A recent case has put mediation for business disputes into the spotlight once again. Notably, the successful defendants failed to recover 25% of their legal costs because they refused to mediate prior to going to court.
Ultimately the judge found in the defendants’ favour but reduced their costs award. It was held that they had unreasonably refused to engage in Alternative Dispute Resolution (ADR).
What is business mediation?
When commercial organisations are in dispute with another business or an individual, a range of options exist to facilitate a resolution out of the court room.
Mediation is a popular form of Alternative Dispute Resolution. ADR is regarded as generally offering a cheaper and quicker route to a pragmatic and commercial outcome and avoids the risks inherent in litigating a claim through the courts.
Although not appropriate for every dispute, mediation is a flexible and confidential process, during which a mediator is instructed to assist the parties in dispute in attempting to reach a negotiated settlement.
The mediator does not take the role of a judge, nor does he or she dictate the terms of any settlement agreement reached. It is the parties in dispute that control the terms and choose how to resolve their issue, with the mediator steering negotiations and suggesting routes to a mutually agreeable settlement.
Why choose mediation in your business dispute?
This recent case highlights the importance the courts place on ADR and the consequences if a party refuses the offer of mediation without good reason. Parties can choose to mediate at any time, even if court proceedings have already been commenced.
Businesses recognise the advantages of the mediation process being confidential and conducted ‘without prejudice’. Anything said during the process cannot be used in court proceedings, should the mediation fail and the court proceedings continue through to trial.
Whilst the confidentiality of the process is a strength of mediation, so too is the legally binding nature of the agreement reached, with settlement terms being recorded and signed by both parties. There is also far more latitude afforded to the parties when seeking to reach a settlement whereas the courts are restricted to prescribed remedies.
The Government announced in July 2023 that it would introduce compulsory mediation for all small claims in the County Court, where the claim was for a specific amount and generally under £10,000. In October of the same year, it announced a sub-committee had been formed to assess the steps required for implementation of the proposal, which was due by April 2024.
As yet there has been no sign of the promised changes, but the reduction applied to the successful party’s costs for rejecting mediation when it was offered in this recent case is a clear sign that compulsory mediation in commercial disputes is receiving a soft launch through the courts.
Should you be facing a commercial dispute, then now would be the right time to speak to a member of the Commercial Dispute Resolution team here at Buckles. We have extensive experience of resolving commercial disputes through mediation, (online and in person) as well as via other means of ADR.
