Following a consultation last year, the government recently announced major reforms to the civil justice system which could significantly change the way many businesses deal with their commercial disputes.
In summary, the Ministry of Justice (MOJ) has decided that claims of up to £10,000 – which are claims in the small claims court – will automatically be referred for free mediation in a move that could see many disputes being dealt with and ultimately resolved without going to trial. The key benefits of this for companies will be a reduction in the costs associated with bringing a claim in the small claims court. The Centre for Effective Dispute Resolution estimates that the overall success of commercial mediation is very high, with 93% of cases being resolved on the day or shortly afterwards, which would indicate that taking part is likely to be effective and not simply a tick box exercise.
It’s likely that the advantages of this free service as a mechanism for saving parties time and money will appeal to many businesses involved in a dispute. For claims above £10,000, commercial mediation is not compulsory but the court strongly encourages the use of Alternative Dispute Resolution (ADR) (which includes mediation) because potential cost sanctions can be imposed by the court for not engaging in mediation. The difference however in claims above £10,000 is that ADR can take place at any point in the proceedings, whereas now over 180,000 small claims cases will be referred automatically to a free hour-long telephone session with a professional mediator provided by HM Courts and Tribunals Service (HMCTS) before their case can be progressed to a hearing.
The reforms are undoubtedly a positive step in the right direction for many reasons and the introduction of this automatic referral to free mediation for civil disputes up to £10,000 is a welcome addition to the dispute resolution process.
Our Head of Dispute Resolution Ian Carson said:
The move towards compulsory mediation demonstrates the increasingly central role that mediation and other forms of ADR plays in resolving commercial disputes. Given the legal costs of pursuing a claim in the small claims court are likely to outweigh the value of the claim, it clearly makes economic sense to embrace the mediation process.
As a business, understanding the merits of your claim and your options going forward (including ADR) is key to achieving a timely and cost-effective resolution.