Knowing when mediation is the right fit

Mediation is a practical and sensible method for resolving an immense range of disputes. There is plenty of first-hand testimony to demonstrate the effectiveness of mediation, and it is increasingly being used in both commercial and consumer markets. In the UK, the government is exploring the potential for introducing mediation as a mandatory step in the litigation process, and not simply allowing parties to think of it as an add-on or afterthought.

Mediation is particularly useful where parties want to be in charge of the process and timetable and retain control over the ultimate outcome of their dispute.

Mediation is especially attractive where there is desire to maintain continuing relationships, which could be damaged in adversarial forums such as arbitration or litigation. It is invariably the right way to go when parties believe their differences can and should be resolved through discussion, and they are willing to cooperate with each other to find a solution.

Disputes can often end up being decided in open court, where anyone can attend and listen in. Parties often want to resolve their differences in private, particularly if they are worried about the possibility of commercially sensitive or personal issues becoming public.

But mediation may not always be suitable. There are certain situations where mediation can perhaps be inappropriate.

Mediated settlements can be difficult, though perhaps not impossible, to achieve in situations where the balance of bargaining power between the parties is vastly disparate. One party might be a formidable negotiator or is much more knowledgeable and articulate than another. This could impact on the perceived fairness of the process, if not the reality, though it is a less of a problem in situations where a less proficient party is represented by a professional adviser.

Mediation may not be so attractive to one or both parties where maintaining a positive relationship is not a hugely important factor. Mediation may be unsuitable where priorities are more about obtaining a lasting decision which determines a rule or sets a standard for industry practice for the future.

Mediation works best when both parties fully engage with the process and are committed to exploring solutions and achieving a mutually acceptable outcome. Ordinarily, where one party declines an offer to mediate, there is no sanction. Unless, that is, the dispute ends up in litigation and the party who declined to mediate, has done so with no adequate reason. The problem for anyone who does not want to mediate, is that the number of adequate reasons for declining it, which courts are ready to accept, have become few and far between.

There has been a litany of case law which demonstrates judicial support for mediation and readiness to sanction parties to unreasonably decline to use it.

For many years the courts have routinely imposed costs penalties on parties because of their unreasonable refusal to mediate.

As a result, mediation has now become an important part of the litigation process in the UK and parties must think carefully about whether or not to mediate their case. If a party chooses to decline an offer by the other side to mediate, it should expect to be sternly examined as to its reasons and be ready with informed and educated responses. Wanting a “day in court”; or citing that there had been a failure to resolve matters in another unrelated mediation with the same party; or the fact there is considerable dislike and distrust between the parties; or a firm belief by one party that they have a watertight case, have all been deemed by the courts as unreasonable justifications for not mediating.

So when is mediation unsuitable?

Mediation involves parties working together in a joint endeavour to bring about settlement of their dispute. A mediator will facilitate their discussions and keep them focussed on maintaining a meaningful dialogue. It follows that the parties are expected to cooperate and be ready to compromise where it is possible to do so. If a party is absolutely unwilling to engage in mediation and is not able or prepared to moderate their stated positions, mediation is not likely to be effective.

There is one situation where mediation is almost always unsuitable. A dispute may present a unique and untested issue of law. At the heart of the dispute there may be a matter that requires a legal ruling which will bind other parties involved in similar disputes in the future.

Mediation cannot result in decisions which bind other, unrelated parties. In any event, the process is private and news of the outcomes of mediated settlements is not normally broadcast, and thus unlikely to sway others. Where there is the need for legal precedent to be set, which would govern the outcome of similar disputes in the future, mediation would not be suitable, and a Court must determine the outcome or resolution. 

Martin Burns

Head of ADR Research and Development, RICS

27 January 2023