The English courts strongly encourage litigants to consider forms of alternative dispute resolution (ADR) at an early stage, and will penalise those who refuse to do so. Mediation is particularly encouraged, and it has a high success rate. A survey in 2016 found that around 67% of cases settled on the day and another 19% shortly thereafter, an aggregate settlement rate of 86%. And that the parties are usually satisfied with both the mediation process and its outcome.
Recent court decisions indicate that:
- failing to respond at all to an offer to mediate will usually merit a costs sanction, even in cases where mediation is unlikely to succeed; and
- where mediation is appropriate the parties must get on with it: if one of them frustrates the process by delaying and dragging its feet, that too will merit a costs sanction.
What sort of costs sanction?
A party who unreasonably refuses to mediate, or frustrates the process, risks being denied recovery of all or part of his costs, even if he succeeds in his claim or defence. So the usual rule that “costs follow the event” is displaced in such cases.
But the court might go even further, and order the party at fault to pay all or part of the unsuccessful party’s costs. That would obviously be a pretty draconian sanction – winning your case is usually a vindication of your position: but no, you must pay your own costs and the other side’s, even though you’re the winner.
If the party refusing mediation is ultimately the losing party, the normal sanction is payment of the winner’s costs on the enhanced “indemnity basis”.
Why take the risk?
It follows that refusing to mediate, or deliberately frustrating the process, will be a high-risk strategy. It will only make sense where:
- you can only get what you need from the court – e.g. where an injunction, summary judgment, or some other interim measure is required;
- the dispute raises an important question of law which you need to have decided by the court, whether for or against you; or
- you know that you will probably lose, but are confident that the other party lacks the resolve and/or resources required to pursue litigation to its conclusion.
Benefits of mediation in international disputes
Mediation is a particularly attractive way of resolving “cross-border” disputes between foreign producers and their UK agents/distributors/joint venture partners. Does St George have to go abroad to slay the dragon, or can he force the dragon onto his home soil to be slain? Which country’s law will apply? Cross border disputes are splendidly fertile ground for generating costly and protracted preliminary skirmishes which can completely obscure the real issues.
If parties and their lawyers are sensible and realistic, virtually any dispute is capable of being settled quickly and cheaply by negotiation. But sometimes parties and/or lawyers aren’t sensible or realistic, or there is too much hostility. If direct negotiation doesn’t sort it out, or even get going, you should consider mediation. For the reasons explained above, the other party will have to take it seriously,. Fixing a date, and working towards it, concentrates minds. The intervention of a neutral third party changes the dynamics. Successful mediators are very skilful operators, who can facilitate movement away from entrenched positions and engineer compromises even where the parties are utterly hostile to each other. The success rate statistics speak for themselves
The benefits are immense. You have an outcome you’re satisfied with. The whole thing can be done and dusted, usually in a day, at a mutually agreed venue and relatively modest cost. You and your team can rule a line under it and get on with what you should be doing, free from anxieties about the eventual outcome and the potentially ruinous cost of full-blown litigation.
If you would like to know more about the mediation process and how it works, ask for our free Client Briefing on Mediation.
Except where otherwise stated, all information given and any legal opinions expressed on this website assume that English law applies. See Conditions of use.