Finance: Taking the heat out of settling disputes: Cases which involve pounds 1bn have been settled in four years without litigation, says Roger Trapp

David Mundell, BT's group legal adviser in Scotland, was initially sceptical about the process for settling business disagreements known as Alternative Dispute Resolution, or ADR. But then he tried it.

The company had been embroiled in a case that had so far taken two years. Since, for a variety of procedural reasons, it looked as if it would take another two years to reach a result, it was decided to try mediation.

Even then, right up to the day of the meeting, Mr Mundell, a solicitor qualified in both England and Wales and in Scotland, was not convinced the problem was capable of being resolved in this way. But by the end of that first session agreement had been reached.

That practical experience has made him a fan of a procedure that, since it was introduced in this country with the backing of the Confederation of British Industry in November 1990, has dealt with cases involving a total of pounds 1bn. And the story of how it happened will be told at the update seminar being held by the Centre for Dispute Resolution tomorrow.

Mr Mundell is happy to talk about it because he sees it as genuinely different from other initiatives that have been much trumpeted but not proved so effective when taken up. For instance, arbitration has become as costly and procedural as going to court, while industrial tribunal hearings have become a lot more complex than was originally envisaged, he says.

ADR, on the other hand, is practical 'because it frees people to deal with a dispute at a predetermined time'.

Consequently, once the parties decide to try it there is a good chance of putting everything on the table. As Mr Mundell says: 'There is not much scope for delaying or messing about. You are either committed to it or not.'

This is important since it is a common misconception about litigation that it inevitably gives those involved their day in court. In fact, says Mr Mundell, they are often disappointed because they have not had the chance to say what they wanted to.

Gerry Ginty, company secretary and administration director at TNT Express, the transport company that is also speaking about its experiences at the seminar, agrees that traditional legal procedures are not all they are believed to be.

'What generally happens with a situation where you have a dispute is it goes on and on,' he says. 'It gets to the eleventh hour and you settle out of court - so all you've done is keep lawyers going for two to three years.'

Not surprisingly, then, lawyers have not been universally eager to back the idea that has generally been regarded as a peculiarly American answer to the excesses of the US legal system. But, although some view getting involved in ADR as like turkeys voting for an early Christmas, others are conscious of the changing relationship between firms and their clients.

Companies anxious to cut costs because of the tough business climate have found that they can cut their legal bills through tough negotiation and shopping around, while some firms are discovering that - attractive as it sounds - going to court is not an efficient way for them to make money.

It is more effective for solicitors to work in great bursts than to have cases dragging on for years like some latter- day version of Dickens' Jarndyce v Jarndyce.

Professor Karl Mackie, chief executive of CEDR, acknowledges that there is 'still a degree of resistance' in the legal community. He says that although professional bodies have backed the idea many individuals are too entrenched in the traditional way of doing things.

Nevertheless, lawyers make up about 60 per cent of the mediation panel with accountants, surveyors, consultants and other professionals helping to give it a broad enough base to deal with complex cases that may be beyond the abilities of the typical court.

While the service has started to handle disputes in such areas as venture capital and financial services, the notoriously dispute-ridden construction industry remains a key area. A large proportion of the arguments between banks, contractors and others that have plagued the building of the Channel tunnel have been quietly settled using the ADR procedure.

Further support for the development of the concept in this area was given by the Latham Report on competitiveness in the industry, published earlier this year.

Prof Mackie believes support for the idea is gradually building throughout the commercial world. But he hopes clients will give it a significant boost by becoming more robust with their lawyers and insisting on mediation.

'It is inevitably going to take off within the next five years,' he predicts.

But what is likely to prove the greatest driver is the business case. Both BT and TNT agree that they might have received more had they taken the dispute the full distance. But it was not worth the expenditure on lawyers or management time.

Moreover, at a time when companies of all sorts need all the customers they could find, alienating them through lengthy and vicious litigation would not serve their long- term interests.

(Photograph omitted)