03. mediation

The question

Litigation and arbitration share a fundamental feature: in each, a third party, a court or a tribunal, decides the dispute and imposes a binding outcome on the parties. There exists a different approach to dispute resolution, in which the third party does not decide the dispute at all but assists the parties to resolve it themselves by agreement, and this sub-unit examines its principal form, mediation. The question is what mediation is, how it differs from the methods already examined, where it sits in the broader field of dispute resolution, and how a mediated outcome is given effect. The answer completes the module by adding to the adjudicative methods a consensual one, and it returns to the theme of party autonomy and agreement that has run throughout the course.

What mediation is

Mediation is a process in which a neutral third person, the mediator, assists the parties to a dispute to reach a settlement of it by agreement, without the mediator deciding the dispute or imposing any outcome. The defining feature of mediation, which distinguishes it fundamentally from litigation and arbitration, is that the mediator has no power to decide: the mediator facilitates the parties' own negotiation, helping them to communicate, to understand each other's positions and interests, and to find a resolution acceptable to both, but any resolution is the parties' own agreement, not a decision imposed upon them. Mediation is, in this sense, a facilitated or assisted negotiation rather than an adjudication.

Mediation connects to the function of private ordering and to the centrality of agreement that this course has emphasised. Where litigation and arbitration resolve a dispute by an authoritative decision, mediation resolves it, when it succeeds, by a fresh agreement between the parties, an exercise of the same autonomy by which they made their original bargain. The mediator's role is to make that agreement possible, by managing the process, by helping the parties move beyond entrenched positions to the interests underlying them, and by assisting them to generate and evaluate possible resolutions, but the mediator does not judge the dispute or determine who is right. Because the outcome is the parties' own agreement, mediation can produce resolutions that a court or tribunal could not impose, tailored to the parties' interests and to the preservation of their relationship, and it can do so more quickly, more cheaply, and more privately than adjudication; but for the same reason mediation can succeed only if the parties reach agreement, and a mediation that does not produce agreement leaves the dispute unresolved, to be taken to adjudication. The contrast with the adjudicative methods is fundamental: litigation and arbitration impose a decision, while mediation assists the parties to decide for themselves.

Consider parties to a commercial dispute who wish to preserve their ongoing relationship and to resolve the matter quickly and privately. They engage a mediator, who meets with them, helps them to understand each other's underlying interests, and assists them to negotiate a resolution. If they reach agreement, the dispute is resolved on terms of their own making; if they do not, the mediator imposes nothing, and the parties remain free to pursue arbitration or litigation. The example shows mediation as a facilitated negotiation that resolves the dispute only by the parties' own agreement.

Mediation is therefore a process in which a neutral mediator assists the parties to reach a settlement by agreement, without deciding the dispute or imposing any outcome, a facilitated negotiation distinguished fundamentally from litigation and arbitration by the mediator's want of power to decide, which can produce tailored resolutions quickly and privately but only where the parties reach agreement.

Mediation within alternative dispute resolution

Mediation is the principal example of a broader family of methods, and locating it within that family clarifies the range of means by which commercial disputes may be resolved. The family is known as alternative dispute resolution, commonly abbreviated as ADR, a term embracing the methods of resolving disputes otherwise than by litigation in the courts, including arbitration, mediation, and others; in its narrower and more common usage the term refers particularly to the consensual, non-adjudicative methods such as mediation and conciliation, as distinct from arbitration, which, though an alternative to court litigation, is adjudicative.

This field connects the methods examined in this module into a spectrum, ordered by the role of the third party and the source of the outcome. At one end stands litigation, the adjudication of the dispute by the state's courts; next arbitration, the adjudication of the dispute by a private tribunal the parties empower; and at the other end the consensual methods, of which mediation is the principal, in which the third party does not adjudicate, instead assisting the parties to agree. A method closely related to mediation, and sometimes distinguished from it and sometimes used synonymously, is conciliation, in which a neutral third person likewise assists the parties to reach agreement, in some usages taking a somewhat more active or evaluative role than a mediator in proposing terms of settlement; the line between mediation and conciliation is drawn differently in different usages, and the two are often treated together as the consensual methods. The spectrum of methods allows commercial parties to choose, or to combine, the means of dispute resolution appropriate to the dispute, and the methods are frequently used in sequence, the parties attempting mediation first and resorting to arbitration or litigation only if it fails, an arrangement that contracts often provide for expressly. The reader should see the methods not in isolation but as a range, from the imposed decision of litigation to the facilitated agreement of mediation, among which parties choose.

Imagine a contract that provides for disputes to be addressed first by mediation and, if mediation does not resolve them within a period, by arbitration. The parties thereby arrange to attempt the consensual method first, seeking a resolution by agreement with the mediator's assistance, and to fall back on the adjudicative method only if agreement cannot be reached. The arrangement uses the spectrum of methods in sequence. The example shows mediation within the broader field of alternative dispute resolution and its combination with the adjudicative methods.

Mediation therefore sits within the broader field of alternative dispute resolution, the family of methods for resolving disputes otherwise than by court litigation, as the principal consensual method, alongside the related conciliation, and at the opposite end of a spectrum from the adjudicative methods, the parties choosing among and combining the methods, often attempting mediation before resorting to arbitration or litigation.

Giving effect to a mediated settlement

A mediation that succeeds produces an agreement, and the manner in which that agreement is given legal effect connects this sub-unit to the law of contract and to the cross-border enforcement examined earlier, completing the module. When the parties reach a resolution through mediation, they record it in a settlement agreement, and the legal character of that agreement, and the means of enforcing it, are central to the value of mediation as a method of dispute resolution.

The mediated settlement connects to the law of contract examined earlier in this course, for the settlement agreement is, in the first instance, a contract: the parties' agreement to resolve their dispute on agreed terms binds them as a contract, and a party who fails to perform it may be sued for breach in the ordinary way. This contractual character is, however, a limitation as well as a foundation, for to enforce a mediated settlement as a contract a party may have to bring fresh proceedings on the contract, which is more cumbersome than enforcing a judgment or an arbitral award, and the difficulty is greatest in the cross-border setting, where the settlement, as a mere contract, did not enjoy the ready international enforceability that the New York Convention gives to arbitral awards. This limitation has been addressed, for international commercial settlements reached through mediation, by the Singapore Convention on Mediation, the United Nations Convention on International Settlement Agreements Resulting from Mediation of 2019, which provides for the cross-border enforcement of such settlement agreements among its contracting states, allowing a party to invoke a mediated settlement directly before the courts of a contracting state, subject to limited grounds for refusal, much as the New York Convention allows for arbitral awards. The Singapore Convention thus strengthens mediation as a method for international commercial disputes by giving the mediated settlement a readier cross-border enforceability than its contractual character alone would provide, and it represents, for mediation, the kind of enabling international instrument that the New York Convention represents for arbitration. The reader should appreciate that the value of any dispute-resolution method depends in part on the enforceability of its outcome, and that the Singapore Convention has enhanced that enforceability for mediated settlements.

Consider parties to an international dispute who resolve it through mediation and record their resolution in a settlement agreement. The agreement binds them as a contract, and within a state party to the Singapore Convention a party may enforce it directly before the courts, subject to limited grounds of refusal, rather than having to bring a fresh action on the contract. The settlement thereby enjoys a cross-border enforceability that strengthens mediation for international disputes. The example shows a mediated settlement given effect as a contract and, under the Singapore Convention, enforceable across borders.

A mediated settlement is therefore given effect in the first instance as a contract binding the parties to its terms, a character that made cross-border enforcement cumbersome until the Singapore Convention on Mediation of 2019 provided for the direct enforcement of international mediated settlements among its contracting states, strengthening mediation as a method for international commercial disputes by giving its outcome a readier enforceability, as the New York Convention does for arbitration.