The Minister for Justice and Equality, Charles Flanagan signed the commencement order for the Mediation Act 2017 (the Act) last Friday. This Act will now come into force from 1 January 2018.
The Act reinforces existing provisions recognising mediation in the Irish High and Commercial Courts and in the Rules of the Superior Courts. It places on a statutory footing the obligation to consider mediation and requires litigants to confirm to the Courts that they have considered mediation. The provision authorising the imposition of costs sanctions (for unreasonably failing to engage in mediation) is intended to ensure that there is greater recourse to mediation as a method of dispute resolution. This reform recognises that the mediation process has the potential to achieve better outcomes for the parties in many cases and can assist in alleviating the strain on the Courts system. The Act does not apply to arbitration.
What is mediation?
Mediation is a collaborative process which offers the opportunity to resolve disputes by way of negotiation and agreement (rather than by way of an adversarial litigation process culminating in a trial). A neutral person (the mediator) helps the parties to try to negotiate the resolution of the dispute. If a mutually acceptable outcome can be agreed, then it can be recorded in an agreement and the parties will execute it so that it becomes legally binding on them. If the mediation process does not result in the parties reaching an agreement, then the parties can still go to Court - the mediation process is without prejudice to their rights in that regard. Mediation is an increasingly utilised tool as part of the wider dispute resolution toolkit particularly in the area of financial services. The Financial Services and Pensions Ombudsman Act 2017 and the Central Bank and Financial Services Authority of Ireland (Amendment) Act 2017 are both pieces of legislation which promote mediation as a prompt and effective way of resolving financial services disputes.
Why the Act is welcome:
Solicitors are obliged to advise clients to consider mediation: A key provision in the Act requires solicitors to advise all clients engaged in litigation to consider mediation as a means of resolving their dispute. The Act obliges solicitors to provide their clients with information on mediation services and on the advantages and benefits of mediation1. Solicitors arguably should have been doing this already in appropriate cases (as part of their professional duty to act in the best interests of their client) but the statutory provision underscores this obligation and is likely to make the use of mediation more common. Solicitors are then required to swear a statutory declaration confirming that they have provided these advices to their clients; thus leaving solicitors with no option but to comply. If they fail to do so, the Court will adjourn the litigation proceedings until the declaration is furnished.2
The role of the mediator is clear: The Act states that the role of the mediator is to assist the parties in exploring ways to resolve their dispute by agreement. The process belongs to the parties and the mediator's responsibility is to ensure the outcome of the mediation is determined by mutual agreement if possible. Indeed, it is for the parties to advance proposals to resolve the dispute – the mediator can only advance his or her own proposals if all parties invite him or her to do so. Provision is also made for the parties to apply to the Court to re-enter the proceedings where a settlement is not reached. In such circumstances, the mediator will be required to produce a report to the Court. Such a report will not detail what transpired during the mediation and will only confirm the outcome. For example, if the mediation did take place but the parties were unable to reach agreement, the report will disclose the fact that no agreement was reached (but should not disclose or comment on the positions adopted by the respective parties)3.
Confidentiality of the process now enjoys statutory protection: The Act provides that all communications (including oral statements) and all records and notes relating to the mediation will be confidential and will not be disclosed in any proceedings before a Court. The wide scope of this protection should allay concerns about sensitive information being disclosed to the wider public. However, this confidentiality protection will not apply where disclosure is necessary in order to implement or enforce a mediation settlement. Disclosure may also be required by law to prevent physical or psychological injury to a party or to prevent the commission or concealment of a crime4.
Setting the rules before mediation commences and stopping the limitation clock: The Act provides that before the mediation begins, the parties and mediator must sign an agreement to mediate. This sets out the formalities of the mediation - how the mediation is conducted, its location, confidentiality, costs, the right to seek legal advice and other terms which the parties or mediator may wish to agree. The signing of an agreement to mediate temporarily stops the clock from running under the Statute of Limitations for a specified period, during which the mediation process is conducted5.
What is still unclear:
How the Courts will interpret "unreasonable refusal": In awarding costs, and where it considers it just to do so, a Court may have regard to any unreasonable refusal or failure by a party to consider or attend mediation. This means that a party unreasonably refusing to engage with the mediation process runs the risk of having to discharge the costs incurred by the other side. The extent to which the Courts will use this provision as the basis to punish those who unreasonably opt-out of mediation is unclear, particularly in light of the parties' constitutional entitlement to have their rights determined by a Court. The Courts already possess the power to penalise parties for an unreasonable refusal to mediate as part of their inherent jurisdiction. Nevertheless, there has been a reluctance to exercise this power, principally due to the voluntary nature of mediation and the view that parties should not be compelled to mediate where they do not voluntarily agree to it6.
How solicitors will engage with the statutory declaration: The introduction of the statutory declaration obligation, compelling solicitors to advise all clients in relation to mediation prior to commencing litigation proceedings, is likely to lead to an increase in the number of clients willing to explore mediation at an appropriate stage in Court cases. However, some clients will still prefer to litigate for various reasons. The effectiveness of this provision can only be assessed with the passage of time7.
Whether a Mediation Council will be established and if so, how it will be funded: The Act provides for the possible future establishment of a Mediation Council (the Council). It is not clear if and when such a Council will be established. The Act states that the Council will be funded from "fees calculated in accordance with such rules as it shall make for that purpose" but fails to specify who should pay such fees. Dispute resolution can be expensive and one advantage of mediation is that it can lead to significant cost savings. Adding unnecessary costs or requirements would be a disincentive; particularly since the parties will already have to bear other costs in the mediation process, including the mediator's fees. It is not clear what useful function such a Council would fulfil in practice – the concern is that the introduction of unnecessary overheads and regulation may reduce the uptake on what is intended to be a flexible and party controlled process8.
The commencement of this Act is a welcome development and should assist in the objective of improving access to justice, an aspiration recently endorsed by the Chief Justice. It preserves the essence of mediation: voluntary, collaborative agreement where the parties control the process, and it adds greater structure and clarity to a method of dispute resolution that has successfully operated for a number of years already. Although not all disputes are amenable to resolution through mediation, the Act is a further encouragement to parties to resolve their difficulties without having to go through an expensive trial process. The statutory obligation on solicitors to advise clients to consider mediation is likely to become an important part of that process.