Mediation: a popular approach to commercial disputes

9th January ‘19

Over the years, mediation has become a popular approach to commercial disputes. However, litigation still remains most parties’ first choice despite its costs consequences.

It is surprising how the majority of litigants still choose litigation in the first instance given the increases in court fees. Litigants see weakness in suggesting and attending mediation. It is this attitude which prevents mediation from taking place in the early stages of a case. Instead, it may take place later on when large amounts of fees have been incurred.

Experts believe that the said mindset is a result of our psychological state. Paul Randolph, a mediator and former barrister, commented in his article ‘The Psychological case for compulsory mediation’ (The Times, 9 November 2017) as follows:

We are a species programmed not to compromise but to win … We have an innate aggressive survival instinct that transforms itself into an acute emotional need to crush the opposition, which prevents us from acting rationally or thinking commercially.

Paul Randolph is of the opinion that litigants simply want their day before a judge in court.

Mediation Success

Mediation can be a very successful approach if chosen by a litigant. The Centre for Effective Dispute Resolution (‘CEDR’) published in May 2016 its Seventh Mediation Audit, in which it stated that mediation had a success rate near to 86%. Often, parties’ positions remain entrenched until they come to meet their opponents across a table, when their attitudes change. A face-to-face approach is often more effective than the impersonal nature of letter and email writing. It is proven that individuals are seemingly more reasonable when involved in face-to-face discussions.

A good mediator will work to encourage parties to communicate and change their focus to identifying common aims and objectives. This approach can result in acceptable settlement proposals being considered and offered.

It is often at the time of mediation, when litigants may see some light at the end of the tunnel, that they reflect upon all of the time and costs incurred to date on pursuing the litigation.

The Advantages of Mediation

Mediation is a voluntary and private process, which is cheaper and quicker than litigation. All statements made during mediations are inadmissible in court which means that parties are free to converse about the case without causing prejudice to their respective positions.

The Future of Mediation

Focus should be placed upon making mediation, and other forms of alternative dispute resolution (‘ADR’), the norm. At present, the Court encourages parties to mediate and it has powers pursuant to Part 44 of the Civil Procedure Rules to penalise, in costs, those who unreasonably refuse to mediate.

A working group of the Civil Justice Council (chaired by mediator William Wood QC) published a report on ADR on 4 December 2018. The report considered whether participation in mediation should be encouraged further to make it mandatory. The report did not recommend that mandatory ADR be introduced but it did propose further measures to push for ADR. The measures included:

  1. A potential “Notice to Mediate”. A party would issue a notice to their opponent requiring mediation, without the need for Court intervention;
  2. The Court encouraging much earlier on, and more stringently, ADR through its case management powers, including the threat of potential costs sanctions being imposed due to unreasonable conduct;
  3. Amending pre-action protocols, court forms and guidance documents to reflect an express presumption that ADR should be sought prior to trial;
  4. Access and increased availability to cheaper mediation models for lower value claims; and
  5. Greater public awareness of ADR. Work has commenced to create a judicial-ADR liaison committee to monitor ADR and advise on its role.

It is very much up to lawyers to draw the benefits of mediation to their clients’ attention. Lawyers should highlight to their clients that the suggestion of mediation does not come from a place of weakness.

If you would like to discuss mediation further, please contact Gemma Dreyfuss (t) 0203 440 9755 (e)

This paper is intended to be a brief note for clients and other interested parties. The information is believed to be correct at the date of publication but should not be relied upon as a substitute for professional advice. Please speak to a member of our team.

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