Commercial Mediation in the UK: An Overview
This mediation guide is intended for commercial organisations that are in dispute with another business or an individual and looking at the different options available for resolution.
We’ll explore the advantages of mediation compared to arbitration or litigation — and how much it costs.
Mediation is not always a suitable choice to resolve a dispute, and we’ll also examine scenarios where mediation is not the best option.
What is Mediation?
Mediation is a flexible and confidential process for individuals and businesses in dispute. Mediation is sometimes placed under the banner of Alternative Dispute Resolution (ADR), which comprises options other than litigation.
During mediation, a trained or accredited mediator is instructed to assist individuals or companies in trying to reach a negotiated settlement.
A mediator does not dictate the terms of the agreement and is not a judge. Both parties control the terms and choose how to resolve the dispute. A mediator steers the negotiations and suggests pathways to settlement. Mediators are often best referred to as ‘facilitators’; they try to find common ground to facilitate an agreement, but they don’t judge who is right or wrong, and they cannot give legal advice to either party.
Mediation is voluntary. A mediator cannot compel the disputing parties to submit to the process unless there is a contract clause agreeing to mediation in case of a dispute. Parties attend and embark on mediation because it can be effective as an alternative way to try to resolve a dispute.
Participating in mediation is actively encouraged by the courts. If a party unreasonably refuses an offer of mediation in a dispute where the option is well-suited and subsequently proceeds to court, the courts may take a dim view of that decision and can order costs sanctions against a party. The courts may consider an unwillingness to attempt mediation before litigation in any cost order.
Why Use Mediation?
In commercial disputes, litigation can be a lengthy and expensive way to resolve a dispute. There can be circumstances in which parties might settle their differences more quickly and effectively via mediation.
Courts actively encourage mediation as often it is the most suitable form of dispute resolution. You can start the mediation process even if you’ve already commenced court proceedings, or at any time.
If you can’t resolve your dispute via mediation, your legal rights are unaffected. You still have the option to go to court. Disputing parties have nothing to lose by attempting mediation first, and it’s much less expensive than litigation.
The process of mediation is entirely confidential. Mediation is also conducted ‘without prejudice’, which means that anything said during the mediation is inadmissible in future court proceedings. Mediation can, for these reasons, be visualised as its own process taking place in its own ‘bubble’.
An agreement reached in mediation is legally binding. The terms are recorded in writing and signed by both parties.
When is Mediation Unsuitable?
Commercial mediation is not suitable for low-value claims of £1,000 or less.
Mediation is also not practical if the opposing party lacks sufficient funds to pay the claim’s value, even if they concede that they owe you the money.
There can be other circumstances where the timing of mediation will be important. For example if there is urgency in the dispute (something is happening), it might not be appropriate to delay issuing court proceedings for mediation. This can often be delicate.
Otherwise if you are in a strong position commercially where the other parties are simply seeking to delay matters it can be unattractive to mediate and this can also be an important factor. For example where a dispute arises between a commercial landlord and tenant and the landlord has the benefit of a costs indemnity, it might be considered inappropriate to mediate not least as that might worsen the tenants position given the landlord might seek to recover their legal costs in full, which would only increase as a result of mediation. Such situations need to be handled with subtlety to avoid risk of costs sanctions.
What is The Purpose of Mediation?
Mediation offers a quick and cost-effective alternative to trying to resolve a commercial dispute.
There are very few disadvantages to mediation, as both parties must agree to the final terms for them to become binding.
What are The Benefits of Mediation?
Mediation is quick and can break a deadlock without months of wrangling or waiting for a court date. In disputes that drag on, the opposing parties’ positions often become more entrenched, making it harder to resolve the disagreement as time passes.
A mediator doesn’t impose a decision on the parties but helps both sides to reach a negotiated settlement in which both parties are satisfied.
Anything said during a mediation is confidential. It can’t be used as evidence later on if the dispute is unresolved and eventually ends up in court. Inadmissibility makes the mediation process and hearings open and unconstrained environments.
Most mediations take place within weeks of instructing a mediator. Mediations are typically short, most lasting only a day other than in larger commercial disputes but even then no more than a few days on average. Resolution and a workable ways forward can be achieved quickly, minimising damage to your business.
A signed mediation agreement is legally binding, so if the other party doesn’t comply, then you can take action to enforce the terms.
Mediation is less costly than both arbitration and litigation.
How does a Party Prepare For a Mediation?
There is no magic in either the mediation process or a mediator him or herself. Preparation and in particular, ‘positioning’ of the parties in advance of mediation are fundamentally important.
Attendance at a mediation without significant preparatory work having been completed in advance rarely results in a settlement being achieved or agreed.
In particular it is extremely important that the parties have a good understanding of the respective cases of one another, including so the parties can consider the relevant facts (and law) at the mediation, and can price in the respective pros and cons of their cases into any settlement.
For example a party who have a counterclaim but do not articulate that counterclaim significantly far in advance of mediation will be less likely to achieve a settlement if they simply raise that on the day of the mediation itself.
‘Positioning’ in this sense in advance of the mediation itself can be incredibly important. One party may allege they are entitled to £X on an open basis in correspondence but a well advised opponent might be able to introduce considerable risks to the Claimant in advance of mediation reducing their view of their prospects of success. That might include challenging facts or legal analysis, or raising risks of defences or further alternative claims. These are all factors that can go towards pricing a settlement and reducing amounts an opponent is prepared to accept, pricing in a discount for litigation risk and a bird in the hand.
How Much Will Mediation Cost You?
Commercial mediators commonly charge a daily rate. The fee will depend on the case value or an hourly or daily rate. An additional fee is charged for the extension if more time is needed.
The rate for mediation is agreed upon in advance. Whilst the rate may relate to the value/size of the dispute, mediators don’t charge a percentage fee based on the agreed settlement. Such a commission would negate their impartiality.
Mediation fees reflect preparation time and time spent in a mediation.
In commercial disputes solicitors and barristers usually attend with each party responsible for their own costs.
Mediation costs in terms of the mediator and venue are customarily split 50:50 between the disputing parties and paid in advance. We now typically find that almost 100% commercial mediations we are instructed in take place virtually.
Where Does Mediation Take Place?
One of the decisions the parties need to consider in any mediation is whether a mediation will proceed virtually, or in person. Most commercial mediations now take place virtually via video conferencing. This saves costs of travel and waiting times. In some larger scale disputes physical presence can be advantageous; there are many locations that can be suitable for the mediation process and we have attended and arranged mediations in diverse locations such as solicitor offices, hotel function rooms, and specifically designed venues such as the IDRC, London. Most mediators provide a selection of preferred venues depending upon the location of the disputing parties albeit most of our mediations in person take place in London.
Mediation venues must have at least three available rooms — 0ne where all parties can meet together and two additional rooms where the mediator can speak to each party alone and confidentially.
If you’re involved in a commercial dispute, it’s always wise to seek legal advice sooner rather than later. Mediation is one form of alternative dispute resolution. There is no magic in the process itself and well advised and well positioned parties can achieve better outcomes- via litigation and via mediation.
Positioning yourself on the front foot in advance of a mediation is fundamentally important- ensuring your case and position is fully (and aggressively if necessary) set out, not least to try to drag the opponent into a reasonable zone of settlement, if/as necessary/appropriate.
Resolving any dispute swiftly is preferable to assist in saving money and costs in the long term and minimising business disruption.Our specialist commercial litigation team at Helix Law offer expert and professional advice in a broad range of commercial disputes. We are well placed to advise on your situation and dispute, and to consider and advise you whether (and if so, when), mediation is an appropriate next step. Where mediation is appropriate we are also very experienced in positioning you on the front foot in advance of mediation in the hope that the best possible terms can be achieved at the mediation itself.