Compulsory Mediation for Claims up to £10,000

Following a consultation last year, the Ministry of Justice has confirmed its commitment to making mediation (a form of Alternative Dispute Resolution) a compulsory step for civil claims valued up to £10,000.

As outlined in a previous guide “A Guide to Alternative Dispute Resolution“, Alternative Dispute Resolution (more commonly referred to as ADR) is the umbrella term used for various methods of dispute resolution available to parties outside of the courtroom.

One of the most commonly used forms of ADR is mediation, which involves an independent third party (a mediator) facilitating discussions between the parties in an attempt to bring about a settlement. The main aim is to have the mediator help the parties untangle knots and remove hurdles between them that are preventing settlement being reached.

As a result of the widespread use of mediation and the benefits that it, and ADR generally, has, there have been ongoing discussions and consultations as to whether it should be made a compulsory step in litigation for certain civil claims, if not all civil claims. This has been ongoing for several years and the scope of what claims would be caught has varied.

Following a consultation launched in 2022, the Ministry of Justice has now confirmed its commitment to fully integrating mediation as a key element in the court process for small civil claims valued up to £10,000. It should be noted that by setting the threshold at £10,000, the government has gone further than the recommendation of the Civil Justice Council, which recommended it apply to claims valued up to £500.

So, how will this work in practice?

The Ministry of Justice’s press release confirms that the requirement will initially apply to specified money claims, which are estimated to make up around 80% of all small claims currently going through the court system.

In such cases, once the Defence is filed and the case is subsequently allocated to the small claims track, the parties will be informed by the court that mediation is the next step. The parties will have to fill out a Directions Questionnaire and the case will then process to HM Courts and Tribunals’ existing small claims mediation service.

During the process, the parties will have separate one-hour telephone conversations with the mediator to try and reach a settlement. The process will be free and if a settlement is agreed a legally binding formal agreement will be registered with the Court. If a settlement is not reached, the dispute will progress to a hearing before a judge. If a party does not comply with the compulsory requirement, the judge can impose sanctions on that party.

What are the advantages to the new mediation requirement?

The main advantages seem to be two-fold:

  1. For the parties involved: it allows the parties the opportunity to resolve disputes out of court, which in turn will reduce costs, remove some of the stress that litigation and court cases can bring, and allow parties to resolve the dispute quickly.
  2. For the courts: the government estimates that the new approach will positively impact up to 92,000 cases per year, which in turn could free up to 5,000 sitting days a year. Therefore, if it is successful, it will provide a substantial boost to court capacity.

However, for it to be successful, the government will need to expand its existing small claims mediation service to meet the demand and influx of new cases. It has been confirmed that this will happen.

In relation to whether compulsory mediation will be expanded to higher-value claims, this is yet to be decided and it might be directed and influenced on how successful it is for the smaller claims. However, if parties to high-value claims are required to undertake mediation, then it is likely they will be referred to external mediators.

If you or your business have any queries regarding an ongoing or a potential dispute or methods of Alternative Dispute Resolution generally, please do not hesitate to get in contact with Geldards LLP’s specialist Commercial Dispute Resolution departments.

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