The benefits of alternative dispute resolution (ADR) are recognised and continue to be recognised by courts in the UK as well as internationally. The current ongoing pandemic has increased the speed and use of ADR mechanisms and in particularly mediation as an effective method in resolving variety of disputes both domestic and international.
Mediation and investment treaty disputes
On 26-3-2021, the Singapore International Mediation Centre (SIMC) and International Centre for Settlement of Investment Disputes (ICSID) entered into an Agreement on General Arrangements. The Agreement provides for the use of SIMC’s facilities and services for mediation proceedings conducted under the auspices of ICSID, as well as enhanced technical collaboration between the two centres. The Agreement complements the use of mediation to settle investor-State disputes, particularly those involving Asian investors or States under the ICSID Mediation Rules. This is a significant step globally in terms of mediation becoming a powerful tool in resolving international disputes.
Further on 16-7-2021, Justice N.V. Ramana, the Chief Justice of India during the India-Singapore Mediation Summit outlined the importance of ADR and mediation in particular as a means of resolving large backlog of cases, saving resource, time and allowing litigants a degree of control over the process and outcome of their dispute resolution process in India.
The English courts and compulsory mediation
In England, also on 26-3-2021, in a speech to Hull University, Sir Geoffrey Vos, the Master of Rolls of England and Wales, discussed the notion of compulsory mediation as the Civil Justice Council, which he chairs, is looking at whether it may be desirable for forms of ADR to be made compulsory. Sir Vos, in his speech, also highlighted a number of areas where ADR has been successful, such as the Online Mediation Information and Assessment Meetings and Financial Dispute Resolution appointments in family claims and the early conciliation notifications to Advisory, Conciliation and Arbitration Service (ACAS) in employment claims.
A central theme of his speech was that ADR should not be considered alternative, but that mediated interventions should be part and parcel of the process of resolving disputes. The legal industry’s increasing use of online tools for dispute resolution provides significant opportunities to integrate ADR, and potentially compulsory mediation into the process, but there are still a number of practical considerations and potential drawbacks to consider.
The often-advanced arguments against compulsory ADR is that it prohibits individual’s access to Court, thus restricts access to justice as provided by law. The recent decisions of the English courts suggest that the courts are also becoming increasingly supportive towards the concept of compulsory mediation. In Halsey v. Milton Keynes General NHS Trust4,the Court held that while the Court may strongly encourage parties to engage in ADR (such as imposing costs sanctions for unreasonable refusals to mediate), but the Court does not have the power to compel unwilling parties to do so.
The Court of Appeal of England and Wales in Halsey also made clear that one party’s unreasonable refusal to mediate could lead to adverse costs consequences against that party. The Court of Appeal of England and Wales added to this point in PGF II SA v. OMFS Co. 1 Ltd.5 where it held that silence, as a response to a request to mediate, could be considered to be an unreasonable refusal, and therefore would also lead to adverse costs consequences. The Court stated that this decision “sends out an important message to civil litigants, requiring them to engage with a serious invitation to participate in ADR, even if they have reasons which might justify a refusal, or the undertaking of some other form of ADR, or ADR at some other time in the litigation”.
Following this decision6, some legal analysts started questioning if mediation has become mandatory in all but name7.
By 2019, the decision in Lomax v. Lomax8 further suggested that courts have begun to lean towards requiring parties to participate in compulsory ADR. In this case, one party sought Early Neutral Evaluation (ENE) but the other party did not consent to ENE. Ultimately, the Court held that it may order an ENE hearing under Civil Procedure Rule (CPR) 3.1(2)(m) whether or not the parties give their consent. The decision in Lomax case9 is part of a trend toward the integration of ADR within the civil justice process, citing the compulsory ADR in family law.
Last year, in McParland & Partners Ltd. v. Whitehead10, Sir Geoffrey Vos commented in obiter on Lomax decision11 noting that Lomax12 “inevitably raised the question of whether the court might also require parties to engage in mediation despite the decision in Halsey13”.The parties in McParland14 agreed to attempt mediation voluntarily, but the comments in the judgment may indicate that the Court could be open to reviewing Halsey decision15 in due course.
In terms of procedure, the Civil Procedure Rules in England and Wales itself encourages parties to consider ADR. CPR44.4 (3)(a) clearly states that the court will consider the parties’ efforts at ADR and CPR 26.4 allows proceedings to be stayed so that the parties may attempt to settle. Additionally, Para 11 of the new Practice Direction–Pre-Action Conduct and Protocols states that “parties may be required by the court to provide evidence that ADR has been considered” and echoing Halsey16, warned that ignoring to refusing to mediation may be considered unreasonable and lead to adverse costs consequences.
In June 2021, the Civil Justice Council (CJC) of England released their report titled “Compulsory ADR”17 . In this report, CJC addressed two important questions. Firstly, can the parties to a civil dispute be compelled to participate in an ADR process? This was termed as the “legality” questions focusing fundamentally on the procedural laws of England and Wales and human rights law. Secondly, if parties can be compelled and in what circumstances, in what kind of case and what stage should such a compulsory ADR requirements be imposed. This was termed as the “desirability” question.
The CJC report extensively reviewed not only English case laws as cited above but also the European jurisprudence with reference to Rosalba Alassini v. Telecom Italia SpA18 and Menini v. Banco Popolare Società Cooperativa19.
In Menini20 the European Court of Justice provided further guidance in relation to what it considered to be the necessary features of a scheme which renders access to the courts conditional on attempting ADR:
- the ADR procedure must be accessible online and offline to both parties, irrespective of where they are.
- Accordingly, the requirement for a mediation procedure as a condition for the admissibility of proceedings before the courts may prove compatible with the principle of effective judicial protection, provided that that procedure does not result in a decision which is binding on the parties, that it does not cause a substantial delay for the purposes of bringing legal proceedings, that it suspends the period for the time-barring of claims and that it does not give rise to costs—or gives rise to very low costs—for the parties, and only if electronic means are not the only means by which the settlement procedure may be accessed and interim measures are possible in exceptional cases where the urgency of the situation so requires….
The CJC report also referred to the fact that many other jurisdictions have adopted different forms of compulsory ADR such as in Italy, Ontario, Australia and Greece.21 The CJC report concluded that any form of ADR which is not disproportionately onerous and does not foreclose the parties’ effective access to the court will be compatible with the parties right of access to courts.
The CJC report recommended introducing further compulsory elements of ADR will be both legal and potentially extremely positive development with the three following observations:
(1) Where participation in ADR occasions no expense of time or money by the parties (as with answering questions in an online process as to a party’s willingness to compromise) it is very unlikely that the compulsory nature of the system will be controversial – as long as the ADR is otherwise useful and potentially productive.
(2) Judicial involvement in ENE, financial dispute resolution (FDR) and DRH (dispute resolution hearing) hearings is proving highly effective and these are of course available free to the parties. Again, as long as they seem appropriate for the particular type of case being considered and can be resourced within the court system, we cannot see that compulsion in an even wider range of cases will be unacceptable.
(3) We think that as mediation becomes better regulated, more familiar and continues to be made available in shorter, cheaper formats we see no reason for compulsion not to be considered in this context also. The free or low-cost introductory stage seems the least likely to be controversial.
However, the observations and recommendations of the CJC report are based on allowing the parties free choice to return to the court if they wish to do so to seek adjudicative justice (as at present they do) and as such the greater use of compulsion is justified and should be considered.
Indian courts and compulsory mediation
ADR in Indian litigation is prescribed as one of the methods that can be adopted to settle and/or adjudicate upon cases away from courts. Section 89 of the Code of Civil Procedure (CPC), 190822 recognises the mechanisms that can be adopted by courts to resolve disputes outside the courts, but the modus available under Section 89 CPC has time and again been held to be voluntary and not compulsory. Recognising this, the concept of compulsory mediation has been mooted by the Supreme Court in its landmark judgment in Salem Advocate Bar Assn. (2) v. Union of India23, which in turn has caught the attention of Parliament, which has, under the Commercial Courts Act, 201524, introduced Section 12-A25, whereby, parties are mandated to participate in a compulsory mediation prior to litigating under the Commercial Courts Act. The exception to this rule is cases wherein urgent interim relief is being sought. In all other cases, there is a bar to the filing of such commercial suits, without engaging in compulsory mediation.
In furtherance to Section 12-A, the Central Government has notified the Commercial Courts (Pre-Institution Mediation and Settlement) Rules,(CCPIMS) 201826. Under the CCPIMS Rules, mediation is defined as a process undertaken by a mediator to resolve, reconcile and settle a commercial dispute between the parties. The process of mediation can be commenced by the parties to a commercial dispute by making an application to the “authority” concerned who will assign a mediator to conduct the mediation process. The time period prescribed for completion of the mediation process is three months from the date of receipt of the application for pre-institution mediation. The time period may be extended by two months, with the consent of the parties. The settlement arrived at during the mediation process will have the same status and effect as that of an arbitral award under Section 30(4) of the Arbitration and Conciliation Act, 199627.
The CCPIMS Rules further provide that, when a party refuses to participate in the mediation or when no settlement is arrived at between the parties, within the stipulated time period or where the mediator is of the opinion that the settlement is not possible, the mediator is required to submit a failure report to the authority. The CCPIMS Rules further ensure confidentiality, by directing all parties to the mediation process, including the mediator to maintain confidentiality in relation to the mediation proceedings.
Thus, the CCPIMS Rules consider and deal with one of the major concerns relating to litigation-connected mediation i.e. confidentiality. However, the CCPIMS Rules in India do not deal with or provide for any penal or punitive consequences for failure to engage in bona fide mediation.
Unlike in England and Wales, where relief in terms of costs are affected when a party failed to engage in bona fide mediation, in India, owing to the absence of a judicial culture of awarding significant or large adverse costs, there is no consequence for failure to engage in mediation, bona fide. Legislative interference in this regard may be warranted to make mandatory mediation more effective in India, as the approach of courts in India to mandatory mediation under Section 12-A of the 2015 Act has been very varied and different.
For example, the Bombay High Court in Ganga Taro Vazirani v. Deepak Raheja28 has held that, Section 12-A of the Act of 2015 is a procedural provision and if there is a substantial compliance, the plaintiff cannot be non-suited. Following that in Dhanbad Fuels Ltd. v. Union of India29, the Calcutta High Court considered in revision, an order passed by the Commercial Court rejecting an application under Order 7 Rule 11(d) of the Code of Civil Procedure, 190830 seeking dismissal of the suit in view of non-compliance of Section 12-A of the Commercial CourtsAct of 2015. In the facts of that case, the defendant in the suit filed an application under Order 7 Rule 11(a) of the Code of Civil Procedure, 1908 which was rejected. The defendant did not raise the issue of non-compliance of Section 12-A of the Act of 2015 therein. The subsequent application under Order 7 Rule 11(d) for rejection of the plaint on the ground of non-compliance of Section 12-A of the Commercial CourtsAct of 2015 filed more than a year since institution of the suit was rejected by the trial court. In revision, the Court had directed reference to mediation and stay of the suit for limited period so as to allow the process of mediation to run its course.
In Laxmi Polyfab (P) Ltd. v. Eden Realty Ventures (P) Ltd.31, the Calcutta High Court, while specifically considering the question of whether Section 12-A was mandatory in nature and would act as a bar against instituting legal proceedings in the absence of compliance with Section 12-A, held that no suit can be instituted in the absence of substantive compliance with the obligation for mandatory mediation. As such, it does appear that Indian courts are taking proactive steps to ensure compliance with Section 12-A of the Commercial CourtsAct of 2015 requiring parties to undertake mandatory mediation.
Pandemic and online dispute resolution
The current pandemic has had a devastating impact on the ability of the courts to function with physical hearings, which has created an opportunity for online dispute resolution platforms to nudge parties towards ADR at various stages of dispute. As early as 31-3-2020, at the beginning of the pandemic lockdown in the UK, Sir David Foskett, Chair of the Civil Mediation Council, published a letter noting that “established mediators have already started adapting their normal working arrangements to offer online mediation where practicable”.32
The online dispute resolution is particularly relevant today, 16 months into the pandemic as the legal industry, and its clients, have had to become quickly familiar with engaging in dispute resolution through virtual means, such as using e-filings and remote hearings, hybrid hearings using variety of online platforms such as Zoom, Microsoft Teams and others.
As the legal industry has become quickly familiar with online mediation and its associated technologies, some law firms have decided that online mediation is so advantageous that they intend to continue using it after the pandemic33. Online mediation has become so prominent that a former lawyer at Greenberg Traurig Chicago recently launched a start-up, New Era ADR, to offer completely virtual arbitrations and mediations34. The most oft-cited advantage is the potential costs savings as no travel expenses or room hire fees need to be incurred. Additionally, both parties may feel more amenable and positive towards the mediation knowing it can be done from the comfort of their homes.
The support for and newfound prevalence of online dispute resolution significantly bolsters the argument for compulsory mediation. Firstly, the rapid changes the legal industry made in response to the pandemic showed that the industry is more adaptable to remote settings than previously thought35. Thus, as both legal service providers and consumers become more comfortable with adapting to virtual dispute resolution, they may also become more open and accepting toward other ways to make dispute resolution more cost and time efficient, namely, by engaging in compulsory mediation going forward.
Mediation is also being recognised as a significant tool to alleviate the current backlog of cases facing the courts. A report by a committee of the House of Lords in the UK titled Covid-19 and the courts, published on 30-3-202136 stated that the backlog of cases has reached record levels. Additionally, a survey of 100 FSTE350 companies by Ernest Young showed that 59% of the companies surveyed expect the number of business dispute claims to be even higher than normal this year as many companies deferred litigation which they would have otherwise pursued in order to focus on navigating the pandemic in the past 12 months.37Should this occur, the record-high backlog will become even more onerous. The House of Lords Committee Report recommended that Her Majesty’s Courts and Tribunals Service facilitates and encourages greater use of ADR to reduce the volume of civil cases in the courts system.
Disadvantages of mediation
Despite the potential that compulsory mediation may hold, and the fact that most disputes would benefit from mediation, it must be acknowledged that there are settled and often recited arguments against mediation. The disadvantages of mediation including the fact that mediation does not always result in a settlement agreement.
Firstly, in some civil disputes, where the parties attend purely for box ticking and costs reasons, to avoid adverse costs consequences, without any intention to reach settlement. In those cases, the mediator costs and legal costs will simply be additional time and costs on top of the inevitable and costly litigation.
Secondly, mediation lacks the procedural and constitutional protections guaranteed by the federal and State courts, as mediation is informal and there could be inequality in terms of resource and representation. Thirdly, mediation in practice has very little reference to settled legal precedents and case laws, which may be very valuable and potent legal power in a State court legal argument. Fourthly, mediation has no formal discovery process, as there is no process by which to compel the parties to disclose relevant material. Fifthly, remote meeting platforms such as Zoom have largely supported the argument for compulsory mediation. However, in cases where both parties have little desire to settle and are mainly mediating for costs purposes, a remote format can be particularly disadvantageous due to the ease at which parties can disengage by muting or simply focusing on another activity.
Practical considerations for compulsory mediation
The key question for legal practitioners is that if there is an introduction of compulsory mediation, then where and what stage of the proceedings it should be inserted? Should it be prior to the commencement of the claim as under Section 12-A of the Commercial Courts Act of 2015 or should it be later in the proceedings like currently in the UK for commercial disputes or at different stages of the proceedings as in Italy, Greece and Australia.
By way of an example, in the UK, in both Family and Employment Tribunal Claims, conciliation occur in the early stages of the proceedings. The advantage of early mediation is that settlement would help both parties avoid the time consuming and expensive litigation. On the other hand, it is often later in the dispute resolution process, such as when evidence is exchanged, where parties can better realise how settling might benefit them and be more willing to settle.
There will also inevitably be a small percentage of claims that will be clearly unsuited to mediation. In the Family Courts in the UK, where Mediation Information and Assessment Meeting is largely mandatory before making certain applications to court, there are exemptions that if one party lives abroad or if one party is a victim of domestic abuse. If compulsory mediations are brought in for civil disputes, then the court will have to consider vary the potential list of exempt or unsuitable cases for mandatory mediation.
Changes to the current dispute resolution processes are crucial due to the critical level of the courts backlog globally and increasing the use of mediation is a clear way to alleviate that backlog. Due to the courts current support for mediation, the significant benefits it would pose, and new technologies, compulsory mediation may be a likely addition to the dispute resolution process.
In the event that compulsory mediation is deemed too controversial to implement in the near future, Sir Vos’s aforementioned speech also suggested new ways to suggest and encourage parties to consider settlement, rather than mandating them to settle. The example Sir Vos provided was that with the Money Claims Online and Online Civil Money Claims, “if the claim is for £1000 in respect of the failure to deliver 50 units, and the defence is that 25 were actually delivered, a bot could pop up and suggest that £500 be paid to settle the claim”.
Regarding these artificial intelligence (AI) driven pop-ups and encouragements, parties may feel as if their burden to act is lower than compulsory mediation, and therefore, these new and innovative methods of encouraging settlement would be more readily accepted by the public and more quickly implemented into their systems. Thus, even if the idea of compulsory mediation for all civil disputes proves too controversial or complex to implement in the near future, there are still a variety of innovative options the courts may use to integrate mediation in the dispute resolution process, to encourage parties to settle at different stages of a dispute and lighten the court backlog.
In essence, mediation as an effective ADR tool is here to stay internationally due not only to the Singapore Convention on Mediation but due to many national courts promoting mediation as a necessary ingredient in the delivery of civil justice system. In India, the advent of Section 12-A of the Commercial Courts Act of 2015 and the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018 is a significant step towards integrating mediation in the Indian civil justice system.
* LLB (Hons.), LLM, FCI Arb., Advocate and Barrister-at-Law, Fellow of the Chartered Institute of Arbitrators (London). Author can be reached at firstname.lastname@example.org
ICSID Mediation Rules, International Centre for Settlement of Investment Disputes, available at <https://icsid.worldbank.org/sites/default/files/publications/WP.Mediation_Rules.pdf> (last accessed on 5-11-2021).
Full text of speech delivered by Justice N.V. Ramana, Chief Justice of India, at Mediation for Everyone: Realising Mediation’s Potential in India, India-Singapore Mediation Summit, 2021, available at<https://www.livelaw.in/pdf_upload/cji-speech-at-mediation-summit-396853.pdf>(last accessed on 5-11-2021).
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8(2019) 1 WLR 6527 : 2019 EWCA (Civ) 1467.
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102020 Bus LR 699 : 2020 EWHC 298.
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13(2004) 1 WLR 3002 : 2004 EWCA (Civ) 576 (CA).
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18(2010) 3 CMLR 17. [Joined Cases C-317/08, C-318/08, C-319/08 and C-320/08, ECLI:EU:C:2010:146, decided on 18-03-2010.]
192018 CMLR 15 [Case C-75/16, ECLI:EU:C:2017:457, decided on 14-6-2017.]
202018 CMLR 15 [Case C-75/16, ECLI:EU:C:2017:457, decided on 14-6-2017.]
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