Mandatory mediation: Insights from the LCAM-HSF survey

Herbert Smith Freehills recently partnered with the London Chamber of Arbitration and Mediation (LCAM) to  survey a cross-section of the dispute resolution community on attitudes to compulsory mediation in arbitration and mediation.

The results indicate that there seems to be support for some degree of mandatory mediation in both litigation and arbitration, but that effective system design might prove complex and will need to be tailored to reflect the diversity of proceedings across the broad spectrum of civil disputes.

Please use this link to access the recording of a live webinar in which Craig Tevendale, Chris Parker KC, Gill Mansfield and Jonathan Wood discuss the survey’s outcomes.

Who did we ask?

The Survey attracted just under a hundred responses from a range of dispute resolution practitioners. Over half of the respondents described themselves as external counsel and over one third considered their primary role to be either mediator or arbitrator. The remainder comprised other lawyers and stakeholders (such as in-house counsel, knowledge lawyers, and academics).

While questionnaires of this nature naturally do not provide definite empirical answers, the survey’s results provide some insight into attitudes toward compulsory mediation within a cross-section of the dispute resolution community.

However, it is important to bear in mind that the survey reflects views from across a range of practice areas. As we have previously discussed, the question of whether and when compulsory mediation may be appropriate depends on a range of factors, and these differ markedly between different types of proceedings across the broad spectrum of civil disputes. (For our analysis of how they apply in complex commercial court proceedings, see this article).

Could compulsory mediation be effective?

Many dispute resolution practitioners will be familiar with Dyson LJ’s (as he then was) comment in the seminal Court of Appeal decision in Halsey v Milton Keynes [2004] 1 WLR 3002 that “[i]f the court were to compel parties to enter into a mediation to which they objected, that would achieve nothing except to add to the costs to be borne by the parties, possibly postpone the time when the court determines the dispute and damage the perceived effectiveness of the ADR process.” For years, this quote has been a go-to for law students and commentators grappling with the issue of compulsory mediation. However, do practitioners (still) agree with this sentiment?

It appears the survey respondents do not. The survey’s ‘warm-up question’ was whether mandatory mediation could, in principle, be effective. Just under three quarters of our respondents answered ‘yes’. Of course, an “effective” mandatory mediation might not lead to the settlement of a claim in full; a mediation could still be effective if it resulted in a partial settlement, narrowed the issues in dispute, (re-)started a commercial discussion or relationship after the mediation, or contributed to an understanding of the other party’s case. It may be that the respondents were of the view that a skilled mediator might draw out (some of these benefits), even if the parties are recalcitrant.

This view appears to be shared by policy-makers, at least to some extent. Regular readers of our ADR Notes blog will be aware that mandatory mediation has featured prominently on the governmental and judicial agenda, with the Civil Justice Council recommending the greater use of compulsory ADR in a June 2021 report, the Ministry of Justice’s (MoJ) call for evidence and subsequent report considering compulsory ADR, and the MoJ recently announcing its proposal to introduce mandatory mediation for all County Court Small Claims, with a view to this being progressively expanded to other areas of the civil justice system

Digging deeper: comparing attitudes towards mandatory mediation in litigation and arbitration

While our respondents were, in principle, supportive of mandatory mediation, did they think it should be introduced in practice?

Litigation

In a litigation setting, the answer is clearly “yes”. Over three quarters of respondents considered that the litigation process should provide for compulsory mediation in some circumstances. While the majority of this group (~57%) favoured mediation being a mandatory procedural step at some point in the litigation process, the alternative of mediation ordered by the court when appropriate on a case-by-case basis was not far behind (~43%).

Only a small group of respondents who considered that compulsory mediation could, in principle, be effective considered that the litigation process should not provide for compulsory mediation in some form (around 8%). These respondents all indicated, however, that mediation should be encouraged to a greater extent than it currently is by the courts.

We also asked our respondents how to enforce the mediation requirement: what should happen in case of non-performance (without a valid reason) or perfunctory performance by a party? As might be expected, almost all (96%) were of the view that such conduct should attract some form of penalty. Costs consequences were the most popular penalty, selected by almost 80% of respondents (either individually or alongside other consequences). As the Courts already consider an unreasonable refusal to mediate in their costs orders, respondents’ preference of costs consequences for non-compliance with a mandatory mediation requirement might indicate that they would expect (even) more serious costs sanctions to be applied in those circumstances.

Coming in at second place, almost 70% of respondents considered that, if the failure to mediate was the result of the claimant’s actions, any court action should be stayed until mediation had taken place. The more invasive penalties proved less popular but still attracted some support, with 20% of respondents supporting the striking out of claims or defences in case of non-compliance, and 30% considering that an order for contempt of court was appropriate (in the event of a failure to mediate by the defendant).

Arbitration

Similarly, the overwhelming majority of survey respondents (80%) were in favour of provision for some form of compulsory mediation in institutional arbitration.

Opinions were split regarding the form such a mediation requirement should take. Of the respondents who supported mandatory mediation in arbitration, the most popular approach (selected by just over half) was a pre-dispute ‘opt-out’ system. This would involve institutional rules, by default, providing for mediation, with it remaining open for the parties to opt-out of mediation in their arbitration agreement. Others (just over 30% of those supporting mandatory mediation in arbitration) preferred a power for the tribunal to order mediation as it considered appropriate, on a case-by-case basis. The remainder of the respondents open to mandatory mediation in arbitration preferred a pre-dispute opt-in system, where the default position under the institutional rules is no mediation, unless the parties opt to include a mediation provision in the arbitration agreement.

Returning to sanctions for non-compliance or perfunctory performance – this time in the arbitration context – costs consequences once again came out top of possible sanctions, supported by over three quarters of respondents. At present a refusal to mediate might (but does not have to) have an impact on the exercise of a Tribunal’s discretion in a costs order. An express power to make an adverse costs order for a failure to mediate would strengthen the presumption that such a refusal should be taken into account.

The second most popular option (supported by 60% of respondents) was a power for the Tribunal to stay the arbitration proceedings in case of a failure to mediate by the claimant. The more draconian sanctions for non-compliance were also less popular with respondents in the arbitration context: only a small number of respondents (11%) considered that non or perfunctory performance by the claimant should go the jurisdiction of the tribunal or the admissibility of the claim. This might have been influenced by a concern for challenge proceedings if jurisdiction is rejected on this basis.

Picking your moment: timing of the mediation

Choosing the right moment for a (mandatory) mediation can be tricky: at an early stage of the case the parties might not have exchanged enough information to assess their (and the other side’s) position, at a late stage the parties might have become entrenched in their position or settlement might seem less appealing because of the costs that have been incurred already.

Faced with this question, respondents broadly preferred that the mediation take place early in the course of the dispute. Respondents thought the most appropriate stage for mandatory mediation to take place was after submissions but before disclosure (~45%), followed by pre-action (~32%), after disclosure but before the hearing (~29%), and before submissions/statements of case (~26%). Just under 40% thought that the timing should be flexible, and only under ~10% considered that the mediation should take place post-hearing.

Front-loading mediation to take place before the notoriously expensive document production and/or hearing stages can make sense, both for the parties (with an eye on costs) and from a policy perspective (with the aim of reducing courts’ caseloads). These findings accord with our previous LCAM-HSF Survey on Mediation in Arbitration which concluded that mediations in arbitration usually happen at the pre-document production stage.  However, this question of timing is one of the issues where what is appropriate will be heavily influenced by the nature of the proceedings (as discussed in detail here).

What’s on and what’s off the table?

When asked whether there was any type of case that did not lend itself to compulsory mediation, only 21% of respondents answered in the affirmative.

Some of these respondents referred to substantive areas of the law with a particular public interest element, such as insolvency, tax, estates, fraud, public law (including disputes involving public bodies) and protection of intellectual property. However, the majority of respondents appear to consider that these issues are not less (or more) suitable for mandatory mediation than other disputes.

Of the 21% of respondents who considered that some cases did not lend themselves to compulsory mediation, others instead referred to either (non-substantive) circumstances where mediation may not be appropriate or situations where the kind of relief being sought was not compensatory damages. Responses of this nature included cases where:

• one party is not participating in the proceedings;
• injunctive, declaratory, or interpretive relief is sought, or a party is seeking to enforce an on-demand performance bond or debt;
• there has been a track record of non-compliance with Court/Tribunal orders by a party;
• the claim is exceptionally urgent; or
• the claim concerns the breach of a settlement agreement.

These answers suggest that any regime providing for mandatory mediation should at least consider the inclusion of carve-outs for situations where going through the mediation process might not be expeditious. In practice, the easiest way to tackle these issues might be to grant the Court/Tribunal the discretion to override the requirement for mandatory mediation when it does not consider it appropriate in the circumstances.

We also asked respondents whether they considered that mandatory mediation should be limited to claims over or under a certain value. 35% of respondents answered yes and, of those respondents, 80% were of the opinion that mandatory mediation should operate with a ceiling (the other 20% preferred a floor). However, respondents had widely divergent views as to what the appropriate ceiling would be: values ranged from £10,000 on one end to £15.2 million on the other, with an average value of £2 million and a median number of £2 million. These answers reflect the breadth of the respondents’ practice areas, and illustrate that this issue cannot be addressed on a ‘one size fits all’ basis.

For more information, please contact Craig Tevendale, Partner, Chris Parker KC, Partner, Rutger Metsch, Associate or your usual Herbert Smith Freehills contact.