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Alternatives to mediation: expert determination and early neutral evaluation

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Posted by Susan Hopcraft on 12 February 2012

Susan Hopcraft - Professional Negligence Lawyer
Susan Hopcraft Partner

Mediation is a well known tool amongst those familiar with disputes. It can be very effective in clearing a way to settlement, but it can also sometimes feel like a rather unsophisticated ‘cutting of the cake’, purely to avoid the costs risk of losing at court. There are more subtle alternatives, that might allow the parties to settle but within a framework that more clearly reflects the legal merits - for example, expert determination or early neutral evaluation. 

Mediation can be very effective in bringing parties together by the conciliatory approach of an independent  third party. By focussing on commercial outcomes the mediator attempts to facilitate discussions leading to settlement, as an alternative to carrying on the argument to a court trial. Mediation has been widely used over the past ten years particularly and its use is still increasing across a broad range of disputes, not just commercial matters. 

It is a key tool, and one that the courts embrace with huge enthusiasm. Lord Justice Jackson’s recent report on litigation costs couldn’t have been keener for legal advisers, the public and small businesses to be aware of the benefits of mediation and it certainly has a vital role to play.  

A typical settlement rate for a mediator is 70% of cases mediated so there is no doubt that it works. It also allows a wider range of outcomes by bringing into the deal all sorts of issues that a court judgment cannot include – confidentiality, future business arrangements, press releases/apologies.   

Yet what of other resolution paths? These others are all similarly confidential, they all have a cost and none can be imposed on the adversary in the absence of a contractual obligation to use them. But if the parties are willing to invest in these, they offer the possibility of a better reflection of the legal merits. If that is not the most important factor then by all means use mediation, but where it is important then they are worth considering. 

Early neutral evaluation

Early neutral evaluation is a process in which the parties involved appoint an independent person to provide a non-binding opinion on the merits of the parties’ cases. This is usually a paper exercise, with the evaluator seeing a set of evidence agreed between the parties. It can take some time to agree the terms of the evaluation but, once carried out, the parties should have a better understanding of how the case might fall at trial. The evaluator will be a senior expert within the relevant business sector or even a leading QC or retired judge. 

Once the evaluation is made, on however many issues have been referred, the intention is that the parties use that as a basis for negotiation. It may be that real negotiation becomes more difficult if one side is, by now, convinced that it is ‘right’ – or if the other just chooses to ignore the evaluation result. However, where one stumbling block is removed there may still be negotiation around other less important issues leading to a mutually beneficial result. 

Expert determination

Expert determination is similar to early neutral evaluation but the outcome from the independent expert is binding. This is a much more risky way forward for any party on uncertain ground since it will be contractually binding once the determination is given, but it nonetheless can offer a relatively quick and cost effective way for the parties’ cases to be assessed. 

On occasions there have been court proceedings over the extent of the expert’s remit, which is disappointing. Last year in Barclays v Nylon an expert determination on the correct interpretation of a partnership profit allocation clause was set aside by the Court of Appeal because the expert had no standing to make a determination until an allocation had already been made. The case also shed doubt on the ability of any non-lawyer to determine points of law. Cases like this one remind parties to ensure they are fully agreed on the ambit of the expert’s instruction. Provided the scope of the referral is clear then the determination should bind.

Summary

Both early neutral evaluation and expert determination are suitable where the issue is technical, or a matter of interpretation, or perhaps a matter of law. Where the issues are narrow and not very fact dependent then both of these can offer a route to resolution without a purely commercial ‘carve up’. 

They are worth bearing in mind and can offer significant cost savings over a full blown trial.

About the author

Susan is a disputes and professional negligence lawyer, mainly in the financial services sector.

Susan Hopcraft

Susan is a disputes and professional negligence lawyer, mainly in the financial services sector.

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