Mediation has many advantages, but there are also downsides to it that should not be overlooked, warns Philip Hesketh.
Mediation is no longer an esoteric option for the resolution of legal disputes. It has become what the then Master of the Rolls, Sir Anthony Clarke, called for in a speech he made in May 2008. It is ’an integral part of our litigation culture’ . The string of cases following PGF II SA v OMFS Company 1 Ltd  EWCA Civ 1288 shows how the courts have run out of patience with parties unreasonably refusing to mediate, and will readily use costs penalties to demonstrate their displeasure.
Mediation has many advantages, but there are downsides to it also that should not be overlooked.
A significant advantage (at least to clients) of mediation is that it can save considerable costs by ending the litigation early, but mediation itself involves cost. Part of this is the mediator’s fee. The Centre for Effective Dispute Resolution’s (CEDR) Seventh Mediation Audit, published in May 2016, reported the average fee for a junior mediator was £1,545, and £4,500 for more experienced mediators. This fee is usually split between the parties. There may be room hire costs too. In addition, there are the costs of legal preparation and representation. Parties often choose to be represented by solicitor and counsel, so these costs are significant, and usually exceed the mediator’s fee.
In Garritt-Critchley and others v Ronnan and Solarpower PV Ltd  EWHC 1774 (Ch) at paragraph 23, the defendant refused to mediate, arguing the costs of mediation were likely to be as much as their latest offer to settle (£10,000). The judge rejected that, saying: ‘The point is that you compare the costs of a mediation with the costs of a trial. And the costs of a mediation, on any view, would have been far less than the costs of the trial, as both parties’ costs figures demonstrate.’ This is not withstanding the fact that mediation is not guaranteed to settle the claim.
Mediation is clearly a viable alternative to litigation, but only where going to court remains as an option. Without that, a party cannot effectively negotiate.
The amounts that can be saved depends on how early on in the process mediation is attempted. I frequently mediate relatively modest probate disputes where the parties have collectively spent £50,000+ on legal costs. Could the mediation have taken place earlier? Possibly, but mediating too early without sufficient information to make a decision on settlement may mean the parties do not resolve the dispute on the day. The significant increase in the issue fee to £10,000 for some cases will make pre-litigation mediation more attractive.
Mediation can add to the costs of the dispute if it does not result in a settlement on the day. However, this is difficult to quantify, because some issues may be resolved which will have an impact on the overall costs. The CEDR survey reports that 67 per cent of mediations settle on the day, with a further 19 per cent settling shortly after for an aggregate settlement rate of 86 per cent.
On those figures, mediation is clearly an effective device for settling claims, although it should be noted that the results were self-reported by the mediators taking part in the survey. Also, this cannot take into account the proportion of these cases that would have settled later, had there been no mediation.
Given the potential for significant costs savings and the reported success rate, mediation is clearly a viable alternative to litigation, but only where going to court remains as an option. Without that, a party cannot effectively negotiate. There would be no BATNA (best alternative to a negotiated settlement). The effectiveness of mediation, in my opinion, is dependent upon parties’ access to the courts and to skilled litigators.
Mediators are trained to encourage and develop a collaborative, problem-solving approach to the dispute with the parties and their representatives. In reality, however, mediations are, at least at the outset, adversarial, with parties instinctively wanting to persuade the mediator that they have the stronger case. They may also have a very well-developed disregard, to put it no stronger, for the other side. The mediator does not make a decision on the outcome as a judge would do. This is as well, because the mediator has not had full disclosure, or seen the evidence tested under cross-examination, or heard fully reasoned arguments on the legal issues in the case.
Mediation can add to the costs of the dispute if it does not result in a settlement on the day.
In this regard, the mediator’s role differs significantly from that of a judge. This is an advantage to parties who want to have a say in the solution to the dispute. It allows them to be fully heard in a way that is not afforded in a trial, and there is no settlement without their agreement. It allows for creative results over and above what the court has the power to award.
Understanding the mediator’s role is key to making the most out of a mediation. On the other hand, it is a disadvantage if a party wants to create a precedent, needs certainty that the matter will be resolved on the day, or thinks that the other side is bound to shift its position simply because it is attending the mediation.
Ultimately, we are in an age of client choice. A solicitor’s obligation is to give the client sufficient information to allow them to make an informed decision about the risks, disadvantages and potential benefits of mediation and other forms of ADR. One route to the resolution of a legal dispute is a process lasting months or years where the client gives evidence under cross-examination and a judge makes a decision on the outcome with both sides presumably advised that they have a better than 50 per cent chance of success. Mediation is just one of the alternatives to that.