When does voluntary mediation become obligatory?

A familiar mediation mantra is that mediation is a voluntary process, with both parties wanting and being willing to use mediation to find a resolution to their dispute.  It is generally thought that the voluntary element of mediation is crucial to the parties being willing to embrace the process and use it as their chosen dispute resolution process.  So when the Court (Mrs Justice O’Farrell) in Ohpen v Invesco[1] ordered that “…it would be appropriate for the Court to stay the proceedings to enable mediation to take place…”  it is not surprising that several learned mediation commentators jumped in to provide a commentary on this case.

The case concerned the retention of Ohpen by Invesco to build a digital investment platform. The parties found themselves in dispute, with such dispute being subject to a tiered dispute resolution clause. The clause contained a familiar escalation procedure, requiring reasonable efforts by management to resolve the dispute failing which the dispute was to be referred to the parties’ respective executive committees. Subsequent to this and assuming no resolution, the next tier provided for a mediation by a CEDR appointed mediator. The clause provided that in the event of a failure to resolve the dispute at mediation then either party may commence court proceedings. Court proceedings having been commenced without mediation having been attempted, Invesco sought to enforce the mediation provision of the dispute resolution clause.

Commentary has focused on the effect of the dispute resolution clause and the court’s power to enforce a contractual provision, providing for the parties to go to mediation before being permitted to commence court proceedings. It may be surmised that Ohpen, by their actions in commencing proceedings, did not want to go to mediation. Mrs Justice O’Farrell, having determined the formalities necessary for a dispute resolution clause to be mandatory held that “The court has a discretion to stay proceedings commenced in breach of an enforceable dispute resolution agreement. In exercising its discretion, the Court will have regard to the public policy interest in upholding the parties’ commercial agreement and furthering the overriding objective in assisting the parties to resolve their disputes.”

In reality this case has little if anything to do with the process of mediation, let alone a court stepping in to ensure that mediation is mandatory as between the parties. It is true that the Court acknowledged that “There was a clear and strong policy in favour of enforcing alternative dispute resolution provisions and in encouraging parties to attempt to resolve disputes prior to litigation.”  However, in legal terms this case is about contract interpretation and the enforcement of agreed and binding contract terms. Put simply, the Judge found that in this particular case, because of this particular dispute resolution contract clause, that mediation was a condition precedent to a party’s entitlement to commence litigation. It is debatable as to whether there was any need to refer to public policy’ given the finding that the dispute resolution clause was unambiguous, clearly agreed as between the parties and therefore contractually enforceable. It is perhaps a lesson for those involved in a dispute or their advisors to ensure that that they comply with any compulsory aspects of their dispute resolution mechanism.

But what this case (but not the judgment) highlights is the fact that these parties, at a time when relationships were good, made a voluntary decision to put mediation before litigation. At that time the parties could only see the advantages of entering into a commercial arrangement, whereby the parties agreed how they would deal with a dispute and/or a breakdown of contractual relationships. What this dispute resolution clause shows is that the parties wanted to try and resolve any dispute (that management had been unable to resolve) by mediation before going to court and the litigation process.

The parties put mediation first and thereby in doing so recognised it as a true alternative to litigation as opposed to simply being an adjunct to the litigation process, to be used at some time and some way down the litigation road.  The parties recognised the importance of having an Early Stage Mediation prior to the commencement of litigation. And why? Because at the time of entering into the contract, when relationships were good, it made commercial sense to the parties.  They acknowledged that the sooner parties can start to talk about their dispute, and the reason why they are in dispute, the more likely they are to get a resolution that is acceptable and advantageous to all parties. In this case, the dispute resolution clause shows that the parties valued a mechanism of solving a dispute by means of self-resolution over that of having a dispute determined by a third party.

The fact that this matter ended up in litigation, arguing over the meaning and effect of the dispute resolution clause is a matter of human nature and a familiar tale of parties falling out. However, what this dispute resolution clause illustrates is that the parties in this case voluntarily agreed that it would be obligatory for mediation to come before litigation. This obligation was only an obligation because the parties had wanted and volunteered that it be so. With the benefit of hindsight it may well be that such decision was made at a time when both parties had clearer minds and better intentions.

[1] Ohpen Operations UK Ltd v Invesco Fund Managers Ltd [2019] EWHC 2246 (TCC) (16 August 2019)