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The New Commercial Court & Alternative Dispute Resolution Procedures

February 2005 - Litigation & Dispute Resolution. Legal Developments by Landwell.

More articles by this firm.

The new Commercial Division of the High Court came into being on 12th January 2004. This newly created Commercial Court is not a Court in itself but a branch of the existing High Court and it will have specialised commercial judges and state of the art facilities so as to enable large scale commercial litigation to be brought in a more rapid and cost effective manner.

What commercial proceedings are covered?
Commercial litigation proceedings are not automatically admitted to the Commercial Court, as either party must apply to the judge in charge of the Commercial Court List to have the case heard in the Commercial Court. The Rules of the Commercial Court provide examples of "commercial proceedings" for the purposes of entry onto the Commercial Court List. Therefore any commercial litigation proceedings or arbitration matters in respect of which a claim or counterclaim exceeds €1,000,000 can be heard in the newly established Commercial Court. Intellectual property disputes and judicial review actions in respect of statutory decisions or determinations of a commercial nature can also be heard in the Commercial Court regardless of €1,000,000 threshold limit. There is also an underlying discretion for the judge of the Commercial Court List to have any other commercial related disputes heard before the Commercial Court. However, actions in relation to personal injuries, medical or dental services, contracts of employment are expressly excluded from the Commercial Court's jurisdiction.

New pre-trial procedures
The Rules of the Commercial Court now provide for three types of pre-trial procedures, which any party litigating before the Commercial Court must be prepared to engage in. The pre-trial procedures contemplated are an initial directions hearing, a case management conference and a pre-trial conference. These new procedures enable both the judge and the parties involved to gain an insight into the issues in dispute and also provides the parties with pre-trial knowledge of the other side's expert witnesses and the reports that will be relied on during the trial. Parties will also be expected to fill out a pre trial questionnaire before the case will be listed for hearing.

Alternative dispute resolution
One of the more interesting aspects of the newly established Commercial Court is the power of a judge during the initial directions hearing to adjourn the proceedings for a period not exceeding 28 days so as to allow the parties to consider or engage in an alternative dispute resolution process such as mediation, conciliation or arbitration (ADR). The Commercial Court judge in charge of the case can do so upon his or her own volition or upon the request of either party.

Mediation is an ADR whereby the parties engage a mediator who acts as a facilitator to the parties and assists them in reaching a mutually agreed settlement to their dispute. At all times the parties remain in control of the procedure and are not limited to the reliefs that can be granted by a Court, there is greater scope for "creative solutions" to commercial disputes. The mediation procedure is non-binding in that it is only when a settlement agreement has been signed by both parties that the settlement becomes legally binding on the parties. It should also be noted that anything disclosed or given to the other side during a mediation procedure is confidential and without prejudice to any subsequent litigation or arbitration proceedings that may take place in the event of a failed mediation attempt.

Conciliation is very like the mediation process described above but with one main difference. Should the parties fail to agree on the settlement of the dispute then the Conciliator will assess the positions of both parties, and any common ground during the process and come up with a set of recommendations. The parties will then have a period of time within which to disagree with the recommendations of the Conciliator otherwise the recommendations shall have legal effect between the parties.

Arbitration is the most litigation like dispute resolution procedure in that the parties are requesting an Arbitrator, after hearing both sides' submissions and evidence, to determine the dispute between the parties by making a legally binding arbitration award. The advantage of arbitration over litigation in the commercial context is the fact that the Arbitrator can be appointed by the parties and is usually a person skilled in a particular trade or profession relevant to the dispute. An example of this would be an arbitrator specifically skilled in building contracts. There is also more freedom of procedure for the parties in relation to how the case is heard by the Arbitrator. For instance the parties can agree between themselves their legal representation, the evidence that can be produced and the applicable law to be applied in resolving the dispute. In relation to arbitration awards in the international commercial context, the New York Convention on the Recognition and Enforcement of Foreign Arbitration Awards, allows foreign arbitration awards to be enforced in the domestic Courts of over 120 countries. This is something upon which Court Judgements and Orders cannot compete with. This is one of the main reasons why arbitration is popular within the context of disputes involving international commerce.

Costs implications for failure to engage in alternative dispute resolution procedures
In the UK there has been a growing line of case law to suggest that where a party unreasonably fails to take up an offer by the other side, or in fact a Court recommendation, to engage in an ADR procedure, such as mediation, then the normal rule that costs follow the event, i.e. that the losing party pays the winner's legal costs, will not apply. This is on the basis that the UK's Civil Procedure Rules provide that the overriding objective of the Court is to deal with cases in the most cost saving and expeditious manner so that the Court's resources can be allocated effectively.

One of the first cases where this issue arose was the case of Dunnett v Railtrack plc. (2002) where the judges in that case refused to order the losing party to pay all of the winner's legal costs on the grounds that the winner had refused to take up both a Court recommendation and a subsequent offer by the losing party to mediate the dispute. The principle reason why the Court took this action was because they had recognised that skilled mediators are now able to achieve results satisfactory to both parties which would be beyond the scope of lawyers and Courts to achieve. Such cases should be resolved outside of the Courts process and therefore parties should be aware that any turning down of an offer to engage in ADR procedures may lead to adverse cost consequences.

This case has been followed in a line of cases subsequently. However, it was eventually considered to have gone too far in favour of the losing party that has made an offer to use an ADR procedure such as mediation. Therefore, this year in the case Halsey v Milton Keynes General NHS Trust (2004) the Court held that the test that will now be applied by the UK Courts is whether the offer to mediate was refused on a reasonable basis and that the burden of proof to show that the mediation had a "reasonable prospect of success" rests with the losing party that had previously offered to mediate the dispute.

The situation in Ireland
Although the Rules of the Commercial Court do not provide for any express adverse cost consequences that would penalise a winning party that had unreasonably refused to mediate a dispute, it is still within the Court's jurisdiction to deviate from the general rule that costs follow the event where "special cause" exists. Whether a refusal to engage in ADR would be a "special cause" remains to be seen but it should be noted that Mr. Justice Peter Kelly, who is the judge in charge of the Commercial Court, has indicated at a conference on the topic of the new Commercial Court that he does intend to look into the possibility of cost implications where parties unreasonably ignore or decline ADR mechanisms. It remains to be seen whether in fact this will come to fruition but at this stage commercial litigants should be aware that it may now become the norm in Ireland, as it has in the UK, that failure to propose or agree to ADR procedures such as mediation, conciliation or arbitration may have adverse cost consequences for parties to disputes before the Commercial Court.

Gerard Kelly
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