With suggestions that settlements reached through mediation lack the ‘legitimacy’ of authoritative judicial decisions, the mediation process has elicited criticism. The referral of commercial disputes to mediation gives rise to the understandable concern that mediation could inhibit the development of commercial law. The benefit of mediation over litigation and arbitration – its private and informal nature – can also create potential risks; given the absence of judicial due process safeguards, opportunities can exist for manipulative and oppressive behaviour. Courts and tribunals play an important role in defining the appropriate limits of the mediation process. The primary controversies relating to the commercial mediation process can be categorised into three groups: substantive fairness, procedural fairness and public interest concerns. Much of the criticism of mediation stems from the fact that many different processes are, regrettably, characterised collectively as ‘mediation’. The judicial system and mediation should be viewed as having a symbiotic relationship, with each contributing different principles to an interconnected and increasingly integrated justice framework.

Disputes should be resolved by using the appropriate process, whether that be litigation or a form of alternative dispute resolution (ADR) such as mediation. Court systems in jurisdictions throughout the world are organised on the assumption that most commercial cases will settle, often at the doors of the court. Litigation consequently operates as a legal default or fallback option. Parties should be aware of the various forms of ADR available and where commercial mediation fits within the range of processes. Certain dispute resolution processes may be particularly well suited to certain types of dispute, and the parties’ choice should be informed by clear criteria. Mediation has proved difficult to differentiate from other forms of ADR, in part due to the lack of a generally accepted definition. Attempts to define mediation have proved challenging, given its varied use in different contexts. However, a comparative view of mediation definitions, both statutory and judicial, generally reveals a broad consensus across jurisdictions on the treatment of issues such as dispute, voluntary nature, communication between the parties and consensual resolution by the parties.

Mediation confidentiality can be characterised as the cornerstone of the mediation process. The legal protection of mediation evidence can emanate from common law privilege, contract and statute. If comprehensive statutory protection is available, parties may not have to protect from disclosure mediation evidence in their contract, or rely on common law privilege with its various exceptions. There is often a lacuna between the general perception that complete confidentiality applies to the participants in a mediation, and the more limited protection conferred by the courts. While a balance is required between supporting mediation and not freezing litigation or upholding illegality, this balance is not easy to achieve. The approach of making mediation confidentiality ‘absolute’ appears to create straightforward rules for an informal process, but it can prove to be either overreaching or inappropriate. While uniform laws offer consistency, experience indicates that they fail to gain sufficient traction or acceptability to have widespread impact. In protecting mediation confidentiality, it is important that courts retain the power to admit mediation evidence in appropriate cases.

A mediated settlement agreement must be enforceable for its obligations to be binding. Several elements can result in mediated settlements being set aside: the absence of contractual certainty to bind the disputing parties, rescission on account of an unjust factor, undue influence, duress and coercion, unconscionability, incompetence or incapacity, lack of authority, fraud and mistake. The jurisprudence resulting from attempts to evade mediated settlement agreements provides guidance to the mediator and the legal advisors to the parties on the practical steps that can be taken to provide certainty and avoid enforcement problems. Careful and comprehensive drafting incorporating all the intended commercial terms is critical to ensure that mediated settlement agreements are complete and enforceable. Where compliance may be an issue, the settlement can be converted into an arbitral award or a court judgment, or enforced under the Singapore Convention which elevates international mediated settlement agreements to a new status that can be recognised and enforced within the framework of private international law.

Many jurisdictions require lawyers to advise clients about mediation. As gatekeepers of the process, lawyers have duties to fulfil before the mediation starts, during the process and when it ends. There are ethical considerations that mediators must consider and potential legal liability to bear in mind. While it is important to distinguish between acting as a lawyer and as a mediator to ensure there is no conflict of roles, the two roles can also have a symbiotic relationship. Observing the work of lawyers in mediation from a detached perspective is beneficial, as opportunities arise to see behaviours that are counter-productive and behaviours that are constructive. This acquaints a lawyer with a variety of ways to respond to difficult behaviours by clients or opposing counsel that can help in meeting the parties’ substantive needs. Mediation has been instrumental in the emergence of the ‘new lawyer’ – a professional who has a greater focus on the potential for interest-based bargaining and problem solving, and accepts the value of non-legal solutions to legal problems. The flexibility of the mediation process can also facilitate expert involvement in a non-adversarial way.

Where there is a significant risk of onerous costs being imposed on recalcitrant parties, a substantial increase in the number of disputes being mediated is the likely outcome. There is a clear link between the deployment of costs sanctions for unreasonable refusal to mediate and the increased use of mediation by commercial parties. Many jurisdictions, notably England and Wales among them, have equipped courts with the powers and authority to use mediation as a device for containing costs. Attempting to assess a party’s conduct to determine whether a costs sanction is appropriate has significant implications for mediation confidentiality. Objective criteria developed in seminal cases offer guidance to the courts in determining whether a party’s refusal to mediate was reasonable, and guidance to advisors and parties when considering mediation. While there are potential human rights implications where sanctions are construed as a means of making mediation compulsory, costs sanctions have proved to be an effective form of targeted incentive-setting where regulatory aims are integrated into the parties’ decision-making process.

Mediation is neither novel nor new. However, traditional forms of mediation are different from modern mediation practice; in traditional forms, the role and social standing of the mediator are central to the process, and the outcome focuses more on social harmony than on the individual rights or interests of the parties. This difference has given rise to two broad mediation cultures. Cultural differences can be reflected in different approaches to meeting needs, and can shape the interests of the parties and party behaviour during the process. As an informal and adaptable process, mediation offers the possibility of greater sensitivity to cultural differences. A consequence of globalisation has been the increasing harmonisation of laws and practices, and the harmonisation of dispute resolution systems is an important part of this movement. This is reflected in the emergence of several regional and international instruments, the most recent of which is the Singapore Convention. What matters is the potential for any new regional or international legal instrument to be effective and have a positive impact on the people and corporations involved in cross-border legal relationships.

Issues of education, training, accreditation and standards are increasingly important, and this is reflected in the considerable efforts that have been taken to develop quality, standards and accountability in mediation to enhance process safeguards for commercial parties and professionalise the service. While mediator standards leave some issues unresolved, experience from practice and mediator training should help to clarify statements in codes of conduct on issues of neutrality, impartiality, confidentiality and the use of mediator power. Greater precision should also come from some standards being judicially defined. There are a number of factors for mediators to consider in avoiding liability claims. A carefully drafted mediator liability exclusion clause in an agreement to mediate is important. As many lawyers mediate, it is important that there is a clear distinction between the role of a lawyer and the role of a mediator. Where a judge mediates, private caucus mediation sessions should be avoided and the mediation should be referred to a judge other than the trial judge or to a non-judicial court official to address procedural fairness and bias issues.

Commercial contracts frequently contain mediation clauses requiring parties to mediate as part of a sequence of dispute resolution methods, where they progress from consensus to evaluative methods until resolution is reached. Careful drafting is required to ensure such clauses are effective and enforceable. The primary issues relevant to the enforceability of mediation clauses include severability, certainty, completeness, attempts to oust the court’s jurisdiction, additional policy considerations, certainty, waiver and remedies for breach of mediation clauses. While compliance with mediation clauses is not easy to determine, only the narrowest of requirements has proven workable in practice. Regional and international instruments covering mediation tend not to provide for the enforcement of mediation clauses. There is an international trend towards obligating legal advisors to discuss with their clients whether their commercial disputes are suitable for mediation, and policy in many jurisdictions is moving towards penalising parties where mediation is not given due consideration. Similar to mediation clauses, agreements to mediate require careful drafting to ensure enforceability.

Various models of mediation have been developed, reflecting mediation practice. In a commercial context, the most important distinction is between evaluative (or substance-oriented) mediation and facilitative (or process-oriented) mediation. However, in practice, a purely facilitative approach to mediation is rare, and experience suggests that a successful mediation results from using a clearly identified ‘mixed process’. Pre-mediation considerations are important in laying the groundwork for a successful mediation. The temporal contours of the process are also important to bear in mind, particularly when considering issues such as limitation periods, confidentiality and costs. The mediation process develops through stages and phases during which the mediator helps the parties towards resolution. Free from the constraints of viewing the dispute in terms of legal rights and obligations, the parties create an opportunity to empower themselves to resolve the dispute and essentially determine the future. The process offers them the opportunity to emerge from commercial conflict stronger, personally and contractually, with an outcome that better reflects their needs and interests.