A Paper Prepared for the Libralex Meeting, Perugia, Italy, Updated 16.04.2013.
The Reasons for the Mediation and Directive
The European Parliament adopted in 2008 Directive 2008/52/EC on certain aspects of mediation in civil and commercial matters (‘the Directive’). Its purpose is to build trust in the process of mediation within the EU. The Directive notes there are a number of advantages of mediation over litigation, including that it is cost effective, flexible and that agreements reached through mediation are more likely to be adhered to voluntarily without further recourse to the courts.
According to a recent EU funded study, the time wasted by not using mediation (based on a claim of €200,000) is estimated at an average of between 331 and 446 extra days in the EU, with extra legal costs ranging from €12,471 to €13,738 per case. In England and Wales, the position is similar. In March 2011 the English Ministry of Justice noted in its consultation paper that:
“Last year, more than three quarters of claims in the civil system were settled after allocation but before trial. That’s 87,000 more cases that could potentially have been resolved earlier if mediation had been use more widely and committedly.”
Implementation of the Directive
The Directive provided that Member States (apart from Denmark, which has opted out) were to ensure by 21st November 2010 that its terms were implemented into national law. So far, only Austria, Estonia, France, Greece, Italy and Portugal have notified the Commission that they have implemented the Directive, while Lithuania and Slovakia have provided notification of the competent courts for enforcing cross-border mediation settlements. It is expected that most countries will avail themselves of the mechanism already in place pursuant to the Brussels Regulation for recognising and enforcing judicial awards and apply it to mediated settlement agreements.
The United Kingdom has partially implemented the Mediation Directive by enacting the Civil Procedure (Amendment) Rules 2011, which came in to force on 6th April 2011 and The Cross-Border Mediation (EU Directive) Regulations 2011 (SI 2011 No 1133) that came into force on 20 May 2011. Both of these pieces of legislation apply only to the mediation of cross-border disputes, not purely domestic ones. However the Ministry of Justice in England and Wales is now considering extending the national legislation to govern domestic mediations. The other countries that have implemented the Directive into their national laws have also done so only in relation to cross-border mediations.
Cross Border Recognition and Enforcement
One of the main aims of the Directive is that mediated settlement agreements will be recognised and enforced in one Member State if made in another Member State as if they were court judgments. This is an important step in enhancing the efficacy of cross border mediation within the EU. It provides that mediation settlements will be made enforceable by a new type of order called a ‘mediation settlement enforcement order’. Article 6 of the Directive requires the ‘explicit consent’ of all parties for enforceability to be recognised by a court. The practical way to deal with this in cross border settlement agreements is for an enforceability clause to be drafted in the mediation settlement agreement. A model clause for inclusion in a mediation settlement agreement under English law is annexed to this paper.
So far there are no international conventions that deal with recognition and enforcement of mediations between parties outside the EU, or with one or more party outside the EU. In these cases the mediation settlement agreement will be enforceable in contract.
Generally the question of legal and other costs are resolved at a mediation if the liability and quantum issues are settled. The costs element of the mediation settlement agreement would then be recognised and enforced in the same way as the substantive settlement. If the costs issues remain unresolved, that part of the dispute would be referred back to the court where the proceedings were being heard and costs would be assessed in accordance with the rules of the jurisdiction seised.
Voluntary or Compulsory Submission to Mediation?
The Directive envisaged that parties in dispute would seek recourse to mediation voluntarily. Article 5 provides that the court may invite the parties to use mediation to settle a dispute. However, it provided that Member States could elect for mediation to be compulsory before recourse to the courts. England has chosen for mediation to be voluntary. However, in order to obtain legal aid in England for a family law case, it is necessary to seek to resolve the dispute by mediation first. Italy, briefly elected to make it mandatory to mediate many civil and commercial disputes before initiating proceedings, but this rule has now been abolished in favour of voluntary mediation.
The question of whether mediation should ever be mandatory has been the subject of significant discussion by jurists and judges. Generally mediation is considered to be a voluntary process, and its consensual nature a fundamental contributor to the success of the process. Many, especially mediators, fear that if parties are compelled to mediate the goodwill essential for a successful outcome will not be present. Further, Dyson LJ in Halsey v Milton Keynes (2004) EWCA Civ 576 considered that “compulsion of ADR would be regarded as an unacceptable constraint on the right of access to court and, therefore, a violation of Article 6 (of the European Convention on Human Rights).” Some, such as Sir Anthony Clarke (former master of the Rolls) believe that compulsory mediation does not prevent a party’s right to a fair trial; it merely at worst delays that access.
In the ECJ case of Rosalba Alassini and Others Joined Cases C-317/08 to C320/08 19th November 2009, it was considered that a requirement to use ADR before instituting proceedings in an Italian consumer complaint situation was permissible on the basis that although a fundamental right might thereby be restricted, ADR was quicker, less expensive and more likely to produce a satisfactory long term solution.
The United Kingdom has notified the European Commission that it has already complied with Article 5 of the Directive by virtue of the current Civil Procedure Rules. CPR 1.4(2) requires the courts to engage in active case management, which includes if appropriate encouraging the parties to use ADR.
A further step in favour of mediation is Article 8 of the Directive, which provides that member states shall ensure that the limitation or prescription period for any litigation or arbitration shall be extended during the period of the mediation process. The general domestic position is that mediation does not of itself suspend the limitation period. For example, in England and Wales, the rule before 20th May 2011 was that if a party wished to mediate, they had to either (i) obtain the agreement of the other party to suspend the limitation period or (ii) issue a protective claim and then seek a stay of that claim by the court while the mediation takes place. Following the implementation of the Cross-Border Mediation (EU Directive) Regulations 2011 in the UK if a mediation in respect of a cross-border dispute begins on or after 20th May 2011, the limitation period is extended accordingly.
Quality of Mediation
Member States were by 21st May 2011 to provide systems for quality control of mediation services, judicial powers to invite parties to mediate, confidentiality of mediations and encourage Codes of Conduct and training of mediators. The United Kingdom Government considers that it has already complied with these requirements.
Article 7 of the Directive provides that confidentiality of the mediation process will be preserved, unless (i) there are overriding policy considerations; or (ii) where disclosure of a mediation settlement agreement is necessary to enforce that agreement; or (iii) the parties agree. The first two exceptions alone would mean that mediators and mediator providers could not be compelled to give evidence save in very limited circumstances. However the addition of the third exception, namely the agreement of the parties, is seen by many to be too wide and to go against the grain of one of the fundamental factors of mediation: confidentiality.
In the UK, an application for disclosure of mediation evidence will only succeed if the parties agree and one of the first two limbs of Article 7 of the Directive are met – i.e. the parties’ agreement alone will not justify disclosure and confidentiality not being preserved.
The implementation of the Directive in the EU is a welcome advent for mediation. It puts mediation at the forefront of ADR, and gives a clear message that it is an effective and highly satisfactory method of resolving many types of disputes. It is hoped that its terms will be implemented in England and Wales and other jurisdictions in relation to domestic as well as cross-border mediations, since its provisions are equally valid and desirable in the domestic context as the international context. How long will it be before, as is already the case in Australia, Primary Dispute Resolution is arbitration and mediation, and Alternative Dispute Resolution is litigation before the courts? That, I believe, will be an important turning point for parties locked in contention.
ANNEX MODEL CLAUSE FOR INCLUSION IN CROSS-BORDER SETTLEMENT AGREEMENTS TO ENSURE CROSS-BORDER ENFORCEMENT IN THE UNITED KINGDOM.
“The parties agree that: the matters settled in this agreement fall within the definition of cross border dispute as set out in Article 2 of Directive 2008/52/EC and for the purposes of CPR 78.23*; and this settlement has resulted from mediation, and is a ‘mediation settlement’ as defined in CPR 78.23(2)*; and by entering into this agreement each of the parties gives explicit consent to an application by any or all of the parties for a mediation settlement enforcement order pursuant to CPR 78.24*.”
This confirms that the settlement has resulted from mediation. This may be particularly important where the settlement has not been put into writing at the mediation. It obviates the need to obtain the parties’ consent at a later stage.
© rebeccaattree 18th October 2013
* The relevant procedural rules of any other EU jurisdiction where the settlement agreement may be enforced should be included in a) b) and c).