Mediation is now a legitimate contender to the traditional court system as a forum for resolving commercial disputes in Ontario. On October 25, 2010, the Commercial Mediation Act, 2010, S.O. 2010, c. 16, Sch. 3 (the “CMA”) came into force as part of the province’s Open for Business Act, 2010, S.O. 2010, c.16. The purpose of the CMA is to facilitate a legal framework for the mediation of commercial disputes and to provide for the enforcement of mediated settlement agreements in Ontario. With its enactment, the CMA now allows parties who have undertaken mediation to register settlement agreements with the court. This greatly improves the significance of mediated settlements since they will now have the same effect as court judgments, with all of the enforcement measures that come with it. As a result, the CMA has effectively made mediation a viable alternative for resolving commercial disputes in Ontario.
The CMA is based on the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Conciliation (2002) and, as such, parties and mediators may look to international principles when interpreting the CMA. Ontario is the second Canadian jurisdiction, after Nova Scotia, to adopt legislation governing the mediation of commercial disputes. Jurisdictions in the United States, such as Ohio, Illinois and New Jersey, have also enacted similar legislation. All of this signals a change in the way in which commercial disputes will be resolved in the future. With the traditional court system being a costly and time-consuming process, mediation is becoming an attractive alternative to resolving commercial disputes as the CMA provides for more certainty in the mediation process and the ability to enforce mediated settlement agreements.
What is Mediation?
Although the mediation of commercial disputes under the CMA is voluntary, it has many benefits for commercial parties. “Mediation” is defined in section 3 of the CMA as a collaborative process where parties agree to request a neutral person to assist them to reach a settlement in their dispute and where the mediator does not have authority to impose a solution on the parties. Thus, mediation is a flexible process that is designed by the parties themselves. The parties may not only appoint their own mediator by way of agreement, but they also may design the conduct and process of the mediation. Most importantly, parties to a mediation may choose an agreed upon remedy and design the settlement agreement with the assistance of a mediator. Therefore, unlike the court system which imposes a remedy on the parties, mediation allows parties to decide what remedy is most appropriate for them in the circumstances. Consequently, parties have more control over the process and may engage in more creative remedies than what would otherwise be imposed upon them in a court setting.
In addition, mediation provides a more informal and less adversarial forum than the court system, and is less expensive and time consuming. Where the litigation of disputes through the normal court process could take years to resolve, mediation provides an alternative route that gives the parties access to a more immediate remedy.
Parties should also be aware that pursuing mediation will not affect a party’s limitation period. Section 11 of the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B provides that a limitation period will not run during the times the parties agree to resolve a claim by an independent third party until: (i) the claim is resolved; (ii) the resolution process is terminated; or (iii) the date a party terminates or withdraws from the agreement. Therefore, parties can be sure that engaging in mediation will not prevent them from pursuing litigation in the future if the mediation is not successful in resolving the dispute.
The CMA applies only to commercial disputes commenced after October 25, 2010, when the act came into effect. “Commercial disputes” are defined in section 3 of the act as “a dispute between parties relating to matters of a commercial nature, whether contractual or not.”
The CMA does not affect the existing mandatory mediation process pursuant to the Ontario Rules of Civil Procedure, R.R.O. 1990, Reg. 194. However, the CMA will apply to new commercial disputes before one party has commenced litigation, thereby setting up an alternative system to the typical litigation process. Moreover, the CMA applies to any mediations conducted in Ontario, as well as mediations governed by Ontario law. This provides an incentive for parties to include Ontario as the choice of law in their contracts.
Nevertheless, almost all of the CMA provisions can be contracted out of by the parties, except for the provisions regarding fair procedure and the recognition of international principles. Thus, where there is a contrary agreement of the parties on issues arising from mediation, the CMA will not apply. Although this is beneficial since it provides parties with flexibility in designing contracts that fit the parties’ needs, it compromises consistency in the mediation of commercial disputes in Ontario. It is also only a voluntary process that commercial parties can choose to engage in. Regardless, it is a step in the right direction for resolving commercial disputes outside of the traditional court system in Ontario and provides further incentives for parties to elect mediation as a dispute resolution process.
Enforcement of Mediated Settlement Agreements
The most important innovation in mediation under the CMA is the possibility for parties to register their mediated settlement agreement with the court. This means that, for the purposes of enforcement, mediated settlement agreements are treated the same as a court judgment. Prior to the passage of the CMA, mediated settlement agreements were difficult to enforce. When an agreement was breached by one party, the other party had to commence a lawsuit for breach of contract for failing to fulfil the terms of the settlement agreement. This resulted in a lengthy and costly process. Now with the CMA in force, parties have the advantage of registering agreements which will be treated like a court judgment, with all the usual enforcement mechanisms of the court process, thereby reducing costs and time in the process.
Under the CMA, if a party to a settlement agreement fails to comply with the terms of the agreement, the other party wishing to enforce the agreement has two options. The party may apply either to a Judge of the Superior Court of Justice for a judgment in the terms of the settlement agreement, or to the Registrar of the Superior Court of Justice to obtain an order authorizing the registration of the signed agreement with the court. If the party applies to the Registrar, the Registrar will only be able to refuse making an order if a party did not sign the settlement agreement, the settlement agreement was obtained by fraud, the parties did not consent to the terms, or the agreement does not reflect the terms agreed to by the parties. Once the order is obtained, the settlement agreement may be registered with the Superior Court of Justice to give it the same effect as a judgment. This is a significant advancement for the future of mediation in Ontario as it puts mediation on a more equal playing field with traditional litigation for resolving commercial disputes.
The Mediation Process
Aside from being able to register a mediated settlement agreement, the CMA provides more certainty in the mediation process as a whole. Currently, there is no professional governing body for mediators, such that mediators are unregulated and almost any person can become one. Nonetheless, the mediation process under the CMA places new obligations on mediators and effectively codifies the practice that many experienced mediators already have in place. For instance, mediators now must determine if they have a conflict of interest or if the mediation will give rise to a reasonable apprehension of bias. A “conflict of interest” is defined in the CMA as a financial or personal interest in the outcome of the mediation, or having an existing or previous relationship with a party or person related to a party to the mediation.
If the mediator determines that a conflict of interest or reasonable apprehension of bias exists, the mediator now has a positive duty to disclose this information to all parties involved in the mediation. This duty to disclose continues until the mediation is terminated. However, parties may consent to the conflict of interest or reasonable apprehension of bias, thereby allowing the mediator to continue to act after a full disclosure of the facts and circumstances. As well, the CMA provides that mediators may not act as both a mediator and an arbitrator, or an arbitrator after acting as the mediator with respect to that dispute or a related dispute, unless all the parties to the mediation agree.
Another advantage of pursuing mediation for resolving commercial disputes is that mediation is a confidential process. Therefore, parties wishing to keep sensitive information confidential have a strong incentive to choose mediation. Pursuant to the CMA, information from the mediation must be kept confidential by all parties and cannot be used outside of the mediation. During the mediation, mediators may disclose any information received from a party to a party relating to the mediation, unless the other party expressly tells the mediator not to do so. Information related to the mediation process, such as documents prepared solely for the purpose of the mediation, views expressed and statements made by the parties during the mediation, invitations to mediate, or a party’s willingness or refusal to mediate, are not discoverable or admissible evidence in any arbitration, court proceeding or administrative process. As a result, mediators cannot be compelled to testify about the events or findings of the mediation.
Confidential information relating to the mediation may only be disclosed where disclosure is required by law or to protect the health and safety of any person, if all parties consent to the disclosure, if the disclosure is required to carry out or enforce the settlement agreement, or so a mediator can respond to a claim of misconduct. Information about the conduct of a party to the mediation or the conduct of the mediator, however, may be disclosed after the dispute is finally resolved for the purpose of determining costs of the mediation or of proceedings taken because the mediation did not succeed.
Finally, another advantage of the mediation process under the CMA is that the parties may agree that they will not proceed to arbitration or court proceedings before the mediation has been terminated. Nonetheless, if it is necessary to preserve a party’s rights or it is in the interests of justice to do so, a court or arbitrator may allow the proceedings to proceed notwithstanding the parties agreement in the contract to complete mediation first.
Mediation as an Effective Alternative to Litigation in Ontario
Ultimately, the CMA has further legitimized the use of mediation for commercial disputes in Ontario by providing greater assurances to parties involved in the mediation process and by recognizing its expanded use as an effective alternative to litigation. Juxtaposed with the time-consuming and very costly process of litigation in the court system, mediation offers a number of benefits to parties wishing to resolve their dispute in a more informal setting. With the CMA now providing a way in which mediated settlement agreements can be registered and enforced like a court judgment, as well as ensuring consistency in the mediation process, Ontario can expect more litigants to make use of this type of alternative dispute resolution. Overall, parties in Ontario or governed by Ontario law will be at an advantage as they now can seek out this alternative dispute resolution forum to resolve their commercial disputes.