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Sometimes, you could disagree with those you work with when carrying out your business activities. This could be, for example, because you cannot agree on the meaning of a term in your business contract or because you disagree on the level of service provided by another business to your company. These situations can give rise to a commercial dispute, which you should resolve efficiently. One way to resolve a commercial dispute is through the mediation process, which avoids the legal costs of court proceedings. This article will explain the legal consequences imposed by a judge for a business owner refusing mediation services in UK courts.
What is Mediation?
Mediation is an alternative dispute resolution (ADR) method available to resolve commercial disputes. Therefore, it takes place out of court. In mediation, parties to a disagreement ask a neutral third party to facilitate discussions to help them resolve the issues.
When you and the other party to the commercial dispute decide to use mediation, you voluntarily choose to. This is an important consideration to note, as it means that you cannot force the other party to take part in it. It is also not something you can rely on a court to insist on.
Why Might I Choose Mediation for My Commercial Dispute?
There are many reasons why you may choose mediation as a method to resolve your commercial dispute. These include because mediation:
- is usually faster and cheaper to resolve a dispute than commercial litigation;
- can help maintain good business relationships; and
- is non-binding, so it can also be more flexible.
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What Happens if I Refuse Mediation?
Even though you or a court cannot force another party to take part in mediation for your commercial dispute, not undertaking mediation can have consequences. You must follow the relevant pre-action rules if you choose litigation, which are rules that dictate actions you must take before court proceedings. One of these says that a party to a commercial dispute must consider ADR methods, such as mediation. As a result, the court, when making its decision, will consider if you have attempted mediation and have expected you to have done this.
How Does a Court Check if I Have Considered Mediation?
A court checks to ensure that parties in a court case have considered mediation or another form of ADR during the litigation process. These are through the directions questionnaire and are as follows:
- requiring you to answer a question asking whether or not you need to halt the court proceedings to allow you to carry out a form of ADR;
- asking your reasons why not if the answer to the above is no; and
- asking your litigation solicitor or other legal representative to confirm they have told you to consider ADR and the consequential costs for not doing so.
What is the Legal Consequence?
The primary result of not conducting mediation or any form of ADR is a financial loss. This is because the court may not award you costs and can give you an order to pay the other party’s litigation costs due to refusing to try mediation. However, you will generally have to pay the other party’s litigation costs if you are the losing party to the commercial litigation. In this case, you may have a chance to have your court costs paid by the other party if they have refused to consider mediation. If this arises, you must show their refusal was unreasonable.
What Does a Court Consider?
If you are the losing party in your commercial dispute and want to prove the other successful party was unreasonable by not attempting mediation, it helps if you know what the court considers. A court will look at:
- what the dispute is about;
- the merits of the case;
- the settlement options open to you;
- how much mediation costs; and
- if there are any delays or prospects of success in mediation.
This guide outlines how to resolve commercial disputes.
Key Takeaways
Mediation is an alternative dispute resolution (ADR) process that potentially resolves your commercial dispute. It is a voluntary process where a mediator facilitates you and the other party to resolve the dispute. You may choose mediation to resolve your commercial dispute because, for example, it is usually faster and cheaper than court proceedings. Although mediation is voluntary, the pre-action protocol for court proceedings requires you to consider it before continuing the court process. If you fail to do so, it can have financial implications for your court proceedings. This can include having your costs and paying the other party’s.
If you need help understanding mediation for your commercial disputes in the UK, LegalVision’s experienced disputes and litigation solicitors can assist as part of your LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
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