In previous articles, we discussed the basics of litigation and arbitration. You can access those articles here and here. The primary difficulty with these forms of dispute resolution is that they are expensive, can take months (if not years) to reach finality and, due to their adversarial nature, can often destroy the relationship between the parties in dispute.
In recent years another form of dispute resolution, mediation, has been gaining popularity. It has proven successful in resolving even the most acrimonious disputes and can be effective at preserving the underlying business relationship between them.
What is mediation?
Mediation is a private process where parties agree on the appointment of a neutral mediator to assist them in resolving the dispute between them. The mediator will have been provided with all the facts of the dispute and will take an active role in attempting to resolve the matter. The goal of the mediation process is to settle the dispute between the parties and, if successful, culminates in a signed settlement agreement.
It is a voluntary process which is conducted entirely without prejudice to either parties’ rights. This means that disclosures or concessions made within the mediation process cannot be held against a party should the matter proceed to court. The mediator has no power to compel the parties to agree the terms upon which the dispute should be settled but will work with both parties in trying to narrow the issues and clear away potential sticking points in the negotiations to bring the parties to an amicable settlement.
Mediation can take place at any time before or during Court proceedings, or, even after the final hearing in litigation or arbitration. It is a process which often runs in parallel with Court proceedings.
What are the advantages of mediation?
- Control: the parties retain the ultimate control as to whether to settle and the terms of the settlement. The process can allow for imaginative, commercial and creative solutions for resolving the dispute which may not be available to a Judge / arbitrator.
- Speedy resolution: mediations can be arranged in a matter of weeks whereas it can take months (or years) for a litigation case to reach a court;
- Lower costs: the mediation process can be more cost effective than full blown litigation. Although of course, if mediation does not result in a settlement of the dispute, the parties will have incurred the cost of the mediation and still face the cost of proceeding with Court proceedings / arbitration.
- Narrowing the issues: even if the entire dispute cannot be resolved through mediation it can have the effect of narrowing the issues in dispute between the parties. Fewer issues in dispute means a shorter hearing which will reduce costs;
- Preservation of business relationship: a mediated settlement that is agreed to by all parties may not just resolve the dispute but also preserve the underlying business relationship.
Litigation and Mediation
The Courts have also recognised the benefits of mediation in situations where, if the matter cannot be resolved in its entirety, the points of dispute between the parties can be substantially reduced. There are detailed obligations set out in the Civil Procedure Rules regarding the parties’ obligations to attempt mediation which, if ignored, can lead to costs penalties against a party even in circumstances where they were ultimately successful in the main case. There have been a number of cases where Judges have made directed and pointed reference, when deciding on appropriate costs orders, to the fact that the dispute before them could have benefitted from proper mediation.
In Dunnett v Railtrack plc (Practice Note)  1 WLR 2434 the court noted that “Skilled mediators are now able to achieve results satisfactory to both parties in many cases which are quite beyond the power of lawyers and courts to achieve”. A recent decision of the Commercial Court in Wales (t/a Selective Investment Services v CBRE Managed Services Ltd and Aviva Administration Limited EWHC 1050 (Comm) took an even stronger view and deprived the successful defendant of a substantial portion of its costs due to its repeated failure to take up offers of mediation made by the Claimant. The court noted that there were extensive issues regarding misunderstanding of fact which took days to untangle in adversarial court proceedings, but which could have been easily cleared up by the intervention of a skilled mediator.
While the general principle is that the successful party is awarded its costs, the order itself remains within the discretion of the court. In making its costs order the court will consider:
- the nature of the dispute;
- the merits of the case;
- the extent to which other settlement methods have been attempted;
- whether the costs of the mediation would be disproportionately high;
- whether any delay in setting up and attending the mediation would have been prejudicial;
- whether the mediation had a reasonable prospect of success.
Litigation can be an expensive undertaking but is sometimes a necessary one. Mediation as an alternative dispute resolution method is one that you should have in mind and discuss with your legal representatives at all stages of legal proceedings. It may well be that a trial is inevitable but, as should have happened in Wales, if inconsequential factual disputes are resolved prior to the trial, your lawyers and the judge will be able to focus on the real issues which will result in a shorter more cost-effective hearing.
If you receive an offer to mediate, you should consider very carefully whether you have any reasonable grounds to refuse to attend a mediation. An unreasonable refusal to mediate can ultimately cost you significantly when the Judge goes on to consider what costs orders to make (even if you are the successful party).
This article is provided for general information only and is not intended to be nor should it be relied upon as legal advice in relation to any particular matter. If you require specific legal advice on any issue relating to litigation or would like to know more about alternative dispute resolution methods, we at Burlingtons Legal LLP will be able to assist. Please contact us on +44 (0)20 7529 5420 to arrange a consultation.