“Mandatory Mediation”– what does it mean for the Construction industry?

The new “mandatory mediation” pilot in England & Wales came into force on 22 May.

As reported by our colleagues Jenny Scott and Chloe Hussey here, this initially applies to new civil claims made on paper or through traditional online systems, before being rolled out to all claims under £10,000.

This means once a claim has been issued and directions questionnaires filed, the claim will be stayed and the parties will be required to take part in a one hour mediation through the courts’ Small Claims Mediation Service. There are limited safeguarding-type exemptions. Otherwise, a failure by a party to take part can result in sanctions against it. Once the mediation is complete, the parties can agree that the claim is to be discontinued or dismissed if a settlement has been reached, if not the claim can continue.

This pilot is the latest move in a sustained push by the Ministry of Justice and other bodies, to integrate alternative dispute resolution (ADR), like mediation, into the civil justice system in England & Wales.  (To the point that the term “ADR” itself is under review and some have suggested mediation and other non-court processes should simply be called “dispute resolution”.)  It also follows the landmark Court of Appeal decision in Churchill v Merthyr Tydfil Borough Council [2023] EWCA Civ 1416, which confirmed that the courts in England & Wales have the power to compel parties to engage in non-court dispute resolution processes like mediation (providing this does not impair the essence of a claimant’s right to proceed a judicial hearing and is proportionate to the aim of settling the dispute fairly, quickly and at reasonable cost). Longer term the pilot is likely to be extended in scope, whilst the impact of the Churchill judgment will be embedded into the Civil Procedure Rules.

In Scotland there is no direct equivalent of this mandatory mediation pilot, nor the Churchill decision.  Nevertheless, mediation is well cemented in commercial dispute resolution in Scotland, including construction disputes. Futher, there is clear judicial encouragement of ADR through the Court of Session’s Practice Note for Commercial Actions – No.1 of 2017. Anecdotally mediation in Scotland remains popular and recent use has increased.  

What does this mean for construction? The industry is well versed in non-court forms of dispute resolution – with adjudication, expert determination and arbitration commonly featuring in construction disputes.  Mediation has provided a further option, which has proven to be well used over the years. It also sits well with recent moves in the industry towards collaboration and the earlier resolution of disputes – e.g. the UK Government’s Construction Playbook; the Hackitt Review; and the RICS Conflict Avoidance Pledge – whilst JCT’s most recent standard forms require the notification and good faith negotiation of disputes, in addition to giving serious consideration to requests for mediation (JCT Design & Build and Minor Works 2024). We are also likely to see parties reviewing their construction contracts and more mediation clauses appearing, such as “escalation clauses” incorporating mediation, to give parties more control over their options before they may be expected to, or ordered to, mediate by a court. Therefore, whilst many construction disputes may not fall under this pilot yet, as the bigger picture moves towards more ADR across the UK, the construction industry is well placed to embrace more mediation.

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