What is Mediation?
Mediation is a widely-used form of Alternative Dispute Resolution (often referred to as ADR). It is an ‘alternative’ to going to court. It can be a very effective tool for settling disagreements while avoiding the time, cost, and uncertainty of court proceedings.
Mediation involves the parties that are in dispute voluntarily agreeing to hire someone (a trained mediator) to hear both sides of the argument and to help them resolve it.
Unlike court judgments (or arbitration awards), mediation does not force a binding decision upon the parties. The mediator does not decide who is right and who is wrong. Instead, the mediator that the parties employ will assist them by guiding the parties’ discussions, fostering their communication, and helping them explore potential solutions from a neutral perspective.
Mediation can be particularly helpful in resolving construction disputes because complex issues, multiple parties, and ongoing commercial relationships often require a flexible and practical approach to achieving resolution quickly.
Key Features of Mediation
Neutral facilitator – The mediator does not act as a judge or decision maker. They do not decide who is right and wrong. Instead, they facilitate discussions, helping parties understand each other's positions and explore settlement options.
Voluntary process – On the whole, mediation is voluntary and requires both parties to a dispute to agree to participate. The court does have the power to order mediation (and has recently shown that it is willing to do so even when one of the parties does not want to) but in most cases both parties must want to engage.
Confidentiality – Mediation is conducted on a “without prejudice” basis, meaning that statements made cannot be used in court later (except in exceptional circumstances).
Flexible procedure – The format and approach of mediation can be adapted to suit the parties and the dispute. Sessions may include joint discussions, private meetings with the mediator, or even site visits.
Less combative – Unlike adversarial forms of dispute resolution such as litigation and arbitration, mediation encourages cooperation, making it particularly valuable in disputes where ongoing relationships (such as those between contractors, subcontractors, and clients) are at stake.
The Mediation Process
Mediation follows a structured approach, but allows for a great deal of procedural flexibility to suit the characteristics and circumstances of the parties and their specific dispute. As a general rule, the following steps are taken:
Agreement to mediate – Both parties agree to mediate, and agree on who the mediator will be. They will sign a mediation agreement outlining confidentiality terms and procedural rules.
Preparation – Parties prepare summaries of their cases, collect up relevant documents, and identify the key issues to be discussed. Mediation works best when parties focus on major areas of contention rather than getting into excessive details. Often, lawyers bring huge value by helping parties to identify what matters and what can be left alone.
Opening statements – The parties attend a venue and begin by sequentially presenting their own perspective on the dispute in a summary form in the presence of both the mediator and the other party. This is sometime called a plenary session. It is an opportunity to clarify misunderstandings and set the stage for negotiation. Ordinarily, the parties don’t answer or reply to each other: they simple summarise their own position and perspective.
Negotiation and exploration – The parties then move into separate rooms at the venue. The mediator facilitates discussions, often through private sessions (sometimes called caucuses) in the private rooms where each party can speak openly. The mediator may help identify common ground, highlight weaknesses in evidence or reasoning, and potentially propose solutions.
Agreement or impasse – If a resolution is reached, it is documented in a settlement agreement, which is usually legally binding once signed. Such and agreement might not be prepared on the day of the mediation, but many parties prefer it to be drafted and signed on the day to prevent the other party backing out. If no agreement is reached, parties can proceed to litigation or arbitration (or take any other step that they wish, including giving up on the dispute altogether).
Why Choose Mediation?
Mediation can offer several advantages over litigation and arbitration:
Cost-effective – Litigation and arbitration are expensive. Mediation typically costs significantly less.
Efficient – Litigation can take months or even years, whereas mediation can often be completed within a few weeks. The mediation itself rarely lasts more than one day, whereas a trial in court can last weeks or months if it is sufficiently complex.
Confidentiality – Unlike court proceedings which take place in public, mediation is private and this allows parties to resolve their disputes without risking unwanted publicity or scrutiny.
Greater control – Unlike a court ruling, where a judge imposes a decision, mediation allows parties to craft their own settlement terms.
Flexible solutions – Mediation enables creative solutions that courts may not be able to order, such as agreeing to future collaboration, revising contract terms, or issuing apologies.
Mediation in Construction Disputes
Mediation is particularly well-suited to construction disputes, where multiple stakeholders (contractors, engineers, architects, and developers) are involved, and the nature of disputes often extends beyond purely legal issues.
Courts, including the Technology and Construction Court (TCC), strongly encourage mediation in construction disputes. Indeed, the courts are willing to force parties to mediate in the right circumstances. The Pre-Action Protocol for Construction and Engineering Disputes requires parties to consider mediation before litigation, and Judges may penalise parties who unreasonably refuse to mediate by adjusting costs orders against them.
When to Mediate?
Parties can mediate at any stage of a dispute. However, early mediation - before legal costs escalate - often leads to better outcomes as the parties will be motivated by the benefit of avoiding time consuming and costly litigation if they settle at a mediation. The right timing depends on factors such as:
whether sufficient information about the dispute has been exchanged by the parties to allow meaningful discussions of their respective positions on the dispute.
the level of hostility between parties.
the potential for preserving business relationships.
the complexity and value of the dispute.
Is Mediation Mandatory in England and Wales?
Mediation is not a per-requisite step that must be taken before litigation or arbitrating a dispute. But, as explained above, the courts consider it important that mediation is at least considered, and are willing to mandate that it takes place in appropriate circumstances. Importantly, however, even if the courts require parties to mediate, the courts cannot force parties to settle and so a particularly stubborn party can attend a court-ordered mediation and intentionally derail it to ensure no settlement is reached.
Conclusion
Mediation is an invaluable tool for dispute resolution, particularly in complex industries like construction. It provides a cost-effective, confidential, and flexible means of resolving conflicts without the risk and expense associated with going to court. While not mandatory per se, it can be ordered and parties who refuse mediation without a good reason may face adverse cost consequences in court.
For those involved in construction disputes, mediation offers a practical pathway to resolution, fostering collaboration and preserving valuable relationships.
If you need help or advice in relation to a mediation, contact Hamshaw today. For more insights into dispute resolution methods, visit www.hamshaw.com/articles