Civil Mediation Council (CMC) guidance on mediators' obligations under the Proceeds of Crime Act 2002

Section 328 of the Proceeds of Crime Act 2002 (PoCA) provides that it is an offence for a person to be involved in an arrangement that he knows or suspects will facilitate the acquisition, retention, use or control of criminal property by or on behalf of another person. Members of the legal profession and mediation community had previously questioned whether Section 328 could apply to legal professionals involved in mediation where the settlement falls foul of the PoCA. The CMC guidance note emphasises the need for all training providers, mediation providers and individual mediators to study previous CIArb guidance carefully so as to ensure that mediators never run the risk of incurring criminal liability under the PoCA. Withdrawal from the mediation/a report under the PoCA may be necessary where first, there are no existing or contemplated proceedings or where the link between mediation and any proceedings is tenuous; and second, where, if proceedings do exist, any settlement does not reflect the parties' respective positions in the proceedings and is known or suspected to be no more than a pretext for agreeing on the acquisition, retention, use or control of criminal property.

In P v P [2003] EWHC 2260, the High Court found that the PoCA requirements trumped legal professional privilege during litigation. This was overruled, however, by the Court of Appeal in the 2005 case of Bowman v Fels [2005] EWCA 226, in which the Court of Appeal found that Section 328 PoCA was not intended to affect the ordinary conduct of litigation by legal professionals. The Court found that this included any step in the litigation, including agreements between the parties to dispose of the legal proceedings in whole or in part. The Court of Appeal also found that even if Section 328 PoCA did apply to the normal conduct of litigation, it did not override legal professional privilege.

Following the Court of Appeal's ruling in Bowman, the Chartered Institute of Arbitrators (CIArb) published guidance on the effect of the PoCA for mediators, arbitrators and adjudicators (see guideline 13, CIArb: List of guidelines and protocols). In June 2010 the Civil Mediation Council (CMC) published its own guidance note,  "The obligations of mediators under the Proceeds of Crime Act 2002".

The CMC guidance note emphasises the need for all training providers, mediation providers and individual mediators to study the CIArb guidance carefully so as to ensure that mediators never run the risk of incurring criminal liability under the PoCA. In particular, they draw attention to two situations: first, where there are no existing or contemplated proceedings or where the link between mediation and any proceedings is tenuous; and second, where, if proceedings do exist, any settlement does not reflect the parties' respective positions in the proceedings and is known or suspected to be no more than a pretext for agreeing on the acquisition, retention, use or control of criminal property. In such cases, the guidance indicates that it may be necessary for the mediator to withdraw from the mediation and/or make a report under the PoCA.