Mediation in Commercial Disputes

Mediation in commercial disputes has long been recognised as being a beneficial process to enable parties to reach agreements, even in the most difficult of cases.

The parties can agree a resolution to their dispute on terms which preserve confidentiality, rather than having the courts impose a decision on them.

The process is flexible and is often less expensive and quicker than going to court.

There is always the risk that, if unsuccessful, mediation will increase the costs and time of the dispute, although it is generally considered that the advantages outweigh the disadvantages.

In terms of the process of mediation, a mediator is appointed whose job it is to try and facilitate a settlement. Mediations can be in person or remote.

The parties are often in separate rooms with their legal advisors and the mediator shuttles between them trying to bring the parties to agreement. Mediations are generally a confidential process whereby neither party can disclose any information arising out of it, or in connection with it, to the other party. Without prejudice privilege also applies to negotiations which take place during the mediation.

The key to a successful mediation is often the parties attending with an open mind and preparing for the mediation fully, by giving consideration in advance to potential settlement options.

The Courts strongly encourage parties to mediate and the courts can, and often do, apply costs sanctions for parties who unreasonably refuse to agree to mediation.

The general rule in litigation is the unsuccessful party pays the majority of the successful party’s costs. However, the court has a discretion regarding costs and can take into account the conduct of the parties. A refusal to mediate is likely to be a significant factor the court considers when making its costs decision at the end of a case.

There has been an important recent update in this area, by way of the Court of Appeal decision in Churchill v Merthyr Tydfil CBC [2023] EWCA Civ 1416 (29 November 2023). In this case, the Court held that it can order parties to engage in mediation, or order a stay for mediation, provided that it is proportionate to the aim of settling the dispute fairly and does not impair on the right to be heard in Court.