Has Mediation Become Compulsory In Commercial Disputes?

11th July 2017 by

Advisable but not (quite) compulsory to use ADR but don’t delay in the face of an offer to do so.

Mediation is a quick and cost-effective way of dealing with disputes which can be used to avoid litigation or the need to go to trial. It is the process which entails the use of a neutral participant (the mediator) to facilitate non-biased negotiations between the parties, in the hope of settling the dispute.

In the UK, the voluntary and consensual nature of mediation is seen as the fundamental distinguishing feature between mediation and litigation. It allows both parties to discuss the matters of the case with more flexibility and allows more innovative resolution than in court. Legal proceedings can appear to be rigorous and strict, whereas mediation is often considered a more natural process when settling the dispute.

There are several advantages of using mediation before issuing proceedings. One fundamental argument is costs. Mediation can be significantly cheaper than litigation, making it a more affordable option. One point which is often over-looked is the improvement of future relationships. By two parties settling through mediation, business and personal relationships may be saved from a point of no return as mediation allows for a cheap and more tailored resolution of the dispute than litigation.

That being said, mediation does have its negatives. By its nature settlement of mediation is a compromise and the parties may be unable to reach agreement for example it may leave both parties feeling their grievances have not been properly heard. This may lead to the parties continuing with proceedings regardless, which would make mediation an additional expense rather than a saving.

Compulsory mediation could lead clients to a feeling of dissatisfaction with the legal system as it is their inherent right to have access to justice and therefore litigate. The overarching positive of mediation is that it is a voluntary, consensual process, and making participation mandatory would be paradoxical.

In a recent decision (Briggs v First Choice Holidays and Flights) the High Court overturned a decision of the Costs Judge that it was neither reasonable nor proportionate for holiday claimants to incur litigation costs when they could have used a voluntary ABTA mediation scheme when claiming compensation for poor holiday conditions. Mr Justice Singh stated ‘’I do not consider the position has yet been reached that the mere availability of [mediation] is enough to deny a successful party costs where they have reached a costs order.’’ This emphasises the view that mediation should remain voluntary.

Nonetheless, clients will feel the pressure of the Court’s expectation that litigants are pro-active and engage constructively with one another to explore the potential to mediate or risk costs sanctions even if they are successful at trial.

Following the decision of Lord Justice Jackson, one could be forgiven for thinking that for all practical purposes mediation is all but compulsory. Sir Rupert Jackson’s Final Report for England and Wales argued that despite the considerable advantages of mediation, parties should never be compelled to mediate but in his recent decision of Thakkar v Patel he said “In a case where mediation is obviously appropriate, it behoves parties to get on with it. If one party frustrates the process by dragging its feet for no good reason, that will merit a costs sanction”. In this case the parties had agreed to mediate but the defendants delayed for so long and raised such difficulties that the claimants lost confidence in the whole ADR process. The successful but unreasonable litigant was ordered to pay 75% of the “losing” party’s costs.

The message is clear, whilst not compulsory a litigant cannot refuse to consider mediation, remain silent in the face of an offer to mediate or agree and then drag their heels or otherwise pay lip-service to the process even if mediation is unlikely to succeed. To do so will be seen as unreasonable behaviour and risk costs sanctions.

This is obviously sensible. To compel parties to attempt to settle defeats the objective of mediation as a whole. If parties wish to enter into mediation on their own accord, they would be far more likely to agree to settlement arrangements that both parties see fit. But where a case is suitable for mediation a party who “plays the system” should be penalised in costs.

If you require further information on this topic please contact David Bailey on 01273 685 888 or email david.bailey@healys.com.