As reported by us in previous ADR e-bulletins, an EU Directive on mediation in civil and commercial matters was adopted on 23 April 2008 by the European Parliament. The Directive, which only applies to European cross-border disputes rather than to disputes within any one Member State, covers five broad areas: (1) encouragement by Member States of mediator training and the development and adherence to a voluntary code of conduct; (2) judicial powers to invite parties to mediate; (3) obligations on Member States to ensure mediation settlement agreements are enforceable as if they are court judgments (should all parties consent); (4) confidentiality of mediations such that submissions made during a mediation cannot be used in subsequent judicial proceedings if the mediation fails; and (5) the suspension of limitation periods whilst parties mediate.

EU member states (except Denmark, which has opted out) have until 21 May 2011 to implement the new rules into national law. Belgium, Estonia, France, Italy and Portugal have already notified the Commission that they have implemented the Directive, with Italy applying it to both domestic and cross-border mediations and Germany also having introduced a draft bill proposing to apply elements of the Directive to domestic disputes (see further item 10 of our ADR ebulletin).

In England and Wales, the Ministry of Justice has confirmed that the Directive will apply only to cross-border disputes. The Ministry does not intend to take any action in relation to areas (1) and (2) since mediation practice and procedure in England and Wales is already compliant with these requirements. However, the Civil Procedure Rules (CPR) are being amended and a Statutory Instrument prepared, to give effect to areas (3) to (5). The new rules will come into effect from 6 April 2011 and implementation will be effected as follows.

Ensuring that mediated settlement agreements have the force of court orders (Article 6)

It is proposed that mediation settlements will be made enforceable by way of a new type of order called a ‘mediation settlement enforcement order’. Changes to the CPR have been approved by the Civil Procedure Rules Committee that will allow parties to apply to court for the settlement order. Where there are existing proceedings, parties may make an application by way of a Part 23 application (General Rules about Applications for Court Orders). Where there are no existing proceedings, parties may make an application by way of a Part 8 application (Alternative Procedure for Claims), as amended by Practice Direction 78 (European Procedures).

Of particular interest in relation to Article 6 is that the "explicit consent” of all parties is required for enforceability to be recognised. This could be achieved by providing for enforceability in the settlement agreement itself, and it will be interesting to observe whether such clauses begin to be used. If the content of the agreement is such that the law of that Member State does not provide for its enforceability, an order will not be made. This is particularly relevant to mediation, where settlement arrangements may include traded solutions or other non-monetary remedies.

Safeguarding the confidentiality of the mediation process (Article 7)

The general rule in Article 7 is that the mediator, or those involved in the administration of the mediation process, cannot be compelled to give evidence in court or arbitration proceedings in connection with “information arising out of or in connection with a mediation process” (Article 7.1). This is subject to certain exceptions under the Directive, namely: (i) if the parties agree; (ii) if it is necessary for overriding considerations of public policy; or (iii) if it is necessary in order to implement or enforce the settlement agreement. Article 7 will be implemented through the provisions of the CPR and parties seeking disclosure or inspection of mediation evidence will need to make a Part 23 application (where proceedings are on foot) or otherwise use the Part 8 procedure. The procedural rules on evidence will remain in the CPR.

Article 7 impacts on the court's common law discretion to admit confidential information if it is "in the interests of justice" to do so. It is conceivable that different decisions may be reached depending on whether the court is reviewing a cross-border mediation or a domestic mediation. Interestingly, the position following the decision in Farm Assist v DEFRA No. 2 [2009] EWHC 1102 (TCC) (see our e-bulletin) may afford mediators slightly less protection in relation to domestic mediations than that afforded by the Directive at the cross-border level. Also, the definition of "overriding considerations of public policy" has a narrow meaning at the European level, namely, there must be a genuinely and sufficiently serious threat to a fundamental interest in society, which may be contrasted with the flexible "interests of justice" test applied by the court in addressing the confidentiality of domestic mediation.

In relation to Articles 6 and 7, a new rule, 5.4C(1B), will be created to ensure that mediation settlement enforcement orders, settlement agreements annexed to the orders themselves, and mediation evidence the subject of disclosure and inspection applications, should not be made available to a non-party to proceedings unless the court directs otherwise.

Limitation periods (Article 8)

The present position in domestic mediations is that if the expiration of a limitation period is approaching but a party wishes to mediate, that party must either seek agreement from the other side to suspend the limitation period or issue a protective claim and then seek a stay from the court for mediation to be conducted. In cross-border disputes parties will be better protected under the Directive as a consequence of Article 8.

Although draft legislation is not yet available, we understand that changes will be made by way of a Statutory Instrument to postpone the effect of the expiry of the limitation period. This means that, in the event that parties proceed to a cross-border mediation and the limitation period expires in the meantime, the courts will treat that expiry as if it occurred on a date eight weeks after the end of the mediation. This mirrors the usual time frame applied by the courts when allowing parties to re-activate proceedings after they have been stayed pending the outcome of a domestic mediation. Precisely when a mediation starts and ends will be defined in the Statutory Instrument.

Comment

We await the introduction of the CPR amendments and the relevant Statutory Instrument in April. We envisage that it will take some time, perhaps even a couple of years, for the effect of these changes to "bed down" and trends to emerge. Also, since the Directive is to apply to cross-border disputes only, its reach within this jurisdiction at least will be limited and it remains to be seen whether the Ministry of Justice chooses to apply the Directive to domestic mediations too in due course.