Why ADR should be compulsory in commercial disputes

The courts are increasingly encouraging organisations with commercial disputes to resolve their differences by Alternative Dispute Resolution (ADR).

This can take the form of an independent assessment, joint settlement meeting or mediation. Mediation in particular has been championed. This is a consensual process but, at present, the courts cannot order the parties involved to mediate.

The usual strategy employed by lawyers handling a commercial dispute is to pursue or defend a position sufficiently aggressively to force the opposing party to settle, preferably before incurring the costs of trial. To clients it is often unclear how or when mediation fits that  strategy – offering mediation looks a sign of weakness.

The courts have stated that offering to mediate is not a sign of weakness and have imposed costs penalties on parties who unreasonably refuse to attend mediation. That principle was extended by the Court of Appeal in PGF –v– OMFS in which a successful party who failed to respond to an offer of mediation, as opposed to rejecting the proposal, was refused the chance to recoup his costs.

One has to question why, if the judiciary are so keen on mediation, they don’t order parties to mediate, making it a component of the litigation process, in the same way as parties exchange documents and witness statements? The judiciary’s concern appears to be that ordering parties to mediate might be deemed to interfere with litigants’ right to a fair trial which is enshrined in Human Rights legislation.

The current system is confusing for clients and lawyers alike. They don’t have to mediate, but are unclear what the consequences might be if they refuse. Sometimes the court sees it as acceptable to refuse to mediate, in other cases people who refuse find themselves out of pocket as they are not permitted to recoup their costs.

However, the benefits of ordering parties to mediate, rather than simply encouraging it, seem plain. Litigants would know at the start  that ADR  was not optional and could budget for it. If parties knew they had to mediate, there would be no stigma in offering that, so encouraging earlier mediation and saving costs.

The time has come for judges to start ordering parties to mediate. They do not have to settle. The benefits of judges ordering mediation outweigh the risk of a challenge on Human Rights grounds. The judiciary should clear up the uncertainty and start ordering litigants to mediate so they know where they stand.

For individual advice, please contact a member of our Dispute Resolution team on 0330 404 0773.