Access to justice and accountability, as well as the existential challenges of the climate crisis and artificial intelligence, are just some of the issues shaping developments in dispute resolution. Global Insight reports.

In autumn 2023, the UK Court of Appeal found that parties to a dispute can be ordered by the court to engage in alternative dispute resolution (ADR). The finding was part of a judgment handed down in Churchill v Merthyr Tydfil County Borough Council. It overturned a previous ruling in Halsey v Milton Keynes General NHS Trust, which argued that compulsory ADR ‘would be regarded as an unacceptable constraint on the right of access to the court’.

The Churchill judgment reflects enthusiasm for ADR in numerous jurisdictions amid an access to justice crisis. There’s also growing awareness that dispute resolution mechanisms must evolve to meet today’s existential challenges, such as the climate crisis and artificial intelligence (AI).

Sylvia Tonova, Conference Quality Officer of the IBA Arbitration Committee and Co-Head of International Arbitration and Investor-State Dispute Settlement at Pinsent Masons in London, argues that the Churchill judgment will probably ‘encourage parties to think more strategically when approaching complex dispute resolution and seriously consider ADR early on’.

Following Churchill, the UK Civil Procedure Rule Committee made changes to the civil procedure rules regarding engagement in ADR. For example, the rules now include text instructing courts to ‘consider whether to order or encourage the parties to engage in alternative dispute resolution’ when giving directions. These changes came into effect in October.

In overturning Halsey, the Churchill judgment set aside the idea that court-mandated ADR prevents access to justice. The judgment says that any stay in court proceedings should be proportionate and shouldn’t affect the ‘very essence’ of the right of parties to a fair trial under Article 6 of the European Convention on Human Rights. This form of mandated ADR doesn’t rule out a return to court if a settlement can’t be reached and therefore it can facilitate justice.

‘Even if you have to go through a mediation process’, says Wolf von Kumberg, an independent arbitrator and mediator practising globally out of London, Washington, DC and Abu Dhabi, ‘that doesn’t mean you have to settle because settlement is always voluntary. If you want to then proceed to court or to arbitration, you’re still free to do that.’

The question of whether access to justice necessarily involves the courts is being grappled with across multiple jurisdictions. In India, section 6 of the country’s draft Mediation Bill 2023 provided for compulsory pre-litigation mediation in civil or commercial disputes before parties could approach a court or a tribunal. However, this provision was not included in the final Mediation Act 2023. Instead, the final Act makes pre-litigation mediation voluntary rather than mandatory.

Neerav Merchant, Conference Quality Officer of the IBA Litigation Committee and Partner and Head at AQUILAW in Mumbai, highlights that mandatory pre-trial mediation was removed from the final version of India’s Mediation Act on the basis of recommendations outlined in a Standing Committee report. In particular, the report advised that mediation should be voluntary because making it mandatory would amount to a denial of justice where parties are unwilling to mediate. For Tonova, the Churchill judgment ‘has the potential to cause this question [of mandatory mediation] to be revisited’ in jurisdictions beyond the UK.

Breaking down barriers to justice

Court backlogs and increasing litigation costs are significant driving forces behind the push by governments and the judiciary for ADR to see greater use. ADR can offer a quicker and cheaper alternative to the courts that gives parties resolution and clears backlogs. ‘There’s been a recognition broadly internationally by governments that there is a benefit [in ADR]’, says von Kumberg, ‘and the judiciary generally is behind it because that also alleviates their workload’. He says the United Arab Emirates promulgated a mediation law in 2023. Its courts are promoting mediation, and for small claims it’s mandatory.

Gary Gao, Member of the Editorial Board for the IBA journal Dispute Resolution International and a partner at Zhong Lun in Shanghai, says that ‘almost all Chinese judges are overloaded’, meaning that many courts ‘now encourage a case to be settled’. He says that Chinese first instance courts will mandate mediation before parties can officially file their case.

Shaun Henriques, Co-Chair of the IBA Mediation Committee and an attorney-at-law, mediator and arbitrator, says that where he’s based in Jamaica, mediation was developed in 2002 to assist with backlogs and the country’s civil procedure rules have mandated attending mediation since then. According to Tonova, clients are also ‘pushing for resolutions that are outside a formal process such as litigation or even arbitration’.

Many practitioners observe that when mediation is ordered or encouraged by the courts, there can be scepticism or hostility at first. However, this perspective often changes as discussions progress and in most cases a settlement is reached. Mediation has a very high success rate: in its Tenth Mediation Audit, London’s Centre for Effective Dispute Resolution reports an aggregate settlement rate of 92 per cent.

Kim Rooney, Editor of Dispute Resolution International and an independent arbitrator and barrister at Rede Chambers, Hong Kong, says parties are more regularly including provisions to mediate before going to arbitration. Arbitrators are being encouraged to have mediation on the agenda of the first case management conference for the parties.

A significant drawback of mediation is that it doesn’t offer the same certainty of enforcement that comes with arbitration or litigation. According to Blazo Nedic, Co-Chair of the IBA Mediation Committee and an internationally accredited independent mediator, trainer, consultant and attorney based in Belgrade, the small proportion of mediation settlements that aren’t voluntarily enforced ‘is really affecting the willingness of the large international parties to mediate rather than arbitrate’.

The Singapore Convention on Mediation, which entered into force in 2020, attempts to address this. It’s a multilateral treaty offering a framework for enforcing and invoking international settlement agreements resulting from mediation. However, the Convention doesn’t offer the same level of enforceability as the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (‘the New York Convention’).

Sometimes, mediation won’t be suitable – for example, where the parties require emergency relief, a precedent needs to be set, a party wants a public hearing, or one or more parties aren’t seriously engaging in the mediation process.

The class action is another developing dispute resolution mechanism. Robert Johnston, Co-Chair of the IBA Class Actions Committee and a partner at Johnson Winter & Slattery in Sydney, believes more class action regimes will be introduced and those already in existence improved with the aim of aiding access to justice. ‘In every jurisdiction where they have a class action regime, you’re seeing an increase in the number of actions being brought’, he says, ‘for wrongs that probably have been there for a long while but never brought to account or addressed because it’s been too difficult or too expensive’.

Johnston argues that the rise of class actions is ‘responding to the economic reality that we are global consumers in a global marketplace with global producers’. He wonders whether disputes about products and services with global usage will continue to be heard on a jurisdiction-by-jurisdiction basis or whether an international forum for these cases can be established.

The evolution of arbitration

Arbitration offers another alternative forum for resolving disputes outside the courts, and represents a voluntary process that must be agreed to by both parties, usually via a contract. It’s typically a private, confidential forum. The result of proceedings is an arbitral award that can be enforced globally pursuant to the New York Convention, in contrast to a mediation settlement or a court judgment, which are difficult to enforce across borders. Arbitration can, however, be costly and time-consuming.

Arbitration is often preferred for very complex, high-value disputes because it can be tailored to fit the specific needs of the parties. Nedic gives the example of a large international transaction involving companies from all over the world. In that case, he says, the conflict of laws – for example, the question of where the court should sit and which law would apply – would be impossible to resolve. ‘All of that can be pre-arranged in arbitration’, Nedic explains, with a tailored dispute resolution process. Often the parties are willing to pay higher costs for this kind of bespoke mechanism, and value the associated confidentiality.

Arbitration is, however, sometimes criticised for lacking accountability and transparency. ‘It may well be accurate to say that [arbitration] lacks transparency and accountability, but we are fully aware when choosing arbitration, because it is voluntary’, Henriques says. For Tonova, arbitration is ‘an informed trade-off on the part of the parties who want a quicker decision, which is not subject to appeal, is confidential, and is made by decision-makers whom they have chosen’. She argues there are mechanisms in place to correct fundamental due process violations because most arbitration acts that apply when a seat is chosen include the supervisory powers of that jurisdiction’s courts.

‘Institutions and policy makers in arbitration have recognised that there are concerns about transparency’, Rooney says. She highlights the addition in 2013 of a new paragraph to the UN Commission on International Trade Law (UNCITRAL) Arbitration Rules, which provides for transparency as a default position for specific types of disputes.

To make the process more transparent, arbitration institutions are increasingly publishing information about the appointment of arbitrators and awards made. There’s also greater diversity in terms of arbitrator appointments to reflect the nature of disputes being heard. Rules on conflicts of interest are becoming stricter and are being harmonised internationally, which reflects a greater focus on the need for impartiality and independence. According to Rooney, ‘those are all measures that support the accountability of the arbitration sector’.

She believes it’s important to make arbitration quicker and cheaper while preserving the key features that mean it’s attractive. She says this could be done by capping arbitrator and institution fees and implementing cost penalties for arbitrator delays, which the ICC Court of Arbitration recently introduced. Arbitration rules could also be simplified and the process made more accessible, perhaps through online platforms.

Gao says arbitration has departed from its original purpose, which was to facilitate dispute resolution in an efficient and economical way. For him it now more closely resembles court proceedings in terms of both time and cost. He believes that arbitration should return to its initial starting point, with the use of other ADR forums, as well as the adoption of AI, encouraged. ‘The only issue is the cost’, he says. For Gao, the bigger issue is ‘whether arbitration institutions can develop a workable, practical arbitration tool in an economical way [that is] commercially affordable’.

Critics of arbitration particularly object to investor-state arbitration. Here, the dispute is between a foreign investor and a state, and issues of public interest are often discussed, debated and decided. Because the public interest is at stake, critics argue these disputes shouldn’t be resolved in a confidential forum. They say investor-state arbitration makes it difficult for governments to make policy decisions that are in the best interests of their jurisdiction because they might be taken to arbitration by foreign investors. According to von Kumberg, ‘states feel they’re inhibited in their sovereign rights to make changes for the benefit of their citizens [...] because these investors might bring a large claim against them’.

Tonova says ‘it’s the states that have offered protections for foreign investors in investment treaties. In the majority of cases, states have also agreed to arbitrate such investment disputes with foreign investors’. She adds that ‘there has been a movement for greater transparency in investor-state arbitration and the ability of third parties to intervene in the proceedings’.

The International Centre for Settlement of Investment Disputes (ICSID), based in Washington, DC, has developed mediation rules as states are increasingly including this form of dispute resolution in new agreements with investors. Doing so gives states the flexibility to discuss how to adapt an investment agreement to the challenges they’ll face while it’s in place. ‘There are all kinds of things that can be negotiated,’ says von Kumberg. He says mediation offers a platform ‘to negotiate those changes rather than them being enforced by tribunal’.

It’s possible that as the public becomes increasingly engaged in environmental, social and governance (ESG) issues, there will be certain disputes that jurisdictions don’t allow to go to arbitration. These could be disputes between investors and states or between consumers and large, powerful commercial entities. The public will probably see itself as a stakeholder in disputes relating to the energy transition, for example, and may not tolerate such matters being discussed and decided behind closed doors. Or, if arbitration remains the most suitable mechanism for a particular dispute, public arbitration may be the only option. ‘Given the widespread societal implications of climate change and the importance of [the] energy transition in this regard, states will have a hard time keeping these [disputes] entirely private’, says Tonova.

The new era of disputes

The energy transition will be a catalyst for new disputes. As regulation expands, companies may well need to make quick changes to ensure compliance. Many businesses have long-term contracts in place with manufacturers that’ll need to be renegotiated. ‘It’s the rapidity of the change’, says von Kumberg, ‘companies tend not to be able to react that quickly’. He believes that getting businesses and their supply chains together to discuss what’s required and negotiate the way forward will be the most constructive approach. ‘You’re going to get a better result by sitting down and having a facilitated dialogue’, he says.

Johnston expects it won’t be long before damages claims are brought in relation to the impact of the climate crisis. Tonova, meanwhile, specifically predicts the appearance of more claims against countries for not doing enough, as well as an increasing number of investor-state claims. ‘When you have such transformational policy changes’, she says, ‘inevitably you’re going to have investor-state disputes as the question is, who is going to pay for the costs associated with the change?’

Gao says Chinese companies are now required to make ESG disclosures and commitments before entering green energy or biofuels contracts with counterparts in other jurisdictions. ‘That’s already a huge [scope] for future disputes’, he says.

Technology, meanwhile, will play a significant role in how disputes are resolved in the future. Video conferencing applications allow proceedings to be carried out remotely, which makes dispute resolution more accessible, quicker and cheaper. Johnston says remote proceedings will ‘allow cases to be run in particular jurisdictions by foreign parties without them having to be there’.

Technology can also be used to make case management more efficient and for processing large amounts of data during discovery. It could also be utilised to process legal aid applications more quickly, improving access to justice.

According to von Kumberg, ‘AI can go one step further than just having that data’. He says it could, for example, help in-house legal teams to analyse historical data and identify patterns to help them decide the right course of action in a future dispute, such as the best forum and the likelihood of winning.

Perhaps where AI could make the largest difference is in the emerging area of online dispute resolution. These platforms are usually aimed at low-value, more straightforward disputes and offer a cost-effective and quick method for resolving them. In doing so they provide access to justice for the parties and keep these cases out of court.

Examples of online dispute resolution platforms include automated mediation services using zones of settlement, or services where parties record blind bids on the court computer – when the two sides make matching bids, the case is automatically settled on those terms. Arbitration is also available online: pinqDR is an online dispute resolution service built on the fundamentals of arbitration, offering a binding arbitral award that’s enforceable globally. ‘If AI can help us to produce maybe one third of our judgments or awards’, says Gao, ‘we can focus on demonstrating our analysis of the case, our reasoning and judgement’.

UN Trade and Development has been working on a technical cooperation project to deliver research and analysis, technical assistance and policy recommendations on how to best implement online dispute resolution for consumers. The IBA Mediation Committee is also developing guidelines on the use of AI in mediation.

While AI will be a useful tool in dispute resolution, some argue it shouldn’t become a decision-maker, particularly in high-value, complex cases. ‘AI must not be used in the judgment process’, says Gao, adding that it ‘cannot replace the judge in terms of making a substantive determination’. Rooney agrees, asking whether there’s ‘a way [AI] can be harnessed so [it’s] a useful tool that makes the process effective, cheaper [and] maintains fairness, but it doesn’t dictate and it doesn’t become a decision-maker’.

She says it’ll be important to retain fairness in dispute resolution. ‘If you start having a dispute resolution process that is not regarded as fair’, she explains, ‘people won’t trust it’. Rooney believes that future access to dispute resolution could be affected by geopolitical events – for example, if one party is subject to sanctions, or is from a nation that is. She sees the future of disputes as ‘continuing work on harmonisation of international standards’.

Gao says there will be more cross-border disputes that call for a greater diversity of arbitrators. He also believes it’ll be important for Chinese lawyers to learn international rules as China becomes more integrated into international society. Meanwhile, Johnston predicts the internationalisation of litigation fuelled by funders. ‘The future of litigation is seeing parties choose jurisdictions which are more favourable to bring their actions’, he says.

Rachael Johnson is a freelance journalist and can be contacted at rachael.editorial@gmail.com

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