The implementation of the European Mediation Directive into UK practice
On 23 April 2008, the European Parliament formally approved the Council’s common position on the EU Mediation Directive (the “Directive”). It was adopted by the Parliament and Council on 21 May 2008 and entered into force on 13 June of that year. The Directive had to be implemented into the national law of member states within three years of adoption, so by 20 May 2011. The Ministry of Justice considered that law and practice in England and Wales already complied in large part with the Directive, but additional legislation was needed to bring particular aspects into force, including the enforceability of agreements reached through mediation and certain confidentiality aspects. Changes have therefore been made to Part 78 of the Civil Procedure Rules (“CPR”) which introduce provisions relating to these two aspects and which came into effect for cross-border mediations commenced on or after 6 April 2011. A statutory instrument (the “Regulations”) which came into effect on 20 May implemented the outstanding provisions of the Directive, relating to confidentiality of mediation proceedings and the suspension of the limitation period while a relevant mediation is on-going.
Objective and scope of the Directive
The stated objective of the Directive is “to facilitate access to dispute resolution and to promote the amicable settlement of disputes by encouraging the use of mediation and by ensuring a balanced relationship between mediation and judicial proceedings” (art 1). The Directive does not cover Denmark, which has again opted out.
The Directive applies where two or more parties to a cross-border dispute of a civil or commercial nature attempt, by themselves and voluntarily, to reach an amicable settlement to their dispute with the assistance of a mediator. It does not extend to revenue, customs or administrative matters, or to disputes involving the liability of the State, nor to those areas of family law where the parties do not have a choice of applicable law. However, given the broad definition of “cross-border disputes”, the Directive's provisions on confidentiality and on limitation and prescription periods also apply in situations which are purely internal at the time of mediation but become international at the judicial proceedings stage, e. g. if one party moves abroad after mediation fails.
What is “cross-border”?
Under the Directive, a dispute is” cross-border” when at least one of the parties is domiciled or habitually resident in a Member State different to that of the other party on one of the following dates:
- When the parties agree to use mediation, a dispute having arisen
- When a court invites or orders the parties to attempt mediation
- When the parties are obliged to use mediation under national law (art 2.1).
This provision has been criticised as being too vague, as no guidance is given on when an agreement to mediate is made. Parties may agree to go to mediation in principle at the beginning of a dispute, and only sign formal terms when engaging the mediator. Since the Directive will only apply where the parties are domiciled in different member states, different national laws may apply to the issue of when an agreement is entered into. Parties should ensure that agreements to mediate are not concluded under local law, when only preliminary steps were envisaged. Alternatively, where a commercial contract contains an agreement to mediate any future disputes, as is becoming common, the date of the contract may be the relevant date for the purposes of article 2.1. The date on which the Directive first applies could be of importance when the obligation of confidentiality is being considered.
The key provisions of the Directive include:
- the development and use of voluntary codes of conduct and quality control mechanisms
- the acknowledgement that judges to have the right to invite parties to attempt mediation
- providing that agreements reached through mediation may be given similar status to court judgments to aid enforcement
- providing that to preserve confidentiality, submissions and disclosure in mediation may not be used in any subsequent legal proceedings and mediators may not be compelled to give evidence in any subsequent legal proceedings
- ensuring that parties' claims will not be statute-barred as a result of time spent on mediation.
The most important of these will be considered in more detail below.
Implementation of the Directive in UK practice
Enforcement of settlement agreements
The Directive obliges Member States to set up a mechanism by which agreements resulting from mediation can be rendered enforceable if both parties so request. The choice of mechanism is left to the Member States. The possibility of obtaining an enforceable agreement can be particularly desirable for obligations which require regular payments over a fairly long period, where there is a chance that the willingness of the paying party may wane. Under current UK law an agreement resulting from a successful mediation is only enforceable as a contract, requiring court proceedings to enforce it if breached.
Under the new CPR 78.24, where all the parties to a mediation settlement agree that it should be made enforceable, they (or one of them) may apply to the court for a mediation settlement enforcement order. Under the Directive such an order may then recognised and enforceable in all other member states in accordance with the Brussels Regulation (44/2001).
The Directive also aims to ensure that mediations take place confidentially and that information given or submissions made by any party during mediation cannot be used against that party in subsequent judicial proceedings if the mediation fails.
The Regulations / CPR 78.26
Confidentiality is already a requirement of mediation in the UK but this provision places the obligation on a legislative footing. The rule provides that disclosure or inspection of evidence arising out of or in connection with a mediation and in the control of a mediator or someone involved in the administration of the mediation may only be permitted in accordance with an order of the court. Such an order will only be granted where all parties to the mediation agree, disclosure is necessary under public policy or is necessary to implement or enforce the mediation agreement itself. A court order will also be required where witness evidence relating to the mediation is sought. The rules include detailed provisions relating to the application procedure.
The Directive proposes that any limitation period should be suspended while the parties are engaging in mediation, in order to guarantee that they will not be prevented from going to court should the limitation expire while the, ultimately unsuccessful, mediation is taking place. This is unsurprisingly the most controversial article of the Directive.
The Regulations make amendments to primary and secondary legislation (including the Limitation Act 1980, the Foreign Limitation Periods Act 1984 and the Prescription Act 1832) to exclude time spent mediating in computing time limits that expire while a relevant mediation is ongoing. These provisions are subject to conditions, which should be carefully considered if a limitation period may potentially expire while a mediation is taking place.
In the UK the Directive, and therefore these Regulations, will only apply to EU cross-border disputes and will not extend to domestic mediations, nor to mediations between parties based in the separate jurisdictions of the UK.
Training of mediators
The Directive obliges Member States to encourage the training of mediators and the development of, and adherence to, voluntary codes of conducts and other effective quality control mechanisms concerning the provision of mediation services. The voluntary nature of Article 4, however, means that there will be no process for monitoring or enforcing this and the emphasis will be on self-regulation.
Judicial invitation or order to mediate
The Directive gives a judge the right to invite the parties to have recourse to mediation, if at any stage of the procedure, he or she considers it appropriate in the case in question. A judge can also suggest that the parties attend an information meeting on mediation. The intention is to encourage parties to consider using mediation, without making it compulsory. However, individual member states are not prevented from introducing legislation to make mediation compulsory or subject to incentives or sanctions, provided that such legislation does not prevent the right of access to the judicial system. Accordingly this provision will not interfere with UK courts continuing to impose cost sanctions upon parties who unreasonably refuse to mediate.
The European institutions clearly regard the promotion of mediation within the EU as highly desirable. The recitals to the Directive emphasise the speed, cost and efficacy of mediation. However, they acknowledge that without formal legislation it has proved difficult to establish predictable and equal opportunities for mediation across member states.
Mediation is already recognised to be a valuable mechanism for dispute resolution in the UK and it is doubtful that implementation of the Directive will have any great impact on its use by parties to disputes. However, provided other member states have also implemented the Directive’s provisions as obliged, it will benefit parties to cross-EU disputes where they have managed to mediate a settlement. Enforcement of the settlement agreement in accordance with the Judgments Regulation should be quicker and easier than having to commence fresh proceedings for enforcement in a foreign jurisdiction.