Ron Cheriyan, Sharpe Pritchard

As we emerge from the depths of the recession, claims against local authorities and public bodies are on the increase. At the same time, cuts to the public purse have meant that public authorities must minimise the costs involved in dealing with disputes.

Mediation is an alternative approach that can be a successful means of resolving disputes. However, there are issues that are specific to public authorities that must be borne in mind before engaging in mediation.

What is mediation?

As a method of dispute resolution, mediation is defined by the Centre for Effective Dispute Resolution as:

“A flexible process conducted confidentially where a trained mediator actively assists parties in working towards a negotiated agreement, with the parties in ultimate control of the decision to settle and the terms of their resolution.”

Mediation is less adversarial than litigation, adjudication or arbitration, and is aimed at finding a solution that is acceptable to both parties. It allows the parties to determine the process and outcome of the dispute, rather than relinquish control to a third party, such as an arbitrator, adjudicator or judge. Other advantages include the potential time and costs saved, as well as the fact that any settlement reached may be kept confidential.

Nevertheless, mediation does require the cooperation of both parties. Neither party may be compelled to participate in mediation, unless ordered to do so by a court. There is also no guarantee that a decision will be reached at its conclusion, as the parties are free to walk away from the process at any time.

Why mediation?

In addition to the benefits outlined above, there is a growing body of case law that makes it risky and potentially expensive to ignore mediation as a means of dispute resolution. The courts actively promote mediation, as well as alternative dispute resolution more generally. Any unreasonable refusal to engage in mediation could result in the imposition of adverse costs sanctions. In chapter 36 of his Review on Civil Litigation Costs: Final Report (2010), Lord Justice Jackson made clear that courts should impose adverse costs orders against parties that unreasonably refuse to mediate. As such, a serious offer to engage in mediation should only be refused in exceptional circumstances. This was emphasised most recently in Northop Grumman Mission Systems Europe Limited v BAE Systems (AL Diriyah) Limited [2014].

Clearly, there may be some disputes that are unsuitable for mediation such as judicial review claims or disputes that require judicial interpretation. On the other hand, there are other disputes, such as breach of contract claims or certain construction disputes, which lend themselves more easily to mediation. Given that mediation is now firmly part of the legal landscape, it should be actively considered throughout the lifetime of any dispute.

Ron Cheriyan, a solicitor in Sharpe Pritchard’s dispute resolution team, suggests three practical tips:

  • check the contract – the first point to check is whether your contract contains a provision in the event of a dispute. In the absence of such a procedure, the parties would have to agree that mediation is the appropriate means of seeking to resolve a dispute. It is also important to review the other dispute resolution procedures within the contract to ensure that any ‘escalation processes’ are complied with;
  • do you have power to settle? – prior to engaging in the mediation, a public authority must ensure that it has the requisite authority to enter into any settlement agreement proposed by the mediator; and
  • do not unreasonably refuse to mediate – even if an authority considers its case to be ‘watertight’, it should not ignore a request to mediate. The courts have shown themselves increasingly willing to punish those parties who unreasonably refuse to engage in mediation, which in turn can have serious cost consequences – even if the authority is ultimately successful in court proceedings.

Ron Cheriyan
020 7405 4600