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Mediating Commercial Disputes - Do we need legislation?

Mediating Commercial Disputes - Do we need legislation?

A ‘Mediation (Scotland) Bill’ has been proposed. Is new legislation actually needed given the well-established and successful use of mediation in commercial disputes?

The proposal

The aim of the proposed legislation is to increase the use and consistency of mediation services in Scotland. In broad terms: (1) questionnaire: parties would have to complete a ‘self-test’ questionnaire at the beginning of a court action to ascertain the appropriateness of mediation; and (2) mandatory meeting: parties would then have to attend a mandatory meeting with a court appointed ‘duty mediator’ to consider the responses and decide whether to proceed with a mediation. The process would be facilitative; there would be no obligation on parties to mediate.

The proposed Bill would apply to all civil commercial cases with some limited exclusions. I have therefore considered it in the context of my own experience advising on construction and engineering disputes, often complex and with large sums of money at stake. These types of commercial disputes are commonly dealt with in the commercial court of the Court of Session. Mediation is often used very successfully to resolve such disputes, but I am not convinced that there is a need for commercial actions to be included within the new proposals. Why?

Commercial Courts already encourage mediation

Commercial judges have wide case-management powers, which are used to encourage and enable parties to resolve their dispute without the need for a court hearing:

  • Mandatory discussions about alternative dispute resolution (“ADR”) are likely to include mediation: before raising an action parties are required to: “… consider carefully and discuss whether all or some of the dispute may be amenable to some sort of alternative dispute resolution”. Similar discussions must take place prior to the ‘preliminary’ and ‘procedural’ hearings once the action has been raised. Those discussions are likely to include mediation, and are consistent with solicitors’ duties under the Law Society rules to advise clients on ADR options.
  • Active case management means mediation can be considered at an appropriate stage: the timing of discussions can be critical to the successful mediation of a complex commercial dispute. In high value cases the parties must be able to assess risk in an informed way. The commercial courts’ procedures facilitate this by ensuring that parties work towards early identification of the real issues in dispute, which, in turn, enhances the prospects of a mediation being successful.
  • Party meetings are regularly ordered “with a view to possible resolution of the action”: These orders are flexible in nature and may encompass a mediation, or simply a discussion between the parties or their Counsel in an effort to reach settlement or at least narrow the issues in dispute. I have seen settlements being achieved as a result of such an order. A commercial judge recently highlighted that the court can play a role during parties’ discussions: “In one case, parties came back to me after their meeting with each other and told me that if one of the issues in dispute could be resolved by me then they needn’t trouble the court with the other issues in the case as they would be able to sort these out amongst themselves”

In this context, adding mandatory meetings to comply with new legislation would be of limited benefit to parties engaged in commercial disputes. In fact, it would add a further layer of legal expense to what is already an expensive procedure in the commercial court. Alternative ways of encouraging the use of mediation, in line with the policy objectives of the proposed bill, might include the development of a court Practice Note to aid discussions about ADR (perhaps even covering the content of the proposed questionnaire).

The bigger picture

Encouraging parties to resolve their disputes outwith the courts is to be encouraged, and I have seen seemingly intractable disputes resolve once parties start talking to each other through mediation. Nonetheless, the proposed Bill comes at a time of substantial reform to our existing court rules. Active case management is at the core of those reforms. In a September 2018 speech, Lord President Carloway quoted Abraham Lincoln:

“Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser - in fees, expenses, and waste of time. As a peacemaker the lawyer has a superior opportunity of being a good man. There will still be business enough.”

So, the court is already alive to the benefits of ADR and it seems to me that active case management, rather than new legislation, is the key to resolution of commercial disputes outside of the courts. 

Consultation response

The proposal will facilitate an interesting debate on ways to increase awareness of mediation and ADR more generally. The consultation paper is open to responses by Tuesday, 20 August 2019.

By Nick McAndrew
Senior Solicitor, Construction

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