Grant Jones LLM, Chartered Accountant, Solicitor, NewYork Attorney, Licensed Insolvency Practitioner & SpecialProfessor of Laws, Nottingham University .LinkedIn - http://uk.linkedin.com/in/accountantarbitratorWebpage - http://www.gmjones.org/ To download theslides, please go tohttp://gmjones.org/accountantsinadr_hmrc.phpAcknowledgements - (a) HMRC website (b) Wikipedia (c)Guardian (d) E & Y website (e) Staffs University (JamesTorr). 1E - email@example.com
the slides2There is no need to read thedetail of these slides. I will skipyou through these slides; deathwill be avoided.The purpose of the detail is soyou can take a considered lookat your convenience later.
3What is alternative dispute resolution (ADR) & why is itimportant?• ADR is non-court (including quasi-courts or tribunals)dispute resolution.• It is becoming increasingly important as stakeholders &governments seek to reduce costs, & seek penalisethose that unnecessarily avoid ADR.• For our (chartered accountants) purposes, ADR comesin three types: Arbitration, Mediation & ExpertDetermination.• ADR is admirably suited to the chartered accountant.
4What is Arbitration?Arbitration, a form of ADR is a legal technique for the resolution ofdisputes outside the courts, where the parties to a dispute refer it toone or more persons (the "arbitrators", "arbiters" or "arbitraltribunal"), by whose decision (the "award") they agree to be bound.„It is a resolution technique in which a third party reviews theevidence in the case & imposes a decision that is legally binding forboth sides & enforceable... Arbitration is often used for theresolution of commercial disputes...Arbitration is a proceeding inwhich a dispute is resolved by an impartial adjudicator whosedecision the parties to the dispute have agreed, or legislation hasdecreed, will be final & binding‟.There are limited rights of review & appeal of arbitration awards„.
5What is Mediation?Mediation, as used in law, is a form of ADR, a way of resolving disputes betweentwo or more parties with concrete effects. Typically, a third party, themediator, assists the parties to negotiate a settlement. Disputants may mediatedisputes in a variety of domains, such ascommercial, legal, diplomatic, workplace, community & family matters.The term "mediation" broadly refers to any instance in which a third party helpsothers reach agreement. More specifically, mediation has a structure, timetable &dynamics that "ordinary" negotiation lacks. The process is private &confidential, possibly enforced by law. Participation is typically voluntary. Themediator acts as a neutral third party & facilitates, rather than directs the process.Mediators use various techniques to open, or improve, dialogue betweendisputants, aiming to help the parties reach an agreement. Much depends on themediators skill & training. As the practice gained popularity, trainingprograms, certifications & licensing followed, producing trained, professionalmediators committed to the discipline.‟
6What is Expert Determination?„Expert determination is a historically accepted form of dispute resolutioninvoked when there isnt a formulated dispute in which the parties havedefined positions that need to be subjected to arbitration, but rather bothparties are in agreement that there is a need for an evaluation.The practise itself is millennia old & well established where complex legalinstitutions either have not developed, or are unavailable, such as tribalsocieties & criminal organisations.In the context of modern jurisprudence the word "expert" appears first inBottomley v Ambler ..., this was however used ambiguously also referring toarbitrators having the qualification of expert. The first mention thatdistinguishes specifically against the practise of arbitration, & introduces theformula "as an expert & not as an arbitrator" was in Dean v. Prince 1953... InContract Law, the parties are free to include a forum selection clauseappointing a special referee to resolve specialised but disputed factual issuesbetween them.‟
7What does the ICAEW say?„An expert determination is when an expert (such as a charteredaccountant) is appointed to decide points of disagreement between theparties to a dispute. Typically an expert may be appointed to determine(among other things): completion accounts, deferred considerations,earnings before interest & tax valuation of shares.The parties will need to agree to be bound by the determination as itdoes not have the same enforceability as arbitration.Arbitration involves processes that are similar to a more formal courthearing but is held in private before an arbitrator. The arbitrator considersthe testimony of the parties & any evidence submitted by them & thenmakes a binding decision that can be enforced just like a courtjudgement.The Arbitration Act 1996 provides for a fair, cost effective & fastresolution of disputes & these are the fundamental principles that anarbitrator must consider throughout the arbitration process‟.
8The new HMRC mediation scheme: what others say about it?HM Revenue & Customs is now offering mediation services for smallbusinesses. The tax authority is ready for mediation. Notwithstanding HMRC‟spropensity to roll over & beg when the likes of Vodafone or Goldman Sachsdemand to pay less tax, its tough-talking officers are offering small & medium-sized businesses the chance to put aside sharpened weapons before a fightkicks off. Lets have a friendly discussion is the message.Not nationwide. A pilot in north Wales will test the water. HMRC says mediationwill save time & money & a short study found "60% of disputes were either fullyor partially resolved". Unfortunately, the word independence is almost entirelyalien to the people at HMRC. There is an adjudicator who performs a watchdogrole. Except this watchdog is staffed entirely by HMRC inspectors &administrators. Then there are the reviews of its practices that are conducted byinsiders or other civil servants. Client confidentiality is the barrier to anydiscussion except by its own people, as the all-party public accounts committeefound to its annoyance last year.
9The new HMRC mediation scheme: what others say about it?Now we are offered a dispute resolution service where "the facilitators areHMRC members of staff who have been trained in ADR techniques & havenot been involved in the dispute"."Alternative Dispute Resolution" is a well-trodden path in law & there will beplenty of precedents for HMRCs specially trained team to use in its work.But there is no hope the team will be independent.Maybe the proposal is an extension of the softly-softly approach thatGoldmans & Vodafone enjoyed. Then again, it could be a response to thecalamitous cuts HMRC is suffering, with many inspectors performing theduties of five redundant workers. Without the necessary staff to carrythrough a well argued & robust tax claim on behalf of the exchequer,HMRC is left pleading in a mediation room for a few crumbs.‟TWO SCHEMES THOUGH?
10The new HMRC mediation scheme: what others say about it?Geoff Lloyd, director in Ernst & Young‟s tax controversy team, commentedon the extension of HMRC‟s Alternative Dispute Resolution service..."Alternative Dispute Resolution (ADR) has been remarkably successful inresolving tax disputes of all shapes & sizes, avoiding the costs & delays toboth sides of going to court. The mediator - or HMRC facilitator in individual& SME cases - can help both parties find a satisfactory basis for settlementwithout either party losing control of the outcome. With almost 20,000disputes in the queue for the Tax Tribunal, theres a need for a lot more ADRthan weve seen to date & opening up the process to individuals & SMEsthroughout the UK is a positive development. Theres more to be done toofor large & complex cases. Only a handful of cases so far have beenresolved using mediation through the large business & complex case pilot.While HMRCs aspiration of managing 50 of these disputes this year is agood starting point, there is scope for bringing in mediators earlier & in morecases, especially as the pilots have shown that ADR can lead to better &faster outcomes all round."
11The new HMRC mediation scheme: what does HMRC say about it?"DRAFT PRACTICAL GUIDANCE FOR HMRC STAFF ON THE USE OF ALTERNATIVE DISPUTERESOLUTION IN LARGE OR COMPLEX CASES“.http://www.hmrc.gov.uk/practitioners/adr-draft-guidance.pdfIn appropriate cases, HMRC considers that mediation can be used as a costeffective, consensual & speedy means of supporting the resolution of tax disputes(whether the dispute is ultimately resolved by agreement between the parties orby litigation).Mediation can be particularly useful in long-running disputes where positions onboth sides have become entrenched, or progress for whatever reason hasstalled. Mediation can help narrow down the areas of disagreement in one ormore component parts of a dispute by clarifying technical issues & identifyingpoints of difference whilst maintaining good working relationships between theparties. For example, mediation could be useful in helping to clarify the keyquestions which need to be answered in order to resolve the dispute (i.e.agreeing a decision tree) or by narrowing the particular points in dispute inpreparation for litigation„.
12The new HMRC mediation scheme: what does HMRC say about it?Mediation is a tool available to HMRC which may be of benefit in certain cases, subject to the criteria& additional governance requirements described below.Types of mediation:(i) „Facilitative mediation‟ is a process in which the mediator tries to bring the partiestogether but offers no opinion on the merits of the arguments being advanced. The mediatormay however put forward a neutral opinion as to how a dispute may play out in front of theTribunal. A facilitative mediator may or may not be a specialist in the subject matter of thedispute.(ii) „Evaluative mediation‟ is a process in which the mediator will try to bring the partiestogether in exactly the same way as in facilitative mediation, but also providing his/her viewof the matter as a specialist.It is possible to have a combination of the two approaches in which facilitative mediation isattempted first, with evaluative mediation following if the initial approach is not successful.
13The new HMRC mediation scheme: what does HMRC sayabout it?At what stage in a dispute should mediation be considered?The stage at which a particular tax dispute may be suitable formediation will vary from case. Mediation can be considered eitherbefore or after the issuing of a formal decision by HMRC.Mediation is unlikely to be appropriate where any or all of thefollowing points apply: The customer does not work with HMRC in a collaborativemanner or on the specific dispute has indicated that they do notwish to try mediation. It would be more efficient to have an issue judicially clarifiedso that the precedent gained can be applied to other cases;
14The new HMRC mediation scheme: what does HMRC sayabout it? Resolution can only be achieved by departure from anestablished „HMRC view‟ on a technical issue, & noexceptional facts or circumstances exist to justify adeparture from the law or practice; There is reason to suspect lack of integrity on the part ofthe customer, whether or not criminal proceedings areenvisaged; There is doubt over the veracity or strength of evidenceprovided & HMRC wish to test it by cross-examination in apublic tribunal.
15So what is the mediation process?„The parties are rarely familiar with the mediation process & it is helpful if the mediator issues apaper outlining the procedure in advance of the mediation. The mediator should ask the parties to: Send him a short written statement outlining how they consider the dispute has arisen;their view of the dispute & what steps have been taken in attempting to resolve thedispute. Define for themselves the subject matter of the mediation. Determine their own objectives, which will include a maximum or minimumrequirement. BATNA WATNA. List the various facts that are helpful to their case & those likely to be raised by theother party. List the issues upon which the parties disagree. Each party should assess their own position in respect of each issue & determine thetactics for each. Consider the needs of the other party. There is little point in pursuing something thatthe other party is unable to provide. Consider their strategies for the mediation.
16So what is the mediation process?The mediator facilitates agreement between the parties by suggestion, advice,persuasion, cajoling or any other means available to bring the parties together.The mediator, having no power to impose a solution, can refuse to start amediation if he thinks the substance of the dispute is unsuitable for mediation. Hecan refuse to continue when he believes that the parties cannot reach a solutionor are not seriously trying to reach a settlement.The mediator can be removed by the parties at any time if they are dissatisfiedwith the way in which he is conducting the mediation.The mediator must endeavour to engender a "will to settle".
17So what is the mediation process?The Mediators role. The Mediators function is to act as a catalyst to enable the parties to resolve thedifficulties for themselves. Parties may not be able to reach agreement by themselves for a number of reasons:-o One or both of the parties have reached an entrenched position from which it isdifficult or impossible to retreat.o The demands of one party are so excessive that no accommodation orcompromise appears possible.o The demands a one party may be impossible for the other party to agree. It is forthe mediator to find some other solution that is acceptable.o Personality clashes may have developed between the parties that make it hard forthem to communicate on any level of understanding.o One party has taken a defensive position because of potential third-partyliabilities.o Resolution of the problem is difficult because of departmental policies.o There may be cultural problems, for example the fear of "losing face".
18So what is the mediation process?Techniques for the mediator. Establish exactly what the dispute is about: establish the reasons behind it; whatcaused the inability to settle & what the parties actually require (this may not be whatthey think they require). Clarify the positions of the parties & translate them into terms that are clearlyunderstood by all. Establish what is important & what is not to each of the parties; the priorities ofthese various requirements & establish what is expendable. Establish areas of overlap: help each side to a position of compromise. Extend discussions into matters or proposals not previously considered. Make suggestions to each party concerning alternative solutions. Exert pressure for a solution to be reached. Seek a "face-saving" formula where appropriate. To be effective the mediator must gain & retain the confidence & respect of theparties.
19So what is the mediation process?Techniques for the mediator Trust has to be established from the outset to enable the parties to deal frankly &openly with the mediator. A successful mediation requires the parties to reveal to themediator their positions & the concessions that they are prepared to make. The mediator should establish this trust by:-o Explaining his role in the process.o Demonstrating that he has the ability to listen to the parties & learn from them.o Showing both impartiality & objectivity.o Not making value judgements.o Being firm but flexible when handling the meetings & ensuring that thediscussions are confined to what is relevant.o Not showing hostility to any partys views or positions.o Remembering that he is not a judge & is not able to decide between the partiescases.
20So what is the mediation process?Tips Be objective: support both sides, even if privately you prefer one point of view. Be supportive: use caring language. Provide a non-threatening learningenvironment, where people will feel safe to open up.Do not be judgemental: actively discourage judgements as to who was right & whowas wrong. Do not ask "Why did you?" Ask "What happened?" & "How did you feel?"Steer process, not content. Use astute questioning. Encourage suggestions fromthe Parties. Resist advising. If your suggestions are really needed, offer as options notdirectives.Win/Win: work towards wins for both Parties. Turn opponents into problem solvingpartners.Get agreement from both Parties about a basic willingness to solve the problem.Let each Party say what the problem is for them. Check back that each Party hasactually understood the position of the other Party.
21So what is the mediation process?Tips Guide conversations towards a joint problem-solving approach & away from personalattack.Encourage Parties to look for answers where everybody gets what they need.Reframe negative statements into a neutral description of a legitimate present concern.Let themediationcommence.
22So what is the mediation process?Procedure The mediator (myself) introduces himself & ensures that all present are introduced to eachother. The mediator (me) makes his opening statement. The parties (Robert & Richard) make a short statement describing their views of thedispute. The mediator (myself) meets with each party separately in turn at a "caucus". The mediator (myself) discusses with each party their respective views of the dispute,trying to find out what is of real importance to each & to identify any areas of possibleresolution. The mediator (myself) will move to & fro between the parties (Robert & Richard) trying outdifferent approaches & attempting to narrow the areas of disagreement in order to bring theparties closer together. When he (the mediator) believes that agreement can be reached, or for some otherreason it would be helpful, the mediator will bring the parties together again in joint session. Once a solution has been reach the mediator (myself) will see that it is recorded in writing.If a lawyer is present he should be invited to draft a formal agreement.
23The mediation has now begun.OPENING STATEMENT BY MEDIATORGood DayAre you are well & ready to begin?I am Prof Grant Jones. As you are aware, I have been appointed to act as Mediatorin the dispute between you.Well done by agreeing to this mediation, you have already reached the first stage ofpotential agreement.Before we begin perhaps it would be helpful to you if I explain a little of mybackground.I am, blah, blah, blah.I am heavily involved in ADR: as an Arbitrator, Lecturer & Mediator. Mediation isincreasingly becoming the preferred method of dispute resolution & the largemajority of mediations reach a settlement. I see no reason why we should notachieve a successful result today.
24The mediation has now begun.TYPICAL OPENING STATEMENT BY MEDIATORInitially it would be useful if you would each introduce yourself by telling me whoyou are & what your function is today.I must confirm that you both have the necessary authority to reach a settlementtoday? I will record that your confirmation of authority to conclude a settlement.Probably no one has participated in a mediation before? So I’ll inform you of theprocess & explain my role as mediator. In so doing, I may refer to written notes.When people are unable to conclude an agreement themselves they may seekoutside help. This help can be ‘legal’ - arbitration or litigation - or by through anindependent person, a neutral person, to act as a go-between to guide them to anacceptable solution. That is my function.I have no power to impose upon you my solution, like an arbitrator or judge. I amhere as a catalyst to assist you to explore routes to agreement.It’s to be your solution, not mine.
25The mediation has now begun.TYPICAL OPENING STATEMENT BY MEDIATORYou are free to leave whenever you are unhappy with the process. You will not commityourself howsoever unless you wish to do so.Importantly today , this process is "without prejudice". That means that anything that issaid today cannot be used as evidence in any subsequent proceedings that mayoccur, & therefore nothing that is said will affect your legal positions in any way shouldwe not be able to reach an agreement. Reference can not be made in any subsequentproceedings to what is said during this mediation. Any rights with which you came intothis mediation will still be with you when you leave.I have not met either of you before [or: I do of course know the HMRC staff in aprofessional capacity.] & I have no personal interest in any settlement that we mayreach. I give you my solemn undertaking that anything that you tell me in theseproceedings I shall treat in complete confidence & I will not disclose anything that youtell me to any other party without your express & explicit approval.
26The mediation has now begun.TYPICAL OPENING STATEMENT BY MEDIATORI will shortly ask both of you to give me a brief dispute outline. Please do notinterrupt each other. There will be time for your alternative views later.After your addresses I will speak to each of you privately in what, in mediationjargon, we call a caucus. I shall go back & forth between you, classifying points &exploring possibilities, until I think that we have the basis for an agreement.I must stress that it is essential that in these discussions you speak frankly & openlywith me. Please remember that our conversations will be completely confidential.At the end of the mediation I will destroy my notes & I will not voluntarily take part inany future action that may occur between you on the matters that we shall now beconsidering.Perhaps I should point out that it is of no importance to whom I decide to speak first& it is also of no significance how long I spend with each of you. That will dependupon how the matter unfolds.
27The mediation has now begun.TYPICAL OPENING STATEMENT BY MEDIATORI would also point out that if I nod at you that does not mean that I agree with thepoint being made, but merely that I understand what you are telling me.It is my normal practice that when I think we are in a position to reach anagreement I shall call you together again, so that we can summarise the points ofagreement reached & decide how to finalise it.When an agreement is reached I shall, if you wish, draft the agreement for youboth to sign before ending the mediation.Robert, in accordance with the standard mediator’s procedure I invite you, as theClaimant, to give your views first.Now Richard, as the Respondent will you please give me your views.Thank you gentlemen. I will now hold my first caucus with Robert, the Claimant.Richard will you please return to your room. I shall hold my first caucus with youin a few minutes time.
28The parties are now in mediation.Please feel free to interrupt with comments throughout the process.Grant Jones LLM.Chartered Accountant, Solicitor, New York Attorney, Licensed Insolvency Practitioner & SpecialProfessor of Laws, Nottingham University .LinkedIn - http://uk.linkedin.com/in/accountantarbitrator (To download the slides, please goto the dropbox account on my LinkedIn page & to the CLSPG seminars folder & downloadslides available on this page).Acknowledgements - (a) HMRC website (b) Wikipedia (c) Guardian (d) E & Y website (e)Staffs University (James Torr).
29The parties have now reached agreement.The settlement agreement.Obviously the terms of thesettlement agreement will varyenormously depending upon thenature of the dispute & indeed ofthe settlement. However therewill be standard terms to anysettlement agreement. Astandard GMJ settlementagreement is reproduced below -
30The parties are now drafting the settlement agreement.Mediated settlement agreement (“the Agreement”).DateMediants(“Mediant A”).[Address](“Mediant B”).[Address] __________(jointly “the Mediants”)WHEREASThe Mediants have agreed to settle certain matters in dispute ("the Dispute") asbetween them which were previously subject to litigation or arbitration ("the Action").The Dispute has been settled as more particularly described in this Agreement,through mediation ("the Mediation"). The Mediation was conducted under theauspices of the Mediation Body.NOWIt is agreed as follows:
31The parties are now drafting the settlement agreement.1 [A will deliver...............to B at.........by not later than........]2 [B will pay £.........to A by no later than.......by telegraphic transfer to accountnumber.....in the name of........at the Bank of........, with sort code of........]3a The Action will be stayed, the Mediants consenting to the Tomlin Orderreproduced as appendix 1.OR3b The Action will be discontinued with no claim or order for costs.5 The Agreement is in full & final settlement of any & all matters in dispute orcontroversy between the Mediants.6 The Agreement overwrites any & all earlier agreements between the Mediants asto the Dispute.
32The parties are now drafting the settlementagreement.If any dispute or controversy arises out of or in connection with theAgreement, the Mediants will attempt to settle it by further mediation inaccordance with the [rules & procedures of the mediation body]. If the partiesare unable to agree a mediator, the mediator will be chosen & appointed by [themediation body].8 The Mediants will ensure that this Agreement arising out of orotherwise connected with the Mediation (unless otherwise required by anycompetent, relevant legal or regulatory authority, or auditors or insuranceprovider, or to enforce any settlement agreement) remains confidential.9 The Mediants submit this Agreement & any matter arising out of it orotherwise in connection with it, save for any matter concerned with theEuropean Convention of Human Rights, to the exclusive jurisdiction of thecourts of England & Wales.Signed, etc
33The parties are now drafting the settlementagreement.Draft Tomlin Order[Action heading]UPON hearing …..By consentIT IS ORDERED that all further proceedings in this case be stayed upon the termsset out in the Agreement between the Mediants dated ….., an original of which is heldby each of the Mediants‟ solicitors.& IT IS FURTHER ORDERED that either Mediant/any of the Mediants may apply tothe court to enforce the terms of the said Agreement [or to claim for breach of it]without the need to commence new proceedings.& IT IS FURTHER ORDERED that [each Mediant bear its own costs].WE CONSENT to an order in these terms................................ [Conciliator LLP] Solicitors for [Mediant A].................................. [Co-Operative LLP] Solicitors for
34The party has now concluded.ConclusionThe core question facing any mediator, particularly a mediator who is not legally qualified, is to whatextent can or should he draft the settlement agreement? Do you feel comfortable with a non-lawyerdrafting a settlement agreement?Grant Jones LLM.Chartered Accountant, Solicitor, New York Attorney, Licensed Insolvency Practitioner & SpecialProfessor of Laws, Nottingham University .LinkedIn - http://uk.linkedin.com/in/accountantarbitratorWebsite - http://www.gmjones.org/ To download the slides, please go tohttp://gmjones.org/accountantsinadr_hmrc.phpAcknowledgements - (a) HMRC website (b) Wikipedia (c) Guardian (d) E & Y website (e) StaffsUniversity (James Torr) (f) „Are you being served?‟You’ve all done very well.Thank you, especially to Robert (whoprovided the dispute) & Richard.Prof Grant Jones.