Julie Hamilton considers the role of mediation in commercial litigation and whether the flexibility it offers may be the route to avoiding, or at least limiting, the disputes that get to court.
What is mediation?
As Scottish Mediation describes it:
“Mediation is a flexible process that can be used to settle disputes in a whole range of situations. Mediation involves an independent third party, the mediator, who helps people to agree a solution when there is a disagreement. The mediator helps parties work out what their issues and options are, then use those options to work out an agreement… Parties in mediation are in control of the solution.”
Unlike arbitration, there is no mediation legislation – rather, mediation is a matter of contract. Mediation is increasingly mandated in commercial contracts as a process to use before arbitration or litigation. Its use is also encouraged by the pre-action protocol of the Commercial Court of the Court of Session in Scotland and in the Sheriff Court Simple Procedure rules.
It is confidential, so nothing discussed is shared out with the mediation process. And, as an informal process, parties are free to pursue more formal routes of dispute resolution such as litigation at any stage.
Pros and Cons
Confidentiality is, inevitably, one of the big attractions for businesses to mediation. However, there are other benefits that shouldn’t be overlooked:
- Mediation is often quicker than litigation, saving both time and money.
- Mediation is voluntary, and by signing up and being willing to participate, there can often be less conflict, which in turn increases the potential to save the business relationship.
- Parties remain in control. Ultimately, they have the final say – not the mediator.
- Mediation encourages a flexible approach to how parties deal with a dispute. This often results in creative solutions.
- It gives parties an opportunity to explore the strengths and weaknesses of their case, so even if a resolution is not reached the issues have been focused.
Nonetheless, the flexibility of the process can have its challenges and successful mediations rely on co-operation between the parties. Both sides must be willing to mediate and compromise, and if not, the mediation will be unsuccessful. And although the majority of mediation agreements are adhered to, there is a risk that it is ignored, and litigation is required to enforce it.
Mediation in the mainstream?
With businesses increasingly attracted to this form of dispute resolution, there are signs that mediation might be beginning to gain traction as an alternative, or at least a useful prelude to, litigation.
The Scottish Government is certainly supportive, and June 2019 saw the publication of two reports.
The first, ‘Mediation in Civil Justice: International Evidence Review’ saw the Scottish Government review the use of mediation in civil justice systems in Australia, Canada, England and Wales, Ireland and the USA. With the aim of supporting the work of Scottish Mediation, it fed into their report that was published a few days later called ‘Bringing Mediation into the Mainstream in Civil Justice in Scotland’. This review sought to explore how to encourage the greater use of mediation in Scotland and considers the experiences of other jurisdictions in doing so. Identifying both structural and cultural challenges to embedding mediation into Scotland’s civil justice system, the report suggests ways to address these in an attempt to ‘normalise’ the use of mediation. Although building on current infrastructure to do so, the recommendations are wide-ranging and envisage the need for legislation and rule changes, along with wholesale training and awareness-raising for the public, solicitors and judiciary. A degree of compulsion surrounding the use of mediation is also recommended.
Proposed Mediation (Scotland) Bill
This need for some degree of compulsion is echoed in the proposed Mediation (Scotland) Bill, which was put out for consultation a few weeks before the reviews were published. While it stops short of seeking to introduce mandatory mediation, the Bill would make consideration of mediation by parties compulsory at an early stage of most civil actions coming to court in Scotland. While there are some exceptions – arbitrations under the Arbitration (Scotland) Act being one of them – general commercial actions would be included in its remit.
The proposed Bill has two stated aims: to increase the use of mediation and increase the consistency of mediation services.
While it does not make mediation itself compulsory (indeed both the Bill and the Scottish Mediation review are united on that), that does not mean that the proposed legislation is without teeth. By making consideration of mediation a mandatory step in all civil claims, it could help to grow a mediation culture by making mediation part of the new lexicon surrounding dispute resolution, embedding it into the judicial process and people’s consciousness.
The momentum behind mediation becoming an integral part of the mainstream civil justice system seems to be gaining pace. Whatever the outcome of the consultation on the Proposed Mediation (Scotland) Bill, if the recommendations of the review are accepted, it is likely that legislation in some form will be drafted in the future.
For business, this should be welcome news. With mediation offering a flexible process, which guarantees confidentiality and allows parties recourse to the courts as necessary, it is already an increasingly common tool to resolve commercial disputes – particularly those arising from long-standing contracts where preservation of the relationship matters. And by enabling a frank and open exchange of views, even if ‘unsuccessful’, mediation can narrow issues sufficiently to allow any subsequent dispute resolution to be focused, potentially making it a quicker and less costly process than it otherwise would have been. A win-win for businesses.