Mediation has been under-utilised historically as a means of dispute resolution in this area. Mark Blyth and Geoff Egerton think this is going to change.
Most coverage you read these days inevitably focuses on the stresses and difficulties resulting from the turbulent economic times. Corporate failures and disputes are an unavoidable consequence of such turbulence. This is also relevant for employers and trustees of pension schemes.
In this article, we don't focus on this bleak outlook. We look ahead to how these issues are best resolved in the interests of the parties. Reflecting on what we have seen so far this year, we predict that mediation will be more commonplace in resolving pensions disputes. Mediation has been under-utilised historically as a means of dispute resolution in this area, but we think that is going to change.
What is mediation?
Mediation is a process for resolving a dispute before going to trial. It is entirely voluntary, unless the parties have agreed by prior contract to mediate. Under the civil procedure rules, parties to a dispute are under an obligation, at an early stage in any proceedings, to consider whether their dispute could be settled by alternative dispute resolution. The court has powers to encourage mediation, for example it may stay proceedings to allow parties time to mediate or possibly impose costs sanctions on a party which unreasonably fails to mediate. However, as long as parties behave reasonably, you do not have to mediate and many parties to pensions disputes choose not to do so.
The aim of a mediation is different from a court process. The aim is not to identify who wins or who is right. Instead the aim is to find a position which both parties can accept. If they can do so this will bring the dispute to a close without incurring the time and cost of a full court process. Unlike court proceedings, mediations are confidential. They are also not subject to any strict format or procedure. They can be as complex or informal as a dispute requires and usually offer a much cheaper and quicker avenue for resolving a dispute.
In the context of contractual disputes or negligence claims, mediation resulting in a settlement can bring proceedings to an end at that point. There are some pensions cases where some form of court involvement will be needed even if settlement can be reached. This is usually because the members of a scheme need to be bound by any settlement. These cases have not typically been thought suitable for mediation because court approval will need to assess whether the deal is the interests of the affected parties and this is typically driven by an assessment of the legal merits of the case. However, mediation can still play a key role in these cases too. It can facilitate settlement at a much earlier stage in proceedings by encouraging the parties to think creatively and take into account the delay, cost and wider risks of an adverse judgment. Sometimes the reality testing involved with a more robust mediation approach can help parties to re-evaluate their views of the strength or weakness of the case at an early stage.
Who can be a mediator?
The parties to the dispute will want to appoint someone impartial, with a strong track record, who is experienced in handling disputes of the sort in question. This is done either by agreement or, if agreement cannot be reached, by asking one of the mediation organisations to choose someone. In a technical area like pensions law, it will be a significant benefit if the mediator can ‘speak the language'. As a result, mediators in pensions disputes are often lawyers with experience of pensions disputes.
The key will be appointing an effective mediator who understands the legal and commercial drivers of a case and what each side's position is. Most mediators have accreditation from one of the leading mediation organisations, such as CEDR (Centre for Effective Dispute Resolution) and ADR Group, both of which are heavily invested in the training and education of mediators, as well as acting as an appointing body where parties cannot agree on a suitable mediator.
Backlog in the courts and disputes resolved online
The courts have a backlog. That backlog is likely to increase. Most pensions cases are heard in the Chancery Division of the High Court where the lead times in getting to trial can easily be a year or more, depending on the case..
This year has seen the legal community adjust to virtual hearings for court proceedings. Mediations have also embraced the opportunities offered by this technology. The flexibility of mediation lends itself well to online formats for example through the use of separate ‘rooms' for different communication channels and allowing parties to attend a mediation for pre-agreed times remotely, which avoids disproportionately impacting the day jobs of key decision-makers.
What are we seeing?
Mediation is still relatively under-utilised in relation to pensions disputes. The Association of Pensions Lawyers maintains a list of mediators and various initiatives have been proposed for the resolution of pensions disputes, such as the Pensions and Lifetime Savings Association's 2006 proposal to set up a mediation service in conjunction with CEDR. These initiatives reflect a desire among practitioners to establish mediation more fully in the pensions disputes industry. In general these have not led to widespread use of mediation in pensions disputes but we are starting to see indications that this will change.
During this current crisis we have seen some pensions disputes initially being put on the back burner with employers looking to conserve cash and focus on business critical issues, at least for now. This is understandable. But the can cannot be kicked down the road indefinitely. With the courts already facing a backlog, we anticipate a call for ways to draw a line under disputes. Removing litigation risk frees up management time and provides certainty, for employers, trustees and providers.
Mark Blyth is partner and head of pensions dispute resolution and Geoff Egerton is a managing associate at Linklaters
