'To Mediate or Not to Mediate?' — that is (no longer) the question!

On 25^h July, the Ministry of Justice confirmed its commitment expressed earlier this year that mediation will become compulsory for all civil claims valued up to £10,000, without exception, with parties risking costs sanctions or strike out if they fail to engage in the dispute resolution process.

Whilst initially focusing on making the process mandatory for specified money claims during this Parliament, in due course, all small claims track matters will be in scope, and upon allocation will be referred to the small claims mediation service. If a settlement is agreed, a legally binding formal agreement will be registered with the court. If agreement is not reached, the dispute will be heard by a judge who may impose sanctions for previous non-co-operation.

Whilst the numbers of claims allocated to the fast and multi tracks in 2022 were significantly lower than the average for the three years pre-covid, consistent with the general downward claims trend shown by statistics from the MOJ Portal and DWP, small claims track (SCT) matters bucked the trend, with the number of claims allocated to the SCT in 2022 being 11% higher than the pre-Covid three year average. Although the number of small claims track trials has reduced over recent years, the recently-issued Civil Justice stats highlight the increasing pressures on the court service, with the average time between issue and trial in SCT matters now at a record 51.6 weeks. Factor in the widespread significant budgetary pressures on the court service, and the hidden costs arising from factors like interim procedural challenges and trials being adjourned, and the MOJ’s move is no surprise. As Justice Minister Lord Bellamy explains, in the Government’s opinion ‘A vast number of cases that go through the civil courts each year could be settled far more swiftly and with less stress through mediation. By integrating mediation for small civil claims, we will create valuable court capacity, freeing up time for judges and reducing pressures on the courts.’

So, what will this mean for defendants and their insurers:

• Inevitably, compulsory mediation will lead to some claims being referred to mediation which might not otherwise have been the case, and without doubt some of those claims will successfully conclude within the process. An NHS Resolution FOI report last year showed that 2/3 of their claims which went through such a process were settled at mediation, highlighting how mediation can be an effective process;
• The assurance that the service will remain free is a welcome one and will avoid any increased cost from the process itself.
• Legal reforms over recent years have resulted in more parties in small claims track matters being litigants in person. The input of a mediator at an early stage can bring a sense of realism and pragmatism to obstinate claimants and encourage them to view their dispute from a different perspective and acknowledge the risks in their claims;
• By introducing mediation at the early stage of formal litigation, theoretically resolution times for those cases successfully put through the process should reduce, meaning reduced costs.
• As the Government says, mediation can expand the avenues for redress in legal disputes. Similarly, mediation can effect more non-conventional terms of settlement than conventional litigation.

However, questions remain as to how effective this process will be:-

• It’s clear from the consultation responses that there is no consensus across the industry on key factors such as national standards for mediation and whether and to what extent mediation should be compulsory.
• Mediation has always been an option which parties could request at allocation. The drive to make this compulsory suggests that voluntary take up to date has been limited. Indeed, arguably, compulsion is contrary to the ethos of mediated negotiations.
• For certain types of claim, such as personal injury where financial compensation remains the key driver, it is difficult for some to see how such compulsion will drive significantly increased settlement volumes, particularly in claims where liability is in issue. It is therefore questionable whether the decision to not exclude any Part 7 claims from this process is wise.
• The danger is that on a high number of claims, this compulsion will make mediation a tick-box diversion, delaying an inevitable trial still further, especially given the Government’s decision to only go so far as to require parties to attend the scheduled appointments at this stage. No element of ‘good faith’ has been adopted.
• Where the mediation is not to be in person, the process of using telephone rather than an option to use video platforms is perhaps a missed opportunity which may have facilitated a more effective process.
• The Government’s intention to expand the HMCTS Small Claims Mediation Service, run by HM Courts and Tribunals Service, for this purpose will need significant investment to be effective and avoid significant process backlogs. Clearer and more accessible and inclusive information and explanation about the scheme is required according to respondents to the consultation which again will need resource to deliver.
• Equally, there is still work to be done to “develop a safeguarding and vulnerability protocol for mediation” to support vulnerable persons through the new process and avoid indirect discrimination. It’s not clear how this will be achieved.
• Discretionary sanctions for failure to engage are arguably a positive move but to what extent the court will apply the suggested strike out or costs penalties for failure to do so remain to be seen and query what costs sanction will apply given SCT costs.
• One wonders whether the timing of the compulsory process, post-issue and defence is necessarily the most effective. If the parties are entrenched enough to progress to the time and cost of formal litigation, one wonders how effective compulsory mediation will be.
• Retaining the one hour limit on the indirect meeting with the mediator is arguably too short for some more complex claims to maximise the prospects of success.

Increasing the use of mediation in the civil justice system is clearly another, fundamental contribution to what the Government sees as evolving ways for how legal disputes are resolved and “innovative approaches that will empower people to resolve their disputes swiftly and effectively without the need for a court hearing”.

It’s clear that mediation will become an increasingly integral part of Conservative Government policy and increased focus on methods for bringing and resolving disputes without traditional judicial input. This is clearly the start of a larger project, with the MOJ signalling the wish to integrate mediation into the court journey for fast and multi track claims via external mediators.

Whether this Government gets to fulfil its intentions before any changes at the next general election, and whether this week’s announcement delivers in its prediction to 'positively impact' 92,000 cases and free up to 5,000 sitting days annually’ remains to be seen.