Traditionally, most European businesses equated legal disputes with going to a state court or arbitral tribunal. In the US, litigation costs and a certain degree of unpredictability of judicial proceedings brought alternative dispute resolution (ADR) into focus decades ago. In Europe, ADR methods remained on the sidelines until fairly recently. Most European justice systems did not regard ADR as part of the ‘ordinary’ judicial process. For example, the German Federal Court of Justice held in 1997 that any agreed settlement must be measured against a hypothetical judgment; a lawyer may only advise against court proceedings if ADR achieves an economically equivalent result.

The times they are a-changin’

Recently, there has been a paradigm shift in the European approach to dispute resolution. Led by the EU, legislatures are pushing for an increased use of ADR. This is especially true as regards mediation, which in several jurisdictions has become an integral part of civil procedure. The next stage now being debated is to strengthen online dispute resolution, enabling parties to resolve conflicts swiftly with minimal involvement of the courts, if any.

This change is having a marked effect on the state courts. In Germany, the number of new cases reaching the courts of first instance annually fell by more than one quarter between 2002 and 2012. Though factors such as demographics will have played a part, one reason for this development is the increased use of ADR.

International arbitration institutions are alive to this development; increasingly, they branch out into ADR. The International Chamber of Commerce (ICC), for instance, has for many years administered a set of rules for ADR. In 2014, the ICC published new ‘ICC Mediation Rules’ in order to “reflect modern practice and set clear parameters for the conduct of proceedings, while recognizing and maintaining the need for flexibility”.

Jan-Mar 2015 issue

White & Case LLP