ADR may put courts out of (small) business

ADR offers many advantages over the court process. Picture: Phil Wilkinson

IN the words of Mark Twain, there are “lies, damn lies and statistics”. It does seem, however, that whichever way you look at the latest figures detailed in the Civil Law Statistics for Scotland for the year 2012-13, there is an ongoing trend for individuals and businesses to rely less upon the Scottish court system for resolving their disputes.

Over the past four years, civil cases initiated in both the Court of Session and the sheriff courts across Scotland have dropped by 41 per cent. The total number of civil claims going through the courts has been decreasing since the early 1990s and fell below 100,000 cases for the first time in 2010.

The statistics for Scotland suggest that more people are now engaged in business than four years ago. The number of businesses operating in Scotland in March 2013 stood at 343,105, up from 295,545 in March 2009. GDP, one way of measuring business activity, increased from £132.9 billion in 2009 to £145.2bn in 2012. If we assume that individuals and businesses continue to have disputes at the same rate as we have seen over the last four years, we would have expected civil claims to have increased rather than decrease in the dramatic way they have done. A significant drop in court cases over the past four years, therefore, cannot simply be explained by the effects of the recession or reduced business activity levels.

The most likely explanation would appear to be that individuals and businesses are finding alternative methods of resolving their differences. These methods are collectively known as Alternative Dispute Resolution (ADR). Essentially, ADR is the collective term for those dispute resolution processes and techniques which allow disagreeing parties to come to an agreement short of litigation and resorting to the courts.

ADR can generally be classified into four types: negotiation, mediation, collaborative law and arbitration. Some methods, notably arbitration (and adjudication), will involve a third party or arbiter/adjudicator who is employed by both parties to provide a decision to resolve the dispute at hand. Other more consensual forms of dispute resolution, such as mediation, conciliation and negotiation, do not necessarily involve a third party adjudicator.

The role of the mediator is not to hand down a judgment enforceable against one of the parties, but rather to work with them to find a resolution, which is acceptable and palatable to both parties.

ADR offers many advantages over the court process, one being speed. The court process, by its very nature, can involve lengthy court hearings attended by witnesses for both parties, which may include examining many documents, not all of which are central to the dispute at hand. ADR, being a more consensual approach, enables parties to cut through the peripheral issues and hone in on what really matters in the dispute.

In light of the continued fall in court cases and the rising use of ADR, is there a future for our courts in Scotland? Should the decline we have seen over the past four years continue, then by 2020 the Scottish Courts will very much be the minority player in the resolution of disputes in Scotland. There will, of course, always be the need for the courts for certain cases and parties. It does appear, however, that their role will become increasingly specialised and will only deal with the high end, complex disputes involving multi-million sums.

Whichever way one reads the statistics, it does seem that the courts are now competing with a number of other ADR processes. Given the confidential nature of many of these, it is simply not possible to get a clear picture of how many disputes are being resolved using ADR.

What seems clear is that ADR is not going to go away. If Scotland is to be seen as a truly global player on the international arbitration stage, it needs to aggressively promote the benefit of arbitration and ADR generally to businesses and the legal profession. It is difficult to predict the future accurately, but there is no doubt that individuals and corporations are becoming more demanding of the legal processes available to them.

With the recession being as damaging as it has been, clients are more mindful of costs, and will wish to have a process which is both efficient and speedy in producing a result. Only time will tell what future lies ahead for Scotland’s court system and our use of ADR.

• David Armstrong is head of litigation at Brodies LLP, www.brodies.com