Summary
- Courts in England and Wales now have explicit power to order parties to engage in mediation, and an unreasonable refusal to do so can result in adverse costs orders – even if you win your case.
- When assessing costs, courts will consider whether a party failed to comply with an ADR order or unreasonably declined to engage in mediation, and may order that party to pay some or all of the other side’s costs.
- Refusal may be reasonable in limited circumstances, such as where an urgent injunction is required, a limitation period is expiring, or mediation has already been attempted without success.
- This article is a plain-English guide to the consequences of refusing mediation in commercial disputes in England and Wales, produced by LegalVision, a commercial law firm.
- LegalVision specialises in advising clients on commercial disputes, including alternative dispute resolution and litigation strategy.
Tips for Businesses
Before refusing mediation, document your reasons clearly – courts will scrutinise your decision. Even a strong case carries costs risk if refusal is deemed unreasonable. Engage with ADR proposals promptly and in good faith. If mediation has already failed or urgent relief is needed, those are your strongest grounds for declining.
When you are involved in a commercial dispute, mediation is often suggested as a way to resolve the disagreement without going to court. However, what happens if the other party refuses to engage in mediation? This article explains the consequences of refusing mediation and how the courts view such refusal.
What is Mediation?
Mediation is a form of alternative dispute resolution (ADR) where an independent third party, called a mediator, helps both parties reach a settlement. Unlike an adjudicator or judge, the mediator does not make a binding decision. Instead, they facilitate discussions between the parties to help them find common ground and agree on a resolution. Mediation is voluntary, confidential, and typically less formal and costly than court proceedings.
Can the Court Order You to Mediate?
Following significant developments in the law, courts now have explicit power to “order the parties to engage in alternative dispute resolution”.
This means that if one party refuses mediation, the court can compel both parties to attempt it.
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What Happens if a Party Refuses?
This depends on when mediation was proposed and rejected.
1. Before Proceedings Are Issued
Many pre-action protocols require parties to consider ADR before starting court proceedings. For example, the Pre-Action Protocol for Construction and Engineering Disputes encourages parties to consider whether negotiation or some other form of ADR might enable them to settle their dispute without commencing proceedings.
2. After Proceedings Are Issued
Once court proceedings have started, the court will actively manage the dispute. As part of the process, the court may order the parties to engage in mediation or other forms of ADR. If a party refuses to comply with such an order, they face potential sanctions.
The court may also stay (pause) the proceedings to allow the parties time to attempt mediation. This can affect your trial date and the overall timetable for resolving the dispute.
What are the Consequences of Refusing Mediation?
The most significant consequence of unreasonably refusing mediation is the impact on costs. When deciding legal costs, the court will consider how each party conducted itself.
The CPR now states that courts may consider ADR conduct when deciding costs. This includes whether a party failed to comply with an ADR order. It also includes whether a party unreasonably failed to engage in ADR.
This means you may still face costs consequences even if you win. The court may order you to pay some or all of the other party’s costs. This can happen if you unreasonably refused mediation or failed to consider it properly. The court may also reduce the amount of costs you can recover from the losing party.
When Might Refusal Be Reasonable?
Not every refusal to mediate will be considered unreasonable. There are circumstances where declining mediation may be justified, including:
- where you need an urgent injunction or other emergency relief that mediation cannot provide;
- where the limitation period is about to expire, and you need to issue proceedings to protect your position (noting that proceedings can be paused to enable the parties to mediate);
- where the dispute involves a pure point of law that needs court determination;
- where you have already attempted mediation unsuccessfully; or
- where the other party has shown no genuine willingness to compromise.
However, you should carefully consider your reasons for refusing mediation and take legal advice, as the court will scrutinise your decision closely.
Are there any Other Consequences Beyond Costs?
Beyond financial penalties, refusing mediation can have other practical consequences for your case:
- If the court orders mediation, it will typically stay the proceedings to allow time for the mediation to take place. This pauses the court process and can push back trial dates; and
- An unreasonable refusal to mediate may damage your credibility in any subsequent settlement negotiations and signal to the court that you are not genuinely trying to resolve the dispute proportionately.
This guide outlines how to resolve commercial disputes.
Key Takeaways
The courts now have clear power to order parties to engage in mediation, and refusing to do so can have serious consequences. The most significant risk is adverse costs orders, where you may have to pay the other party’s costs even if you win your case. Courts will consider whether your refusal was reasonable based on the specific circumstances of your dispute. Before refusing mediation, you should carefully consider your reasons and seek legal advice on whether your refusal might be viewed as unreasonable. In most cases, attempting mediation is the prudent course of action, even if you believe your case is strong.
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Frequently Asked Questions
What happens during a mediation session?
A mediation typically lasts one day and involves both parties, their legal representatives, and the mediator meeting at a neutral venue, or online. The mediator will usually hold a private session with each party separately to understand the main issues at hand, and to understand each party’s objectives, followed by a session where both parties present their positions in separate rooms, with the mediator moving between the rooms.
How much does mediation cost compared to going to court?
Mediation costs typically range from £1,500 to £5,000 plus VAT for a day’s session (split equally between the parties), plus your own legal costs for preparation and attendance, though this can be higher depending on the dispute. This is significantly less than court proceedings, which can cost tens or hundreds of thousands of pounds in legal fees, court fees, and expert costs, particularly for complex commercial disputes.
Can a court order parties to mediate in the UK?
Yes. Courts now have explicit power to order parties to engage in alternative dispute resolution. If a party refuses to comply with such an order, they face potential sanctions including adverse costs orders.
When might it be reasonable to refuse mediation?
Refusal may be justified where you need urgent injunctive relief, where a limitation period is about to expire, where the dispute involves a pure point of law requiring court determination, where mediation has already been attempted unsuccessfully, or where the other party has shown no genuine willingness to compromise.
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