Commercial mediation in the United Kingdom
Mediation is voluntary unless there is a prior contractual agreement to mediate. At an early stage in any proceedings, parties are under an obligation to consider whether their dispute could be settled by Alternative Dispute Resolution (ADR). The court also has powers to encourage mediation, for example it may stay proceedings to allow parties time to mediate. The court may impose costs sanctions on a party which unreasonably fails to mediate. Mediations are confidential.
Settlement agreements are enforced as contracts, and agreements reached in cross-border mediations may be enforced by way of application to the court pursuant to the European Mediation Directive (this may be impacted by Brexit).
What is the status of mediation in this jurisdiction?
How is a mediation conducted?
A mediator may be appointed by the parties or by a mediation institution, such as the Centre for Effective Dispute Resolution (CEDR) or the ADR Group. Direct party appointment is increasingly used. Parties do not need to be legally represented, although lawyers usually attend on commercial disputes to advise and assist with the presentation of their client’s case.
While the mediation process is intended to be flexible, a format has developed which is often adopted in practice. Following an initial plenary session, the parties separate and the mediator will shuttle between parties, assisting them, if possible, to reach a mutually acceptable position. Mediations are usually scheduled to last one day. There are no audited figures but it is understood that the settlement rate is 50 – 75%.
Is there any obligation on litigants to mediate?
Subject to any pre-existing contractual arrangement between parties to mediate, there is no obligation on litigants to mediate commercial disputes. However, the courts and court rules are placing increasing emphasis on mediation. Court litigation parties have an express duty to consider ADR before, during and after commencing proceedings. This duty was recognised by a senior Court of Appeal judge, Sir Geoffrey Vos when he said:
“The parties are obliged to conduct litigation collaboratively and to engage constructively in a settlement process.” (OMV Petrom SA v Glencore )
There are also obligations to consider ADR at specific points in the proceedings. Parties must complete a Directions Questionnaire before a case goes to court. The Questionnaire emphasises that parties should attempt to settle their dispute by discussion, negotiation or a more formal process, such as mediation, before the first hearing. It also requires legal representatives to confirm that they have explained to their clients the various ADR options. A court may order a stay of proceedings on its own initiative if it considers it valuable to permit the parties time to mediate. The court can impose costs sanctions where it considers that a party has unreasonably refused to attempt mediation. However, the Court of Appeal held in the leading case of Halsey v Milton Keynes General NHS Trust, in 2004, that forcing parties to mediate may breach their right to a fair trial under Article 6 of the European Convention on Human Rights.
In October 2018, the Civil Justice Council (CJC) published a report making recommendations to encourage the use of ADR. These included promoting ADR throughout the court process, with a presumption that ADR should be attempted at an appropriate stage on route to trial. However, it stopped short of recommending a presumption that parties should agree to ADR as a condition for issuing proceedings. As such, the proposal that mediation should be compulsory was rejected.
Does the court have powers to support a mediation?
Where the parties have previously agreed in a contract that they will mediate a dispute before commencing litigation, the court may stay court proceedings brought in contravention of that agreement. In the absence of such an agreement, although the courts cannot compel parties to mediate a commercial dispute, they increasingly consider “orders to mediate”, which require parties to attempt mediation. A party that ignores such an order will almost certainly face cost sanctions. The basis for such orders is the overriding objective in the Civil Procedure Rules (CPR) to deal with matters justly and proportionately.
Specific court guides and an increasing body of case law emphasise the need for ADR (particularly mediation) to be considered as a method of resolving a dispute. All pre-action protocols (which are procedural rules setting out the obligations on parties before proceedings are formally commenced) include standard wording which require the parties to consider whether ADR is appropriate.
CPR 1.4 also explicitly states that the courts should engage in active case management which includes “encouraging parties to use an alternative dispute procedure if the court considers that appropriate...”, whilst CPR 26.4 allows parties, when completing the Directions Questionnaire, to request a stay of proceedings to attempt to settle their dispute by ADR.
Are mediations confidential?
Generally, yes. Agreements to mediate will usually include express provisions regarding confidentiality. The model agreements used by the two leading mediation organisations, CEDR and the ADR Group, incorporate confidentiality clauses. It is not only the mediation itself that is confidential; the sessions between the mediator and each party before, during and after the mediation will also usually be confidential.
Even in the absence of a confidentiality agreement, discussions during a mediation will generally be held to be confidential, given their character. Further, they are conducted on a “without prejudice” basis, meaning that submissions made in an attempt to reach settlement will not usually be admissible in later court proceedings relating to the same subject matter, subject to some limited exceptions (such as agreement between all the parties or a legal obligation to disclose the information). Any express confidentiality provisions in essence reinforce the “without prejudice” nature of the mediation. However, where the parties agree, the “without prejudice” nature of the mediation can be waived and the court has power to enquire into the mediation, even to the extent of calling the mediator as a witness. This is very rare.
Does failure to mediate attract adverse costs consequences?
Failure to sufficiently consider ADR may result in a court imposing adverse costs orders on one or more of the parties to litigation.
Where parties have previously agreed to mediate or mediation has been suggested by the court, a failure to attempt mediation may also result in costs sanctions. Where the court considers the failure to attempt mediation to be unreasonable, penalties may be imposed on either the party which is ultimately successful at trial or the party that is unsuccessful, or even both. (In the UK, the successful party to litigation is usually entitled to claim reimbursement of a proportion of its costs from the unsuccessful party.) The courts have been willing to impose costs sanctions where refusal to engage in ADR was deemed unreasonable, taking into account factors such as the apparent strength of a party’s case, the nature of the dispute, the costs of mediation, the risk of delay to the trial date and the likelihood that a mediation would be successful.
How are settlement agreements enforced?
A settlement entered into at a mediation governs the contractual relationship between the parties and is therefore enforced as a contract.
Following the implementation into UK law of the European Mediation Directive (EU Directive) (see separate chapter of this publication), an agreement reached in a cross-border mediation (as defined by the Directive) may be enforced by way of an application to court under the CPR. However, that may change following the UK’s withdrawal from the EU. At the time of writing the position was still uncertain but see below for more detail on the impact of Brexit on mediation in the UK.
Is there a system of accreditation and/or regulatory body for mediators?
At present, there is no regulating body for mediation and neither are there any statutory qualifications necessary to act as a mediator. However, in practice most mediators have some form of accreditation following assessed training by regulated bodies. When appointing a mediator, membership of a respected mediation organisation is often taken into account, as well as the mediator’s experience in the field of the relevant dispute.
The two leading mediation organisations in the UK are CEDR and the ADR Group. Increasingly their role empasseses training of mediators and general education of the use of ADR, rather than as appointing bodies.
In its report of October 2018, the Civil Justice Council (CJC) made no recommendation for the compulsory registration of mediators beyond encouraging the Civil Mediation Council to emulate the Family Mediation Council. The Civil Mediation Council is a charity which aims to promote the resolution of disputes by encouraging the use of mediation and other ADR techniques. The Family Mediation Council is another not-for-profit organisation made up of national family mediation organisations in England and Wales, which maintains a professional register of family mediators and publishes a code of practice for its members.
The impact of Brexit on mediation in the UK
When effecting the implementation of the EU Directive, the Ministry of Justice considered that the law and practice in England and Wales already largely complied with the EU Directive’s provisions. Only two specific aspects of the Directive (relating to confidentiality and the extension of the limitation period) required additional legislation. These were implemented by the Cross-Border Mediation (EU Directive) Regulations 2011 (the 2011 Regulations), which came into effect on 20 May 2011, and related amendments to CPR Part 78. The provisions were brought into effect in respect of cross-border mediations only and were not extended to UK domestic mediations.
Legislation revoking the implementation of the EU Directive, in the form of the Cross-Border Mediation (EU Directive) (EU Exit) Regulations 2019, took effect when the UK formally left the EU on 31 January 2020. The legislation retains the effect of the EU Directive with regards to confidentiality and the extension of the limitation period for relevant cross-border mediations already commenced at that date. However, those commenced after 31 January 2020 will be subject to the same rules as domestic UK mediations.