North london lsca_tax_mediation_seminar

Grant Jones LLM, Chartered Accountant, Solicitor, New
York Attorney, Licensed Insolvency Practitioner & Special
Professor of Laws, Nottingham University .
LinkedIn - http://uk.linkedin.com/in/accountantarbitrator
Webpage - http://www.gmjones.org/ To download the
slides, please go to
http://gmjones.org/accountantsinadr_hmrc.php
Acknowledgements - (a) HMRC website (b) Wikipedia (c)
Guardian (d) E & Y website (e) Staffs University (James
Torr). 1
E - gmjones@gmjones.org

the slides
2
There is no need to read the
detail of these slides. I will skip
you through these slides; death
will be avoided.
The purpose of the detail is so
you can take a considered look
at your convenience later.

3
What is alternative dispute resolution (ADR) & why is it
important?
• ADR is non-court (including quasi-courts or tribunals)
dispute resolution.
• It is becoming increasingly important as stakeholders &
governments seek to reduce costs, & seek penalise
those that unnecessarily avoid ADR.
• For our (chartered accountants) purposes, ADR comes
in three types: Arbitration, Mediation & Expert
Determination.
• ADR is admirably suited to the chartered accountant.

4
What is Arbitration?
'Arbitration, a form of ADR is a legal technique for the resolution of
disputes outside the courts, where the parties to a dispute refer it to
one or more persons (the "arbitrators", "arbiters" or "arbitral
tribunal"), by whose decision (the "award") they agree to be bound.
„It is a resolution technique in which a third party reviews the
evidence in the case & imposes a decision that is legally binding for
both sides & enforceable... Arbitration is often used for the
resolution of commercial disputes...Arbitration is a proceeding in
which a dispute is resolved by an impartial adjudicator whose
decision the parties to the dispute have agreed, or legislation has
decreed, will be final & binding‟.
There are limited rights of review & appeal of arbitration awards„.

5
What is Mediation?
'Mediation, as used in law, is a form of ADR, a way of resolving disputes between
two or more parties with concrete effects. Typically, a third party, the
mediator, assists the parties to negotiate a settlement. Disputants may mediate
disputes in a variety of domains, such as
commercial, legal, diplomatic, workplace, community & family matters.
The term "mediation" broadly refers to any instance in which a third party helps
others 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. The
mediator acts as a neutral third party & facilitates, rather than directs the process.
Mediators use various techniques to open, or improve, dialogue between
disputants, aiming to help the parties reach an agreement. Much depends on the
mediator's skill & training. As the practice gained popularity, training
programs, certifications & licensing followed, producing trained, professional
mediators committed to the discipline.‟

6
What is Expert Determination?
„Expert determination is a historically accepted form of dispute resolution
invoked when there isn't a formulated dispute in which the parties have
defined positions that need to be subjected to arbitration, but rather both
parties are in agreement that there is a need for an evaluation.
The practise itself is millennia old & well established where complex legal
institutions either have not developed, or are unavailable, such as tribal
societies & criminal organisations.
In the context of modern jurisprudence the word "expert" appears first in
Bottomley v Ambler ..., this was however used ambiguously also referring to
arbitrators having the qualification of expert. The first mention that
distinguishes specifically against the practise of arbitration, & introduces the
formula "as an expert & not as an arbitrator" was in Dean v. Prince 1953... In
Contract Law, the parties are free to include a forum selection clause
appointing a special referee to resolve specialised but disputed factual issues
between them.‟

7
What does the ICAEW say?
„An expert determination is when an expert (such as a chartered
accountant) is appointed to decide points of disagreement between the
parties 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 it
does not have the same enforceability as arbitration.
Arbitration involves processes that are similar to a more formal court
hearing but is held in private before an arbitrator. The arbitrator considers
the testimony of the parties & any evidence submitted by them & then
makes a binding decision that can be enforced just like a court
judgement.
The Arbitration Act 1996 provides for a fair, cost effective & fast
resolution of disputes & these are the fundamental principles that an
arbitrator must consider throughout the arbitration process‟.

8
The new HMRC mediation scheme: what others say about it?
'HM Revenue & Customs is now offering mediation services for small
businesses. The tax authority is ready for mediation. Notwithstanding HMRC‟s
propensity to roll over & beg when the likes of Vodafone or Goldman Sachs
demand to pay less tax, its tough-talking officers are offering small & medium-
sized businesses the chance to put aside sharpened weapons before a fight
kicks off. Let's have a friendly discussion is the message.
Not nationwide. A pilot in north Wales will test the water. HMRC says mediation
will save time & money & a short study found "60% of disputes were either fully
or partially resolved". Unfortunately, the word independence is almost entirely
alien to the people at HMRC. There is an adjudicator who performs a watchdog
role. Except this watchdog is staffed entirely by HMRC inspectors &
administrators. Then there are the reviews of its practices that are conducted by
insiders or other civil servants. Client confidentiality is the barrier to any
discussion except by its own people, as the all-party public accounts committee
found to its annoyance last year.

9
Now we are offered a dispute resolution service where "the facilitators are
HMRC members of staff who have been trained in ADR techniques & have
not been involved in the dispute".
"Alternative Dispute Resolution" is a well-trodden path in law & there will be
plenty of precedents for HMRC's 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 that
Goldmans & Vodafone enjoyed. Then again, it could be a response to the
calamitous cuts HMRC is suffering, with many inspectors performing the
duties of five redundant workers. Without the necessary staff to carry
through 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?

10
Geoff Lloyd, director in Ernst & Young‟s tax controversy team, commented
on the extension of HMRC‟s Alternative Dispute Resolution service...
"Alternative Dispute Resolution (ADR) has been remarkably successful in
resolving tax disputes of all shapes & sizes, avoiding the costs & delays to
both sides of going to court. The mediator - or HMRC facilitator in individual
& SME cases - can help both parties find a satisfactory basis for settlement
without either party losing control of the outcome. With almost 20,000
disputes in the queue for the Tax Tribunal, there's a need for a lot more ADR
than we've seen to date & opening up the process to individuals & SMEs
throughout the UK is a positive development. There's more to be done too
for large & complex cases. Only a handful of cases so far have been
resolved using mediation through the large business & complex case pilot.
While HMRC's aspiration of managing 50 of these disputes this year is a
good starting point, there is scope for bringing in mediators earlier & in more
cases, especially as the pilots have shown that ADR can lead to better &
faster outcomes all round."

11
The new HMRC mediation scheme: what does HMRC say about it?
"DRAFT PRACTICAL GUIDANCE FOR HMRC STAFF ON THE USE OF ALTERNATIVE DISPUTE
RESOLUTION IN LARGE OR COMPLEX CASES“.
http://www.hmrc.gov.uk/practitioners/adr-draft-guidance.pdf
'In appropriate cases, HMRC considers that mediation can be used as a cost
effective, consensual & speedy means of supporting the resolution of tax disputes
(whether the dispute is ultimately resolved by agreement between the parties or
by litigation).
Mediation can be particularly useful in long-running disputes where positions on
both sides have become entrenched, or progress for whatever reason has
stalled. Mediation can help narrow down the areas of disagreement in one or
more component parts of a dispute by clarifying technical issues & identifying
points of difference whilst maintaining good working relationships between the
parties. For example, mediation could be useful in helping to clarify the key
questions 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 in
preparation for litigation„.

12
The 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 parties
together but offers no opinion on the merits of the arguments being advanced. The mediator
may however put forward a neutral opinion as to how a dispute may play out in front of the
Tribunal. A facilitative mediator may or may not be a specialist in the subject matter of the
dispute.
(ii) „Evaluative mediation‟ is a process in which the mediator will try to bring the parties
together in exactly the same way as in facilitative mediation, but also providing his/her view
of the matter as a specialist.
It is possible to have a combination of the two approaches in which facilitative mediation is
attempted first, with evaluative mediation following if the initial approach is not successful'.

13
The new HMRC mediation scheme: what does HMRC say
about it?
At what stage in a dispute should mediation be considered?
The stage at which a particular tax dispute may be suitable for
mediation will vary from case. Mediation can be considered either
before or after the issuing of a formal decision by HMRC.
Mediation is unlikely to be appropriate where any or all of the
following points apply:
 The customer does not work with HMRC in a collaborative
manner or on the specific dispute has indicated that they do not
wish to try mediation.
 It would be more efficient to have an issue judicially clarified
so that the precedent gained can be applied to other cases;

14
The new HMRC mediation scheme: what does HMRC say
about it?
 Resolution can only be achieved by departure from an
established „HMRC view‟ on a technical issue, & no
exceptional facts or circumstances exist to justify a
departure from the law or practice;
 There is reason to suspect lack of integrity on the part of
the customer, whether or not criminal proceedings are
envisaged;
 There is doubt over the veracity or strength of evidence
provided & HMRC wish to test it by cross-examination in a
public tribunal.

15
So what is the mediation process?
„The parties are rarely familiar with the mediation process & it is helpful if the mediator issues a
paper 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 the
dispute.
 Define for themselves the subject matter of the mediation.
 Determine their own objectives, which will include a maximum or minimum
requirement. BATNA WATNA.
 List the various facts that are helpful to their case & those likely to be raised by the
other party.
 List the issues upon which the parties disagree.
 Each party should assess their own position in respect of each issue & determine the
tactics for each.
 Consider the needs of the other party. There is little point in pursuing something that
the other party is unable to provide.
 Consider their strategies for the mediation.

16
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 a
mediation if he thinks the substance of the dispute is unsuitable for mediation. He
can refuse to continue when he believes that the parties cannot reach a solution
or are not seriously trying to reach a settlement.
The mediator can be removed by the parties at any time if they are dissatisfied
with the way in which he is conducting the mediation.
The mediator must endeavour to engender a "will to settle".

17
The Mediator's role.
 The Mediator's function is to act as a catalyst to enable the parties to resolve the
difficulties 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 is
difficult or impossible to retreat.
o The demands of one party are so excessive that no accommodation or
compromise appears possible.
o The demands a one party may be impossible for the other party to agree. It is for
the mediator to find some other solution that is acceptable.
o Personality clashes may have developed between the parties that make it hard for
them to communicate on any level of understanding.
o One party has taken a defensive position because of potential third-party
liabilities.
o Resolution of the problem is difficult because of departmental policies.
o There may be cultural problems, for example the fear of "losing face".

18
Techniques for the mediator.
 Establish exactly what the dispute is about: establish the reasons behind it; what
caused the inability to settle & what the parties actually require (this may not be what
they think they require).
 Clarify the positions of the parties & translate them into terms that are clearly
understood by all.
 Establish what is important & what is not to each of the parties; the priorities of
these 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 the
parties.

19
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 the
mediator 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 the
discussions are confined to what is relevant.
o Not showing hostility to any party's views or positions.
o Remembering that he is not a judge & is not able to decide between the parties
cases.

20
Tips
 Be objective: support both sides, even if privately you prefer one point of view.
 Be supportive: use caring language. Provide a non-threatening learning
environment, where people will feel safe to open up.
Do not be judgemental: actively discourage judgements as to who was right & who
was wrong. Do not ask "Why did you?" Ask "What happened?" & "How did you feel?"
Steer process, not content. Use astute questioning. Encourage suggestions from
the Parties. Resist advising. If your suggestions are really needed, offer as options not
directives.
Win/Win: work towards wins for both Parties. Turn opponents into problem solving
partners.
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 has
actually understood the position of the other Party.

21
Tips
 Guide conversations towards a joint problem-solving approach & away from personal
attack.
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 the
mediation
commence.

22
Procedure
 The mediator (myself) introduces himself & ensures that all present are introduced to each
other.
 The mediator (me) makes his opening statement.
 The parties (Robert & Richard) make a short statement describing their views of the
dispute.
 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 possible
resolution.
 The mediator (myself) will move to & fro between the parties (Robert & Richard) trying out
different approaches & attempting to narrow the areas of disagreement in order to bring the
parties closer together.
 When he (the mediator) believes that agreement can be reached, or for some other
reason 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.

23
The mediation has now begun.
OPENING STATEMENT BY MEDIATOR
Good Day
Are you are well & ready to begin?
I am Prof Grant Jones. As you are aware, I have been appointed to act as Mediator
in the dispute between you.
Well done by agreeing to this mediation, you have already reached the first stage of
potential agreement.
Before we begin perhaps it would be helpful to you if I explain a little of my
background.
I am, blah, blah, blah.
I am heavily involved in ADR: as an Arbitrator, Lecturer & Mediator. Mediation is
increasingly becoming the preferred method of dispute resolution & the large
majority of mediations reach a settlement. I see no reason why we should not
achieve a successful result today.

24
TYPICAL OPENING STATEMENT BY MEDIATOR
Initially it would be useful if you would each introduce yourself by telling me who
you are & what your function is today.
I must confirm that you both have the necessary authority to reach a settlement
today? 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 the
process & 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 seek
outside help. This help can be ‘legal’ - arbitration or litigation - or by through an
independent person, a neutral person, to act as a go-between to guide them to an
acceptable solution. That is my function.
I have no power to impose upon you my solution, like an arbitrator or judge. I am
here as a catalyst to assist you to explore routes to agreement.
It’s to be your solution, not mine.

25
You are free to leave whenever you are unhappy with the process. You will not commit
yourself howsoever unless you wish to do so.
Importantly today , this process is "without prejudice". That means that anything that is
said today cannot be used as evidence in any subsequent proceedings that may
occur, & therefore nothing that is said will affect your legal positions in any way should
we not be able to reach an agreement. Reference can not be made in any subsequent
proceedings to what is said during this mediation. Any rights with which you came into
this 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 a
professional capacity.] & I have no personal interest in any settlement that we may
reach. I give you my solemn undertaking that anything that you tell me in these
proceedings I shall treat in complete confidence & I will not disclose anything that you
tell me to any other party without your express & explicit approval.

26
I will shortly ask both of you to give me a brief dispute outline. Please do not
interrupt 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 mediation
jargon, 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 & openly
with 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 in
any future action that may occur between you on the matters that we shall now be
considering.
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 depend
upon how the matter unfolds.

27
I would also point out that if I nod at you that does not mean that I agree with the
point 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 an
agreement I shall call you together again, so that we can summarise the points of
agreement reached & decide how to finalise it.
When an agreement is reached I shall, if you wish, draft the agreement for you
both to sign before ending the mediation.
Robert, in accordance with the standard mediator’s procedure I invite you, as the
Claimant, 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 you
in a few minutes time.

28
The 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 & Special
LinkedIn - http://uk.linkedin.com/in/accountantarbitrator (To download the slides, please go
to the dropbox account on my LinkedIn page & to the CLSPG seminars folder & download
slides available on this page).
Acknowledgements - (a) HMRC website (b) Wikipedia (c) Guardian (d) E & Y website (e)
Staffs University (James Torr).

29
The parties have now reached agreement.
The settlement agreement.
Obviously the terms of the
settlement agreement will vary
enormously depending upon the
nature of the dispute & indeed of
the settlement. However there
will be standard terms to any
settlement agreement. A
standard GMJ settlement
agreement is reproduced below -

30
The parties are now drafting the settlement agreement.
Mediated settlement agreement (“the Agreement”).
Date
Mediants
(“Mediant A”).
[Address]
(“Mediant B”).
[Address] __________
(jointly “the Mediants”)
WHEREAS
The Mediants have agreed to settle certain matters in dispute ("the Dispute") as
between 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 the
auspices of the Mediation Body.
NOW
It is agreed as follows:

31
The 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 account
number.....in the name of........at the Bank of........, with sort code of........]
3a The Action will be stayed, the Mediants consenting to the Tomlin Order
reproduced as appendix 1.
OR
3b 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 or
controversy between the Mediants.
6 The Agreement overwrites any & all earlier agreements between the Mediants as
to the Dispute.

32
The parties are now drafting the settlement
agreement.
If any dispute or controversy arises out of or in connection with the
Agreement, the Mediants will attempt to settle it by further mediation in
accordance with the [rules & procedures of the mediation body]. If the parties
are unable to agree a mediator, the mediator will be chosen & appointed by [the
mediation body].
8 The Mediants will ensure that this Agreement arising out of or
otherwise connected with the Mediation (unless otherwise required by any
competent, relevant legal or regulatory authority, or auditors or insurance
provider, or to enforce any settlement agreement) remains confidential.
9 The Mediants submit this Agreement & any matter arising out of it or
otherwise in connection with it, save for any matter concerned with the
European Convention of Human Rights, to the exclusive jurisdiction of the
courts of England & Wales.
Signed, etc

33
The parties are now drafting the settlement
agreement.
Draft Tomlin Order
[Action heading]
UPON hearing …..
By consent
IT IS ORDERED that all further proceedings in this case be stayed upon the terms
set out in the Agreement between the Mediants dated ….., an original of which is held
by each of the Mediants‟ solicitors.
& IT IS FURTHER ORDERED that either Mediant/any of the Mediants may apply to
the 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

34
The party has now concluded.
Conclusion
The core question facing any mediator, particularly a mediator who is not legally qualified, is 'to what
extent can or should he draft the settlement agreement'? Do you feel comfortable with a non-lawyer
drafting a settlement agreement?
Grant Jones LLM.
Chartered Accountant, Solicitor, New York Attorney, Licensed Insolvency Practitioner & Special
LinkedIn - http://uk.linkedin.com/in/accountantarbitrator
Website - http://www.gmjones.org/ To download the slides, please go to
http://gmjones.org/accountantsinadr_hmrc.php
Acknowledgements - (a) HMRC website (b) Wikipedia (c) Guardian (d) E & Y website (e) Staffs
University (James Torr) (f) „Are you being served?‟
You’ve all done very well.
Thank you, especially to Robert (who
provided the dispute) & Richard.
Prof Grant Jones.

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