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This article was originally published in Law360 and can be accessed here

Russell Strong, Senior Solicitor

Mediation: not mandatory, but pragmatic

Mediation has become the preferred alternative method of resolving disputes. Although not mandatory in England & Wales, the court certainly encourages and supports it wherever possible.

According to the latest figures from the Centre for Effective Dispute Resolution (CEDR), which were published last year, 12,000 mediations took place in 2018, more than double the number of a decade ago. These were split between 7,500 ad hoc referrals and 4,500 which originated from organised mediation schemes.

As a result of Covid-19, this year has been like no other in multiple respects. The government’s response to the pandemic will have resulted in a dramatic decrease in the number of mediations held this year, to be followed by a significant resurgence next year. The reason is self-evident: parties and mediators have not been able or allowed to attend mediation venues. 

In part, technology has helped to plug the gap. Just as with court proceedings, many mediations have still happened, primarily thanks to video conferencing tools. In a world governed by the rules of social distancing, the new normal for these meetings has been through the medium of Zoom, Skype, FaceTime or MS Teams.

Now commonplace, the virtual process tends to follow a very similar pattern to conventional face-to-face mediation. Equally, shuttle mediation can still happen, albeit virtually: within the virtual space break out rooms are created, using different types of software.

Some organisations, including the London Chamber of Arbitration and Mediation (LCAM), and CEDR, in conjunction with the Chartered Institute of Arbitrators (CIArb), were quick to offer such a service. In addition, they have made fixed price or short notice mediations available for certain cases, particularly Covid-19 related disputes. 

The situation is not without challenges. Perhaps the most significant for remote mediations is physical context: whether the same degree of intensity and focus on achieving a resolution can be achieved when the parties in dispute are not sitting directly across the table from one another.

For a party to litigation who receives an offer to mediate, the question arises as to whether it is mandatory. In short, the answer is no. No court can compel parties to mediate in order to resolve their disputes (Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576).

But if a party refuses to mediate, it must then be prepared to justify the reasonableness of its decision.

So what justification might a judge consider as reasonable? In fact-specific cases, the court has accepted the reasonableness of refusals. This has applied where the party proposing mediation has only done so as a delaying tactic; where the parties are so distant in their respective positions that any reasonable prospect of a breakthrough in mediation is deemed extremely unlikely; or, where the mediation costs would be disproportionately high and impractical.

And where might a judge sit on the unreasonable test? Silence is seldom golden. The best advice: deliver a clear, reasoned refusal, to an offer to mediate without delay.

The assessment of whether or not a party’s refusal was unreasonable will usually occur when the incidence and quantum of costs is being considered following the court’s determination of the case. While the general rule as to costs is that an unsuccessful party will be ordered to pay the costs of its successful opponent, the court may make a different order. When exercising such discretion, the court will have regard to all the relevant circumstances, not least conduct of the parties, both before and during proceedings.

A party who succeeds, but refuses mediation, may find that only a proportion of its costs, or potentially none at all, are ordered to be paid by the unsuccessful party. Equally, in refusing mediation, an unsuccessful party may be ordered to pay the successful party’s costs on the indemnity basis, making it more difficult to challenge them at an assessment.  

The court’s general view remains that litigation should be a “last resort” and that attempts at resolving a dispute should always be tried before a claim form is issued - often through ADR, of which mediation is one example. Litigation is invariably expensive, often protracted and potentially high risk. Parties in dispute must consider whether negotiation, or some other ADR mechanism, could facilitate a settlement without commencing proceedings. Once proceedings are underway, that duty remains: On many occasions, the court will also intervene to direct parties to consider ADR, requiring any party refusing to accept another party’s offer of ADR to serve a witness statement explaining its refusal.

At one time, a party’s unwavering belief in the certainty of their “watertight” case might have been sufficient to constitute a “reasonable belief” that mediation was inappropriate. But no longer. The contemporary court is likely to follow Mr Justice Griffiths’ recent comment in DSN v Blackpool Football Club Ltd (Rev 1) [2020] EWHC 670 (QB), where he stated: “No defence, however strong, by itself justifies a failure to engage in any kind of alternative dispute resolution”. 

Other cases have raised different points. The court has stressed that a mediator could bring “a new independent perspective” and that even if unsuccessful, issues may be narrowed via a mediation - for example, agreeing quantum without prejudice to liability, potentially reducing the length of a trial.

Change is improbable. More likely, cases that were proceeding have simply been delayed by events and a surge of new, post-pandemic cases is anticipated. Court resources will be further stretched. Seeking to reduce the number of cases reaching trial, more orders will probably be made strongly encouraging parties to mediate (or other forms of ADR), while costs orders may become more punitive against parties found to have unreasonably refused an offer of mediation.

When considering the pandemic’s full effect, it is also worth taking account of the UK government guidance published on 7 May (updated 30 June) “on responsible contractual behaviour in the performance and enforcement of contracts impacted by the Covid-19 emergency”. 

Although the guidance is non-statutory, it may be referred to by a party on the issue of costs, particularly in circumstances where that party offered to mediate in an attempt to avoid, or resolve, legal proceedings, and the other party is said to have unreasonably refused.

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