Commercial mediation in South Africa

Mediation has not traditionally been used in relation to commercial disputes although steps have been taken to try and establish a greater role for mediation in these types of disputes. There are two types of mediation: (i) private and (ii) court-annexed. Unless contractually agreed, there is no obligation to mediate, although the parties must consider mediation at any early stage of the proceedings and the courts may occasionally suggest mediation to the parties. Unreasonable refusal to participate in mediation may attract an adverse costs order in court-annexed mediation. Mediations are confidential. To be enforceable, settlement agreements must be made by an order of the court.

What is the status of mediation in this jurisdiction?

In South Africa, numerous statutes provide for varying forms of mediation as an alternative means of resolving disputes, as opposed to litigation. Mediation is applied most frequently in employment and labour disputes, which is largely attributable to the work done by the Independent Mediation Service of South Africa in the 1980’s. Acts such as the Labour Relations Act of 1995, provides for the referral of certain disputes to conciliation (a form of mediation) as an initial step, before referring the relevant dispute to arbitration by the Commission for Conciliation, Mediation and Arbitration, or a similar body.

Decisive steps have been taken in South Africa in an attempt to establish mediation as an effective alternative mechanism for resolving commercial disputes. This approach is reflected in, among others, the Protection of Investment Act of 2015, the Companies Act of 2008 and leading corporate governance directives such as the King IV Report, which provide for mediation, as an alternative to litigation and arbitration, for the purposes of resolving disputes. The commercial sphere in South Africa has, however, been much slower to adopt to mediation as an effective alternative to litigation and arbitration to resolve commercial disputes.

Court annexed mediations are currently implemented in various Magistrate Courts throughout South Africa, which processes provide for the voluntary submission of civil disputes to mediation.

How is mediation conducted?

Prior to instituting litigious proceedings, mediation may be initiated by agreement between the parties or by invoking a contractual obligation to mediate. In remote instances, mediation may be initiated at the suggestion of the courts.

The mediation process is informal, but robust. Parties are not necessarily legally represented, although in practice parties choose to attend the mediation proceedings with their legal representatives.

On the day of mediation, the mediator will meet the parties to introduce himself / herself, to confirm signature of the agreement to mediate and to confirm that both parties have the required authority to negotiate. The mediator may conduct proceedings in whichever way he / she deems fit. However, most mediations start with the mediator explaining the process that will be followed during the mediation. Thereafter, the parties are given an opportunity to explain the issues in dispute from their respective perspectives along with what they hope to achieve during the mediation.

The parties will then be afforded the opportunity to deliver opening statements, followed by a series of short meetings with both parties to explore the various aspects of the dispute (such as their respective positions, interests and the causes of the conflict). The mediator then proceeds to assist the parties to develop various options which best suit the respective needs of the parties. The mediator also assists the parties to generate solutions that are practical, cost-effective and in the interests of the parties.

The final stage of the mediation process involves the parties either reaching consensus with the assistance of the mediator or confirming deadlock and defining what their differences are. In certain instances, the mediator will follow up with the parties after the mediation process to ascertain whether the parties have successfully implemented the relevant agreement, in the event that an agreement was reached. However, it is important to note that the mediator may only make non-binding suggestions and not binding determinations.

In court-annexed mediations, the mediator will be chosen by the parties with the assistance of the dispute resolution officer (a clerk of the court) from a panel of accredited mediators who have been appointed by the Minister of Justice and Correctional Services.

Is there any obligation on litigants to mediate?

Mediation is a voluntary process by nature. In certain instances, however, mediations could be mandated by way of an agreement between the parties.

Does the court have powers to support a mediation?

Presently, the High Court rules only require that the possibility of mediation be considered by the parties during a pre-trial conference and case management conference. However, in terms of a practice direction of the Labour Court in 2010, judges may issue directives regarding the further conduct of a labour dispute, including directing that the parties attend a mediation meeting before a judge in chambers. Further evidence of support has been the implementation of the court-annexed mediation in certain Magistrate Courts in South Africa.

Are mediations confidential?

Privacy and confidentiality are two of the central concepts of mediation. Confidentiality exists on two levels; firstly, mediation is conducted in private and the contents will only be publicised in the event that the parties agree; secondly, principles of privacy and confidentiality allow parties to communicate with the mediator, without any risk that the mediator may pass information from one party to the next without the consent of the party providing the information, which includes any agreement concluded after a successful mediation. Furthermore, all mediations are conducted on a strictly "without prejudice" basis and, consequently, information that was provided during the course of the mediation proceedings may not be used against a party in subsequent (court) proceedings.

Does failure to mediate attract adverse cost orders?

Failure to mediate will not automatically attract an adverse cost order. However, in terms of the court annexed mediation programme, should a litigant unreasonably refuse to participate in mediation, the dispute resolution officer (a clerk of the court) or the litigant on the opposite side may submit a report to the court, informing the court of the other party's refusal to participate. In the mentioned circumstances, the refusal to voluntarily participate in mediation proceedings may well attract an adverse costs order, depending on the facts of the dispute.

How are settlement agreements enforced?

Settlement agreements must first be made an order of court in order to be enforced.

This can be affected in a number of ways, depending on the nature of the commercial dispute and the stage at which it is referred to mediation.

  • If the dispute has already been referred to a court for determination and, prior to a hearing or judgment by the court, the parties agree to mediate (either by agreement between themselves or at the suggestion of the judge who is appointed as case manager) and reach a settlement at a subsequent mediation, they may apply to the court to have their settlement agreement made an order of court.
  • Where, prior to referring the matter to court, the parties to a dispute have elected to mediate that dispute, either in compliance with a contractual obligation or by separate agreement, and an agreement is reached in an ensuing mediation which is subsequently breached by one of the parties, the agreement can be used as the basis for approaching the court to compel compliance. In these circumstances, the aggrieved party may use the settlement agreement itself and the obligations therein as the basis of an application for a default judgment (where the breaching party fails to enter an appearance to defend) or summary judgment (where the defendant enters an appearance to defend for dilatory purposes only), rather than having to litigate the original dispute in the normal course.

Is there a system of accreditation and/or regulatory body for mediators?

The Dispute Settlement Accreditation Council ("DisAC"), which was established in 2010, exists to define and publish national accreditation standards for dispute resolution practitioners, including mediators and arbitrators, as well as for training courses, trainers and assessors. DisAC publishes a national mediation accreditation standard, based on the standards of the International Mediation Institute ("IMI"). DisAC also maintains and publishes a national register of accredited service providers, settlement practitioners, mediator training courses, trainers and assessors. The rules, prescribed by the rules board, also seek to prescribe the fees which are payable to mediators by the parties.