The changing role of ADR in the civil justice system: the implications of the government’s response to consultation

Matthew Marsh takes a look at the implications of the government’s response to consultation regarding increasing the use of mediation in the civil justice system.

In July 2023 the government published its response to consultation about its proposals for increasing the use of mediation in the civil justice system.[1] Although its conclusions largely apply to Small Claims (mainly claims under £10,000) the report signals that a change of approach we can expect to be implemented in larger claims. This note looks briefly at the changes we can expect and their implications for practitioners.

Introduction

There has for some time been discussion about whether the courts are entitled to order the parties to a claim to participate in ADR. The Court of Appeal in Halsey v Milton Keynes [2004] EWCA Civ 567 concluded that ordering the parties to mediate would be an unacceptable obstruction of the right to have access to the court in light of the right of access to the court under Article 6 of ECHR and the decision of the ECHR in Deweer v Belgium 2. However, in Lomax v Lomax [2019] EWCA Civ 1467 the Court of Appeal distinguished Halsey and decided that the power to order an Early Neutral Evaluation under rule 3.1(2)(m) did not require the consent of the parties. Similarly, the court may order the parties to take part in a Chancery FDR hearing.

The question of whether the court may make an order that the parties to a claim take part in a mediation was considered by a working group set up by the Civil Justice Council in 2021 which concluded that:

“Any form of (A)DR which is not disproportionately onerous and does not foreclose the parties’ effective access to the court will be compatible with the parties’ Article 6 rights.”

If there is no restriction on the ability of parties to litigation to choose whether to settle or to take a claim to court, there is no unacceptable constraint on the parties’ right of access to the court. In other words, as long as the parties are left with the freedom to decide whether to settle and on what terms their Article 6 rights will not be infringed by requiring them to take part in a mediation.

The Master of the Rolls, who chairs the CJC, has endorsed the report’s conclusions. In a speech to the Worshipful Company of Arbitrators in March 2022 he said:

“I have endorsed the CJC report. It would be out of step with the objectives of justice systems across the world for it to be impermissible to require parties to participate proportionately in attempts to resolve their disputes consensually.”

“Increasing the use of mediation in the civil justice system: Government response to consultation”

The conclusions reached by the report are:

1. In small claims, other than claims such as possession claims, mediation will, in effect, become compulsory. As the report puts it, mediation will be a ‘standard step’ at the Directions Questionnaire stage of claims using the Small Claims Mediation Service which is, and will remain, free.
2. There will be no individual exemptions based upon the circumstances of the parties in particular claims. Parties must attend the mediation appointment and must engage with the mediation in good faith.
3. Although participation in a mediation will be a ‘standard step’, comfortingly, the report confirms that settlement will remain voluntary.
4. The court will have power to apply sanctions for failure to participate in the mediation. Sanctions include the claim or defence being struck out and orders for costs.

One very important concession by the government is that there will be no measurement of the degree to which a party participates in the mediation or whether participation was in good faith. Were it to be otherwise, mediators would be required to report to the court what took place in the mediation. The mediation process will remain confidential and the court will only be able to apply a sanction based upon non-participation; limited participation such as a refusal to make concessions will remain known only to the mediator.

What next?

It might be thought that plans to bring in a compulsory mediation regime for small claims is of little interest to those conducting claims in the High Court. However, the report is explicit about plans to create a new approach to mediation for higher value claims in the County Court:

“… we also aim later to integrate mediation within the resolution of higher value claims in the County Court …”.

“The integration of mediation within higher value claims will involve referring parties to external mediators, rather than those employed by HMCTS.”

Integrating mediation into the court process in small claims is relatively easy because the Small Claims Mediation Service is already in place. It is one thing to order the parties to participate in a scheme which does not require them to pay for it and quite another to order them to incur a share of a mediator’s fees. Quite what the ‘integration’ of mediation will mean in higher value claims is far from clear and may be controversial. A requirement to mediate or face sanctions would go rather further than an ‘Ungley’ order that is commonly made.

The report considers some of the implications of orders being made by the court that refers the parties to mediators operating in the private sector; but it is unclear whether a mediator will be nominated by the court or whether the court will merely make an order requiring the parties to identify a suitable mediator and make arrangements for a mediation to take place (and, of course, to pay the mediator).

The report does, however, address the tension between requiring the parties to use a service that is available in the private sector and the need for confidence in a sector that is self-regulated, to the extent that it is regulated at all.  It seems clear that a reference by a court to mediator will mean that the mediator is regulated either by membership of the Civil Mediation Council or another body such as the Chartered institute of Arbitrators.

“Standards for mediators in court-referred cases will therefore need to be robust and clear to promote … trust, especially for the many parties who will be attempting mediation for the first time.”

The report does not give any indication about plans for claims in the High Court.

The future

It remains to be seen how the government proposes to extend the ‘integration’ of mediation into the Civil Justice system. As the current MR has pointed out on several occasions, there is nothing ‘alternative’ about mediation or other approaches to ADR. Based upon my own experience both as a practitioner and as a judge in the Business and Property Courts, mediation is already firmly integrated within the Civil Justice System. It is routinely discussed as part of the process of case management and a stay for mediation is on the menu of directions for the court to consider. I can think of only a very small number of cases in which one or party refused to agree to mediation or some other form of ADR. It must be questionable whether the court in fact needs any further powers than it has at present. The proportion of claims which reach a trial or other final hearing is very small, perhaps as low as 5%. Some claims are struck out or disposed of by way of summary judgment; the majority are resolved by agreement.

The greatest drivers towards settlement of claims are the cost of litigation and the risk of facing an adverse costs order. There can be few cases in which a represented party has been unwilling to try to resolve the claim with a view to saving cost and achieving certainty. Unrepresented parties still face the risk of paying the other party’s costs and therefore have a strong incentive to try to resolve the claim.

However, it seems almost inevitable that the integration of ADR (especially mediation) into the CPR will take place. There is force in the point that the resolution of disputes should be integral to the CPR. Cases should be managed with a view to avoiding a trial. But the parties must be entitled without undue obstruction by the judiciary to take their claim to a trial. After all the primary function of the court is to resolve the dispute where the parties have been unable to reach agreement. It is not the function of the court to put pressure on the parties to reach a compromise if they wish to obtain a determination of the issues in the claim.

More controversial than integration is whether the court should have the power to order the parties to participate in a mediation and be able to apply sanctions if one party declines to do so. Given the terms of the recent report and the views that have been expressed by the MR compulsory mediation seems inevitable. This may not be a major threat to litigants provided the cost of mediation is proportionate to what is at stake in the claim and the court has no power to probe into what took place during the mediation. The integrity of mediation as a process would be directly threatened if mediation confidentiality is removed for the purpose of the court deciding whether the parties fully participated in good faith. Furthermore, it would involve satellite litigation in every claim as each party sought to obtain advantage if no agreement was reached.

 

Matthew Marsh
Arbitrator and Mediator
Former Chief Chancery Master

 

[1] “Increasing the use of mediation in the civil justice system: Government response to consultation”.