effective resolution of commercial disputes”; and there was a 38% increase in the annual number of cases mediated since its 2018 Audit. Of that increase, the majority came from ad hoc mediation referrals (53%), alongside a “steady growth” in scheme related activity e.g. mediation schemes supported by employers, courts and NHS Resolution (11%). Future growth areas for mediation usage are most frequently reported as general commercial disputes, with employment/workplace, professional negligence and personal injury disputes also being prominent.

There is also clear evidence of resilience during the pandemic. As expected there was a downturn in mediation activity of 35% triggered by the pandemic between March and September 2020, however CEDR reports this would undoubtedly have been far more severe, but for the rapid upsurge in online mediation. 89% of mediations were conducted online during this period; a huge increase from pre-pandemic practice. There is also an appetite for this to continue; the Audit reports around 65% of mediation work is expected to continue online in 2021. Whilst views appear to be divided about whether online mediation will have an impact on settlement rates, CEDR reports no concrete data on that so far. Meantime overall settlement rates have increased slightly to a rate of 93%; with 72% settling on the day and 21% shortly after. These figures sit with anecdotal evidence of the recent popularity of mediation and the online mediation of commercial disputes becoming mainstream, including for high value and multi-party disputes.

Implications for the construction industry

This latest mediation Audit comes off the back of a growing momentum towards the early identification, management and resolution of disputes in construction contracts and use of ADR.

With Covid as a catalyst, there have been numerous pronouncements from Government and industry about the need for “fair and responsible behaviour in the performance and enforcement of contracts” (July 2020 Construction Leadership Council, “Covid-19: Managing Contractual Disputes and Collaboration - Summary Guide”). The UK Government’s Construction Playbook (December 2020) emphasises the benefits of long-term strategic, collaborative contractual relationships and endorses the RICS Conflict Avoidance Pledge which supports collaborative working, use of early intervention techniques when disputes arise and early resolution of potential disputes.

We have seen increasing use in the standard form contracts towards escalating dispute resolution procedures. Under JCT there is a requirement to give “serious consideration” to a request to mediate and it is embedded in the dispute resolution provisions of many infrastructure projects (sometimes as a mandatory step).

Against this background, mediation has very much taken its place in the menu of options available to parties when in a dispute. It has long since thrown off any suggestion that it is in some way a soft option or a route to a “split the difference” outcome. Instead, it allows parties to engage in a robust commercial discussion, based on a reality-checked risk assessment, to reach a common understanding of each party’s position and the interests which lie behind it and then to explore solutions. These can be much more “tailor made” than the constraints of remedies available in third party processes such as adjudication, arbitration and court.

Key to a successful mediation process, said mediators surveyed in the Audit, is for parties to prepare thoroughly and the importance of remembering that negotiation is a process of persuasion. That means being clear on what you want to achieve from the process and why and understanding the strengths and weaknesses of your own and the other side’s positions, including a realistic view of what the alternative outcomes to a negotiated resolution look like in terms of potential outcome, cost, management time and other commercial impacts.

In construction disputes, it is often necessary to secure technical, quantum or delay expert input in advance to avoid the discussion stalling for want of key information. Considering practicalities of potential resolutions also helps. For example, in a defects dispute where the resolution could be for a programme of remedial work to be undertaken: what work is needed, when will it be undertaken, how will access be made available, how will the work be monitored and signed off, how is that to be documented? Thinking through these sorts of issues in advance means that the relevant discussions can take place in the course of the mediation day, avoiding “spanners in the works” late in the process.

The construction industry is well-used to undertaking risk assessments for business as usual activities. Mediation is a process which extends this into the management and resolution of disputes, allowing parties to stay in control of achieving commercially robust outcomes. The data from the Audit confirms that the momentum of mediation is only increasing. For the construction industry it presents an important tool in its dispute resolution toolbox.

References:

• CEDR Ninth Mediation Audit
• Construction Leadership Council’s “Covid-19: Managing Contractual Disputes and Collaboration - Summary Guide”
• UK Government’s Construction Playbook