The real incentives to mediate

It is well known that a refusal to respond to a request to mediate a dispute, even an objectively reasonable refusal, can lead to a costs sanction being imposed by the court. Indeed, that was confirmed by a Court of Appeal decision in 2013 [PGFII v OMFS Company 1 Limited].

The Lawyer has, in recent months, highlighted the principles upon which the court will act in a failure-to-mediate case, raised specifically by the Court of Appeal decision in Thakkar v Patel 2017. It is now clear that parties who agree to mediate but who in practice delay and drag their feet for no good reason – thereby frustrating the mediation process – will also be liable to suffer costs sanctions.

But parties should not actually need the threat of a costs sanction being imposed on them by the court to incentivise them to mediate a dispute. The incentives for parties to mediate a dispute are clear.

The main incentive, of course, is the possibility that they might settle their case on acceptable terms without having to suffer the stress, distraction and additional costs of going through trial. But there are other potential advantages to mediating a dispute, even if it fails on the day.

First, you can gain valuable insight into your opponent’s position. You see them present what they consider to be their strongest arguments.  You see how strongly they feel about certain issues, what really matters to them. You sometimes see one of their key witnesses speaking about the issues and can assess how they will perform in the witness box at trial.  And you get a better feel for how your own strongest arguments are likely to be attacked by your opponent.

Second, you get a dry run at presenting the arguments you will rely on at trial to a neutral person.  Experienced mediators “reality test” your weaker arguments with you in private; their views act as a proxy for the views of the judge or arbitrator.  So you gain the benefit of some critical feedback on the strengths and weaknesses of your case before trial.

Third, the mediation process often helps in overcoming cynicism about your opponent’s real position. It is all too easy for parties and their legal teams to be seduced by their own arguments. They start to believe that their opponent knows perfectly well they are in the wrong and are simply acting in bad faith. Sometimes that is the case. But more often than parties imagine, their opponent genuinely believes in their own case – and has received quite different legal advice about the merits of their position.

It is surprising how often a party comes away from a day’s mediation viewing their opponent and the strength of their case through new eyes. That realisation can lead to a subsequent settlement breakthrough.

Finally, parties get a taste of what is like to spend a long day in the company of lawyers who visibly enjoy arguing with each other. At length.

Now if that isn’t an incentive to settle, I don’t know what is.

Ian Terry, mediator, One Essex Court