At long last, it looks as if mainland Europe’s antipathy towards ADR may be changing

Mediation has been an integral part of dispute resolution in the UK for more than a decade. This has not been the case in the rest of Europe, though. The general reluctance by continental European jurisdictions to use any kind of alternative dispute resolution process has meant that cross-border disputes have often had to be resolved outside the courtroom, where practical matters such as foreign procedure, language and legal culture can often put UK litigants on the back foot. However, change is in the air.

European Mediation Directive

On 13 June 2008, EU Directive 2008/52/EC on certain aspects of civil and commercial matters (the Directive) came into force. This was part of a pan-European initiative to “facilitate access to ADR and to promote the amicable settlement of disputes by encouraging the use of mediation and by ensuring a balanced relationship between mediation and judicial proceedings” (see article 1).

All European countries (apart from Denmark) had to implement the Directive into their national law by 20 May 2011.

For the time being, the Directive applies only to civil and commercial cross-border disputes. A dispute is cross-border if at least one party to the dispute is habitually domiciled in a different member state to that of the other party or parties.

It does not extend to “rights and obligations which are not at the parties’ disposal” (see article 1(2)) such as revenue, customs or administrative matters, or to disputes concerning the liability of a government.

The Directive provides only for voluntary mediation. However, it says clearly that member states can make the use of mediation mandatory and impose penalties in the event of default. They can also extend the use of mediation to domestic disputes.

The Directive addresses five principal issues:

  1. The suspension of limitation periods during the mediation process
  2. The enforceability of mediation settlement agreements as if they were court judgments
  3. The confidentiality of the mediation process, so that the participants cannot be compelled to give evidence regarding information obtained during mediation, except in the most extreme circumstances
  4. The consistent quality of mediation through mediator training and compliance with a voluntary code of conduct
  5. The power of the judiciary to suggest, or invite participation in, mediation

Impact in England and Wales

Although the mediation process is already well established in England and Wales – and issues (4) and (5) above have been integrated into domestic law – the treatment of limitation periods, the enforceability of mediation agreements and the confidentiality of the mediation process indicate a new approach.

Limitation - Suspending the limitation period is a radical development from a common law perspective but it is limited in its application. Unsurprisingly, such suspension will only apply to the mediation of EU cross-border disputes. Accordingly, the various legislative provisions on limitation have been amended to:

  1. Exclude time spent during the mediation process in calculating the limitation period
  2. Extend the period when it would otherwise expire during the course of mediation  

These changes will not apply to the mediation of disputes between parties based within one of the UK jurisdictions, or as between parties based in separate UK jurisdictions.

Enforcing mediation settlements - Under the Civil Procedural Rules (CPR) rule 78.24, where all parties to a mediation settlement agreement accept that it should be made enforceable, they may apply to the court for a mediation settlement enforcement order. This order can then be recognised and enforced in all other member states.

Confidentiality - Mediation is already a confidential process in the UK. However, CPR rule 78.26 goes further to ensure that the disclosure of evidence given in connection with a mediation process may only be permitted by order of the court. Such an order will only be granted if all the parties agree, disclosure is necessary for overriding public policy reasons, or if it is necessary to enforce the mediation settlement agreement itself.

The Ministry for Justice has confirmed that these changes only apply to cross-border disputes and will not affect domestic litigation. Further, mediation remains (at least, in theory) a voluntary process. In practice, though, the costs implications for parties that refuse or are unwilling to mediate put a large dent in this principle.

These changes will not make much (if any) difference to the mediation process in the UK. On the other hand, they are likely to have a big impact in mainland Europe, as the Directive adopts (what is for Continental lawyers) a revolutionary approach to dispute resolution – at least, in relation to cross-border disputes – through mediation and other ADR processes.

Mediation in Europe

Most EU countries now comply with the Directive, including Belgium, France, Germany, Italy, Poland, Romania and Slovenia. Some have even extended the scope of the process beyond the Directive to cover domestic disputes, making it mandatory in certain situations.

For example, on 4 March 2010, Italy implemented the Directive by legislative decree (the Decree). This applies not only to cross-border claims but also to certain domestic disputes.

The Decree provides for two kinds of mediation procedure:

  1. A mandatory pre-litigation mediation procedure for disputes relating to insurance, banking and financial agreements; joint ownership, property rights, leases, gratuitous loans, division of assets, hereditary and family law; and compensation for damages arising out of road traffic accidents, medical malpractice and defamation.
  2. A non-mandatory procedure for any other civil and commercial dispute.

Under the mandatory procedure, parties must attempt mediation before starting a court action. If proceedings are issued without prior mediation, the court will not allow the case to go ahead. Instead, it will stay the action for a maximum of four months so that the parties can attempt to mediate.

If no settlement is reached, the mediator may propose a compromise agreement. If this is turned down by one of the parties, proceedings may then be issued. However, if the court judgment substantially reflects the mediator’s proposal, the judge can award costs against the party who refused the original proposal.

Legal advisers also have a duty to inform their clients fully about the mediation procedure, its advantages and the consequences of going to court before attempting mediation. If they fail to do this, then the lawyer-client service agreement may cease to be valid.

The Italian approach to mandatory mediation – and the ensuing costs penalties – may be an indicator of how other European jurisdictions will tackle resistance to mediation and promote its use in both cross-border and domestic disputes.

Future for mediation in Europe

Clearly, there is still a long way to go in terms of training foreign mediators to the required standard and adjusting the mindsets of litigators and parties to non-confrontational techniques of dispute resolution. However, with luck, the use of mediation will prove to be a cost-effective and speedy way of resolving cross-border disputes.

Given the way litigation works in civil law jurisdictions, there are limited opportunities to resolve disagreements at an early stage through negotiations. Access to the courts is frequently an enshrined constitutional right and the limited recovery of costs can easily shift the focus away from a negotiated resolution of the case.

Many UK nationals involved in proceedings in the EU will therefore welcome the Directive as a real opportunity to talk and negotiate with their foreign opponents before becoming embroiled in foreign litigation proceedings (as well as a foreign language and culture) with which they may be entirely unfamiliar.

It will also be interesting to see how the mediation process develops in individual European countries, and whether it evolves in the same way that it has done in the UK and the US. In these two countries, the courts insist that the parties consider mediation seriously before their case is heard, and award costs (and impose penalties) against those who do not embrace the process whole-heartedly.

In any case, mediation should ease the caseload of many an overburdened foreign court system. It also offers a welcome alternative solution to litigants in countries where the litigation process is comparatively long and burdensome.