Cutting the legalese - Mediation

Mediation is a method of Alternative Dispute Resolution which can help parties resolve their differences without the need for litigation, the courts are extremely enthusiastic when it comes to mediation and readily allow a stay in proceedings to accommodate it. It can offer a cost-effective and time-efficient method of reaching an amicable resolution supported by expert mediators.

Mediation is described by the Centre for Effective Dispute Resolution (‘CEDR’) as “a flexible process conducted confidentially in which a neutral person actively assists parties working towards a negotiated agreement of a dispute or difference, with parties in ultimate control of the decision to settle the terms of resolution”. The CEDR states that 67% of mediations settle on the day of the mediation and a further 19% settle shortly afterwards.

Disputes are very common in construction projects and the parties in dispute often become so entrenched in what are possibly the insignificant issues within that dispute they lose focus on the key issues. Mediation provides an opportunity for the parties to end the dispute with dignity; a good mediator will help the parties move from their entrenched position by bringing them back to the basic issues and look at the bigger picture. A mediator will not impose a decision on the parties but will instead help the parties achieve a mutually agreed settlement.

Mediation is often used for the resolution of disputes in a vast range of industry sectors both before the commencement of proceedings and during. It is the intervention in a dispute with the purpose of attempting to resolve it, and unlike adjudication, if the mediation results in a settlement agreement, then that is truly final. The power to resolve a dispute via mediation lies with the parties, they all have to say ‘yes’ to the deal, the outcome is not imposed on them.. This often means that all parties are content with the resolution and thus making it a preferable solution if they wanted to continue their working relationship.

Mediation is often found to be a more effective tool than simple negotiation. Often during negotiation, the parties will not disclose their whole position in fear of being disadvantaged. However, in mediation an independent third party (the mediator) can be given sensitive information in confidence by all parties so will be in a strong position to advise both sides, and will be able to ensure that when a deal is done, all issues have been deal with.

In comparison to litigation, arbitration or adjudication, mediation is much less expensive and offers a quicker solution to finding a resolution. Mediation is also private and confidential whereas litigation is not. The parties will maintain the confidentially of the mediation and subject to the exceptions set out in Neil Mason’s article cannot rely upon or introduce as evidence anything (other than the final signed agreement) in any court, arbitration or other proceedings (including adjudication).

Mediation can take place at any point, including when proceedings have already started. The Court does not have the power to order mediation but does have the discretion to penalise a party who unreasonably refuses to mediate. The Practice Direction on Pre-Action Conduct and Protocols (Pre-Action PD) provides a framework for the pre-action conduct of claims, and specifically flags up the need to parties to consider Alternative Dispute Resolution. Failure to comply may result in an adverse costs order. The aim of the Pre-action PD is to avoid litigation wherever possible by agreeing to settle a claim before the commencement of proceedings.

The Pre-Action Protocol for Construction and Engineering goes one step further than the Pre-Action PD and requires the parties to meet at least once before proceedings are issued. This is with the view to flushing out the issues between the parties and avoiding the need for litigation completely. If a resolution cannot be found, at least the parties have a wider understanding of the other side’s issues. There is no reason why this pre action meeting cannot take place as a mediation.

With the cost of courts getting more expensive and the ever important enthusiasm for alternative dispute resolution, it is always wise to look into the possibility of mediation (or other form of Alternative Dispute Resolution) as early as possible. Even if the dispute cannot be settled and the need for litigation arises, this process should be smoother because the parties’ issues have already been identified.

These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.