Litigate or Mediate?

Mediation is increasingly being used to resolve disputes in many areas of life. It is one of the processes within the Alternative Dispute Resolution (ADR) spectrum and involves a neutral third party bringing two sides together with the aim of reaching a mutual agreement.

The Jackson Review on Civil Litigation Costs, presented in January 2010, recognised that mediation was still not used enough. The report recommended that there be greater use of mediation in order to control costs, and that there should in fact be ‘a serious campaign to ensure that all litigation lawyers and judges are properly informed of how Alternative Dispute Resolution works and the benefits that it can bring’.

The effectiveness of mediation is demonstrated by great settlement rates; a little over 70% of cases settle on the day, and an additional 20% settle soon afterwards, giving a total success rate of 90%.

There has also been a rise in workplace mediations of about 10% pa. Mediation is therefore clearly rising, so there is a real need for this to be recognised by businesses and lawyers, especially those who may need educating in the process. The new pre-action protocols strongly encourage mediation and those who unreasonably refuse to mediate will suffer cost consequences and failure to accept reasonable offers in settlement will carry punitive repercussions for litigants.

There is now another crucial reason for the current importance of mediation – the new costs budget rules, brought about on 1 April 2013. Solicitors are now required to file at court a costs budget for most cases valued over £25,000. This is much more detailed than the previous estimate of costs and determines what costs will be recoverable from the losing party. It is however open for the solicitor to charge their clients over and above this by agreement. The costs budgets will now be rigorously managed and strictly upheld by the court.

These various cost penalties mean that winning litigants may well be worse off than before. There is now a real motivation to settle cases before they become subject to damaging costs consequences. This means that early mediation has a highly valuable place. As more and more cost implications are being brought in to dissuade litigating, mediation will continue to grow, so it is essential to embrace and understand the process. The recent Court of Appeal case of PGF II SA v OMFS Company 1 Ltd [2013] EWCA Civ 1288 has re-emphasised this, where a failure to respond to a request to mediate was severely punished.

Early settlements achieved by mediation are an extremely cost-effective way to resolve disputes, in ways over and above legal fees and cost penalties. It states that mediation saves businesses ‘around £2million a year in wasted management time, damaged relationships, lost productivity and legal fees’. Other such savings would include the personal stress of litigation, the huge delay in getting to trial, reputational damage which may lead to losing current and potential customers, and indeed staff, and so on. The benefit to businesses of litigation, over and above legal fees, can also be achieved by mediation. Mediation offers wider options than the court, which would only normally award a monetary figure. Parties can invent their own commercial solutions, such as payments by instalments, re-negotiating contracts to preserve the business relationship, agreements to communicate any problems or issues in a timely manner, quality controls to be put into place etc. For this reason, the Ministry of Justice along with a number of professional and ​​business organisations have recently created a Dispute Resolution Commitment for local authorities and business. This encourages a commitment to use mediation before resorting to litigation, in order to resolve disputes in a less costly and quicker way.

On an international scale, on 20 August 2013, the International Institute for Conflict Prevention and Resolution declared that the Centre for Effective Dispute Resolution (CEDR) would be their 21st Century Pledge Partner in the United Kingdom. Signatories of the pledge commit to resolve disputes through mediation. This will lead to much more encouragement of and employment of mediation globally.

Clearly mediation will become ever more prevalent and businesses as well as litigators need to be aware of when and how to use it. It is imperative, therefore, that awareness and use of mediation is increased much more rapidly than has been the case over the last two years (which were the subject of the recent audit). If this does not happen, we will fall behind, thus, it is time to embrace mediation as a highly efficient method of dispute resolution.

Here at UCLan we have recognised the importance and prevalent global development of mediation within all areas of law and business, and as a result we are thrilled to be able to offer an exciting new undergraduate course; LLB (Hons) Law with Mediation, as well as a short course for practitioners, entitled ‘A Practical Introduction to Mediation’. Find out more information here: http://www.uclan.ac.uk/courses/llb_law_with_mediation.php

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