Is Mediation Legally Binding?

First, let’s define our terms. The question can refer to either:

  1.  whether or not someone involved in a dispute is legally required to use mediation first to try and resolve that dispute before issuing court proceedings
  2. whether any agreement or memorandum of understanding reached between the participants at the end of a mediation hearing will be legally binding on the participants. 

The question usually refers to number 2,  but let’s look briefly at number 1 first.

Is Mediation Compulsory?

There is strong court-imposed pressure to attempt mediation in several areas. Basically, mediation is compulsory in the Family Court where an applicant must attend an MIAM, or a Mediation Information and Assessment Meeting with a mediator for one or more mediation sessions in advance of a court application.

Furthermore, in Lomax v Lomax [2019] EWCA Civ. 1467, the Court of Appeal held in an inheritance dispute that because the Civil Procedure Rules do not contain a requirement for the parties to consent before an early neutral evaluation, or ENA, is ordered, an ENA by the judge takes place as soon as possible despite the defendant having refused to agree to this.

During these sessions, you should disclose as much financial information as possible to maximise the chances of reaching an agreement through mediation.

The terms of a contract may also contain a mediation clause that requires each party to try mediation first to resolve a dispute before starting court proceedings. For more about clauses like that, please see below under Do Both Parties Have to Agree to Mediation?

Does compulsory mediation mean that a participant is legally bound to reach a settlement? No, compulsory mediation simply means that a participant is required to make a good-faith effort to reach a settlement. If an acceptable settlement cannot be reached, then any obligation to take part in mediation will have been met.

You can read my recent article in Barrister Magazine about compulsory mediation sessions for more information.

Is a Mediation Settlement Agreement Legally Binding?

Subject to the exceptions below, if an agreement is reached at the conclusion of a mediation hearing, it will be legally binding for each participant, providing that the agreement or memorandum of understanding has been put in writing and signed by the participants.

The signed settlement agreement becomes a legally binding contract or, if court proceedings have already commenced, the agreement can be contained in a court order and treated as a consent order, or Tomlin Order. The court will need to approve it although that is usually something of a formality.

The mediator does not draft the mediation agreement–it should be drafted by the participants or their legal advisers, although the mediator will check the written agreement to ensure it properly reflects the outcome of the mediation.

Employment mediation agreements need specialist legal advice to be given to participants before they can become legally binding. A separate assessment meeting with an independent legal adviser will be sensible. 

As the ACAS website notes, in employment disputes:

Agreements reached in mediation relating to workplace relationships are not normally legally binding unless both sides specifically ask for this. You will be given the opportunity to take legal advice before a legally binding agreement is made.

Family mediation agreements are not legally binding unless embodied in a Family Court approved consent order.

HMRC tax dispute mediation requires careful handling by the taxpayer or their advisers. Unlike normal mediations, what is revealed by the taxpayer is not legally privileged and can be used later against the taxpayer or third parties. Also, the mediation agreement will not be legally binding on HMRC until later confirmed by a senior officer. For this reason, HMRC mediations are of very limited use.

Can a Mediation Agreement be Overturned?

It is very unusual for a mediation agreement to be overturned. Normally, neither side will wish for this to happen because the mediation agreement represents each participant’s efforts to agree during the mediation hearing, and will only have been signed if the participants agreed the terms of the settlement arrived at. However, once signed, the agreement is a legally binding contract. The normal grounds for setting aside a settlement agreement would apply. These factors could include:

  • fraudulent misrepresentation
  • mental incapacity
  • undue influence or duress
  • mistake
  • illegality

Again, it would be unusual for any of these factors to apply to a mediation agreement, therefore, the burden of providing evidence for these grounds would be high.

Do Both Parties Have to Agree to Mediation?

If there is a mediation requirement in a contract, the court is likely to stay, or suspend, legal proceedings to allow the participants to honour the agreement to mediate. The court would normally expect both participants to make a good-faith effort to mediate in accordance with their contract. 

However, the court will never allow the parties to ignore the court’s jurisdiction, so a person’s right to seek an injunction, or request the court to order or prohibit an action, will always be preserved. Unless the participants agree otherwise, a sensible mediation clause will ensure that litigation or arbitration can be continued despite the on-going mediation process.

What is the Difference between Mediation and Arbitration?

In an arbitration, the arbitrator makes a legally binding award or decision at the end of the hearing. The participants have less control over the outcome than in a mediation, where they can always walk away or refuse to sign the agreement. For a detailed answer to this question please see my article on this topic here.

How Can Patrick Cannon Help?

Patrick Cannon has over 35 years as a solicitor and barrister, settling disputes of all kinds. Patrick can help people and firms caught up in legal and tax disputes explore the use of mediation to settle their disputes instead of leaving it to a court to decide. To learn more about Patrick Cannon’s mediation services, click here.

If you have a dispute that could benefit from mediation, contact Patrick Cannon below for a no-obligation initial discussion.

 

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