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“Forcing” a party to engage in ADR (Mediation)

Colin Manning - Mediator

We all know, don’t we, that parties in dispute cannot be compelled to engage in mediation. As a general proposition, that is correct. However, as we have been reminded by the judgment of Mrs Justice O’Farrell DBE in Ohpen Operations UK Ltd v Invesco Fund Managers Ltd [1], parties can provide in any agreement regulating relations between them, an alternative dispute resolution procedure such that prior to instituting any court (or arbitral) proceedings between them they should first engage in ADR in accordance with a contractually agreed dispute resolution procedure. In that case Ohpen had issued proceedings for damages alleging wrongful termination of an agreement providing for the development and implementation of a digital online platform for the purchase and sale of investments offered by Invesco.

Invesco applied for the following orders:-

“(i)     a declaration that the Court will not exercise any jurisdiction it may have to hear the claim filed by Ohpen; and

(ii)     an order for a stay of the claim pending compliance with the contractually agreed dispute resolution procedure.”

As Mr. Justice Colman recognized in Cable & Wireless Plc v IBM United Kingdom Ltd[2] a contractual agreement to refer a dispute to ADR could be enforceable by a stay of proceedings, provided that such reference was more than a mere agreement to negotiate. In Holloway v Chancery Mead Ltd[3] Mr Justice Ramsey identified three requirements for such an agreement to be enforceable: (i) the process prescribed must be sufficiently certain that there should not be the need for an agreement at any stage before matters can proceed; (ii) the administrative processes for selecting a party to resolve the dispute and to pay that person should also be defined and (iii) the process, or at least a model of the process should be set out so that the detail of the process is sufficiently certain. Further guidance was provided by Mr. Justice Hildyard in Tang v Grant Thornton International Ltd[4] and, in Emirates Trading Agency LLC v Prime Mineral Exports Pte Ltd[5] Mr, Justice Teare said that enforcement of such an agreement was in the public interest “first, because commercial men expect the court to enforce obligations which they have freely undertaken and, second, because the object of the agreement is to avoid what might otherwise be an expensive and time-consuming arbitration”.

In Ohpen, Mrs. Justice O’Farrell refined the guidance given in the earlier authorities as follows:

(i)   The agreement must create an enforceable obligation requiring the parties to engage in alternative dispute resolution.

(ii)   The obligation must be expressed clearly as a condition precedent to court proceedings or arbitration.

(iii)     The dispute resolution process to be followed does not have to be formal but must be sufficiently clear and certain by reference to objective criteria, including machinery to appoint a mediator or determine any other necessary step in the procedure without the requirement for any further agreement by the parties.

(iv)   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.”

The process and mechanism set out in the agreement between Ohpen and Invesco was sufficiently clear and did not require any further agreement between the parties for the mediation to proceed. In the exercise of its discretion to stay proceedings, the judge cited the strong policy in favour of enforcing dispute resolution provisions, of encouraging parties to attempt to resolve disputes prior to litigation and the overriding objective in the Civil Procedure Rules.

Whilst the judge ruled that the proceedings should be stayed, nevertheless, she noted that the prospects of settlement would be improved if the parties’ respective positions were made clear and, accordingly, ordered that pleadings should be served so that the substantive issues would be clarified before the mediation took place.

The judgment in Ohpen does not make new law, but is a helpful reminder to   parties when entering into contracts to think ahead. Disputes do arise between parties even though they may have begun their relations on the best of terms. The financial benefit of seeking to resolve any disputes in a cost effective and timely manner prior to resorting to expensive litigation is simply common sense. The option of including a dispute resolution clause in commercial agreements should receive greater publicity than is currently the case.

Colin Manning

4-5 Mediation Group (4-5 Gray’s Inn Square)

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Note: 4-5 Mediation Group is a Civil Mediation Council registered provider, and has a standard mediation agreement that can be used in the circumstances considered in the article.

[1] [2019] EWHC 2246 (TCC)

[2] [2002] EWHC 2059 (Comm)

[3] [2008] EWHC 2495 (TCC)

[4] [2012 EWHC 3198 (Ch)

[5] [2014] EWHC 2104 (Comm)

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