Commercial mediation is a process used to resolve disagreements that occur in commercial relationships.
This can include disagreements over land, materials, rights, opportunities, payments, contracts etc. Both parties must agree to use the services of a professional mediator to resolve the dispute and to be bound by any agreement that is reached.
Sometimes the parties only both agree to mediate after one of the parties issues a 'Letter Before Action'. This is a formal; and legal document which must be compliant with Practice Direction- Pre Action Conduct. It is issued as a final warning to a party of a dispute that unless the matter is resolved, a claim may be filed in the courts. A Template Letter Before Action can be downloaded at the bottom of this page.
A professional mediator who has completed a recognised and accredited training program in commercial mediation will facilitate the process. He or she may have a combination of legal knowledge, industry experience and expertise, as well as the skills necessary to reach a resolution that is agreeable to both parties.
The use of commercial mediation to resolve business disputes is steadily increasing because it is an excellent way to resolve a dispute through a formal process, at a much lower cost than litigation.
The increasing use of mediation throughout the world has largely been attributed to the encouragement given by courts to use mediation as an aid to settlement. Many jurisdictions (such as England and Australia) have written mediation into their court processes.
Courts are now adopting a firmer stance for failure to follow CPR and Pre-Action Conduct, in relation to the overriding objective including “…ensuring compliance with rules, orders and practice directions”, particularly illustrated in the ‘Mitchell ruling’.
Specific attention is being paid to timescales in orders; and the use of Mediation and other forms of Alternative Dispute Resolution (ADR). Practice Direction- Pre-Action Conduct section 1.2(2) asks participants to consider ADR methods before going down a more formal route, and the Civil Procedure Rules (CPR) part 1.4(e) asks parties to explore the suitability to mediate. If a mediation offer is not considered or explored, refused or ignored, this is now being seen as unreasonable failure to comply with a rule, practice direction or a relevant pre-action protocol.
When this occurs, courts are considering CPR 3.1(4) “Where the court gives directions it will take into account whether or not a party has complied with the Practice Direction (Pre-Action Conduct) and any relevant pre-action protocol” and if a party has unreasonably failed to comply with the rules; and explored ADR, the court can invoke CPR 3.1(5) “The court may order a party to pay a sum of money into court if that party has, without good reason, failed to comply with a rule, practice direction or a relevant pre-action protocol”.
Recently ignoring a request to mediate (i.e. not responding one way or another) was seen as ‘an unreasonable refusal’ to mediate and incurred costs implications for the offending party (PGF ii SA – v – OMFS Company Limited  EWCA CIV 1288 2nd October Court of Appeal.) and many other judges have followed in recent cases.
The use of mediation is well established in the UK and, although an "alternative" to litigation and arbitration, it is now as important a form of dispute resolution as the more "mainstream" options. Its use is likely to increase over time as its effectiveness reduces the need for court time and expense.
Elsewhere, commercial parties are becoming more aware of the benefits mediation and other forms of ADR can offer. Mediation can be used successfully together with arbitration or litigation, where parties agree to seek to resolve a dispute by mediation first and only proceed to arbitration or litigation if the mediation fails to produce a settlement.
Lord Justice Jackson Reform:
From April 2013, the Government started to reform civil litigation funding and costs in England and Wales, which is predicted to a give a significant rise in the appeal and popularity of the process of mediation.
Lord Justice Jackson, a highly experienced member of the Court of Appeal, was asked by the current Government to come up with recommendations to reform the way litigation is funded and how costs could be controlled. The resulting 584 page report identified important weaknesses in the existing structures and systems for litigation; believed to give rise to disproportionate and often unnecessary costs.
The majority of the Jackson reforms to English Civil Litigation were started to be implemented in April 2013. This will result will see a huge impact on how future litigation is conducted.
Lord Justice Jackson made specific reference to mediation and joint settlement meetings as being a "highly effective means of achieving satisfactory resolution". But it was clear that smaller businesses and the general public did not appreciate the benefits of mediation.
Lord Justice Jackson noted mediation has a "significantly greater role to play in the civil justice system than is currently recognized", summarized in his belief that "mediation has a vital role to play in reducing the costs of civil disputes. It is underused and its potential benefits are not as widely known as they should be". Indeed Lord Justice Jackson called for a "serious campaign" to teach lawyers and judges the benefits of mediation to settle disputes.
Collis Mediation Ltd only uses mediators who are qualified in Civil, Commercial and International Mediation.
Please review our mediation fees here.
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