Dispute Resolution
Changes to Dispute Resolution: Compulsory Mediation for Small Claims
Author
Barbora Korcova
Author
Barbora Korcova
April 25, 2024
Dispute Resolution
In our recent blog on Civil Procedure Rules, we discussed the concept of alternative dispute resolution (ADR) and its voluntary character in resolving disputes. Mediation, a form of ADR, involves an independent mediator who assists parties in reaching their own decision without imposing a decision on them. The court system has actively encouraged use of mediation by potential litigants or litigants: resolving disputes out of court is much less costly for litigants and it saves the court itself time.
However, the voluntary nature of mediation is about to change. A new policy is coming into effect for small claims.
HM Courts and Tribunals Service (HMCTS) issued a letter on 11 April 2024, providing guidance regarding upcoming changes to small claims mediation. Notably, mediation will shift from a voluntary to a mandatory step for parties involved in the small claims track.
Current landscape
Up until now, parties involved in money claims cases under £10,000 had the choice to engage in the HMCTS Small Claims Mediation Service (SCMS) on a voluntary basis. However, all involved parties had to agree to use this service. If they agreed, they were offered a one-hour telephone session with a mediator at no cost. The HMCTS-appointed mediator spoke with both parties separately where possible, helped to resolve disputes without the need for a court hearing.
If mediation was successful, the parties would ideally agree a binding settlement agreement between them. However, if the parties were unable to get anywhere during mediation and it was still necessary to go to court, any matters discussed during the mediation could not be raised in court. Parties to a mediation session are required to treat all discussions and documents as confidential and without prejudice.
According to the HMCTS, the SCMS currently assists in resolving approximately half of all cases.
Understanding the changes
Going forward, mediations will become an integral part of the small claims process, representing a shift towards integrated mediation. This aligns with the Government’s plan to increase the use of ADR mechanisms across county courts, family courts and tribunals.
Under the new policy, parties will be automatically referred to a free, one-hour mediation session with a HMCTS-appointed mediator, which they will be required to attend. While reaching a settlement during mediation will remain optional, parties will be expected to engage in mediation in good faith.
According to its blog post, HMCTS aims to complete the mediation process within 28 days, and it will not transfer cases to court until mediation has taken place. According to HMCTS, a case is not put on hold while mediation takes place so taking part in mediation does not delay a case coming before a judge, should the parties fail to reach an agreement at mediation.
However, if parties do not attend the scheduled mediation, a judge will be later able to sanction them at their discretion, which includes striking out the claim or ordering the non-compliant party to pay part or all of the other party’s legal or court costs.
To prepare for the introduction of integrated mediation, the HMCTS have expanded the SCMS by adding more mediators and administration staff.
Who will be affected by these changes?
The new policy will apply to small claims cases, starting with most money claims under the value of £10,000.
Starting from 22 May 2024, mediation will become a requirement for all new claims made on paper and through traditional HMCTS online systems, including Money Claims Online (MCOL). A new practice direction that will give effect to this change is expected to be published in April 2024.
The mediation requirement for cases submitted through Online Civil Money Claims (OCMC) will be introduced later this year. During this interim period, cases issued in OCMC will still have the option to participate in the SCMS, with parties retaining the ability to opt out if they wish.
According to the Government Consultation outcome, the future plans include integrating mediation within the dispute resolution of higher value claims in the County Court i.e. within the fast-track and multi-track.
Comment
This is a significant change in the small claims process. While mediation can offer benefits like quicker resolution and reduced costs, it is important to recognise that it may not always be appropriate, especially when parties are unwilling to negotiate, or practical obstacles exist. Although this new reform might help save courts time and reduce court backlogs, it will be interesting to see how it impacts the overall efficiency of the legal system and access to justice. HMCTS must prioritise providing adequate support and guidance to parties navigating this transition.
There are numerous uncertainties surrounding its implementation. For instance, the one-hour time limit for mediation raises concerns, especially in complex cases requiring more time to reach a resolution. Clarity on the role and qualifications of the appointed mediators is also essential for the success of this initiative. It’s important to address questions regarding the practical aspects of mediation, such as whether sessions will continue being conducted over the phone and, if so, whether teleconferences will be effective in all cases.
Significantly, the courts will be empowered to sanction parties that do not attend the SCMS in the usual way (which can include severe measures like the striking out of a claimant’s case). Currently, however, there is not a strict obligation on parties to cooperate during the SCMS.
The forthcoming SCMS guidance will be an important moment for both potential litigants and lawyers, enabling everyone to understand in more detail how the SCMS will work. This guidance is expected by the end of April.
At EM Law, we are experts in civil litigation, and we understand the significance of these changes to dispute resolution in small claims cases. If you need assistance or would like to speak to us, please reach out to our Sasha Bark Jones directly, or contact us here.
