Over the course of the last 20 years or so, mediation has become an increasingly important part of civil proceedings. In some jurisdictions such as Ontario, Canada, mediation has even become a mandatory part of the process in major commercial litigation centres. Mandatory mediation applies to many forms of civil proceedings, although there are some exceptions.
The framework for mediation has typically been found either in Rules of Procedure, or in Practice Directions of the court. Voluntary mediations have also been available on an ad hoc basis as arranged between the parties.
The New Legislation
The new kid on the street in Ontario is the Commercial Mediation Act, 2010, the stated purpose of which is “to facilitate the use of mediation to resolve commercial disputes”.
“Mediation” is defined in Section 3 of the Act as meaning, “a collaborative process in which,
- the parties to a commercial dispute agree to request a neutral person, referred to as a mediator, to assist them in their attempt to reach a settlement in their dispute, and
- the mediator does not have authority to impose a solution to the dispute on the parties (“mediation”) 2010, c.16, Sched. 3, s. 3”.
“Commercial Dispute” is also defined, as meaning, “a dispute between parties relating to matters of a commercial nature, whether contractual or not, such as trade transactions for the supply or exchange of goods or services, distribution agreements, commercial representation or agency, factoring, leasing, construction of works, consulting, engineering, licensing, investment, financing, banking, insurance, exploitation agreements and concession, joint ventures, other forms of industrial or business co-operation or the carriage of goods or passengers”.
One can see from this definition that the Act is intended to pertain to a very wide range of commercial dealings conducted in everyday business.
The Act is based on the UNCITRAL Model Law on International Commercial Conciliation (2002) and provides that, “consideration must be given to its international origin, the need to promote uniformity in its application and the observance of good faith”. s.4(1)
The Act makes provision for the formal commencement and termination triggering events and also provides for the appointment of the mediator to be made by agreement of the parties. (s.5 and s.6)
The proposed mediator is obliged to investigate potential or current conflicts or any circumstances that may give rise to a reasonable apprehension of bias, and to disclose same without delay to the parties if such conflict or circumstances exist. That duty to disclose continues until termination of the mediation.
Section 6 also deems certain interests in relationships to be a conflict of interest. This provision avoids the guess work by a proposed mediator in relation to personal interests, financial interests, and existing or previous relationships with a party or person related to the party to the mediation.
As to the mediation process itself, the parties and the mediator may agree on the process or may agree to follow a set of existing rules or procedures unless otherwise prohibited from doing so. In the absence of such an agreement, the mediator may conduct the mediation following the process he or she considers appropriate by taking into account requests of the parties and circumstances of the dispute. (s.7)
There are provisions for a multi-party and separate caucuses and for proposals for settlement at any stage of the mediation; there are also requirements for fairness, disclosure and confidentiality.
Disclosure and Confidentiality
Section 8 deals with disclosure and confidentiality with some particularity. Essentially, there is a duty of confidentiality on the parties, the mediator and any other persons involved in the conduct of the mediation. The exception occurs when the parties and in certain cases the mediator agree to disclosure, or if the disclosure is required by law, or for the purposes of enforcing settlement, or for a mediator to respond to a claim of misconduct, or if the disclosure is required to protect the health or safety of any person. There are also exceptions for publicly available information and otherwise non-confidential information. (s.8)
Section 9 deals with information which is not discoverable or admissible in evidence in arbitral, judicial or administrative proceedings. Those forms of information not so discoverable or admissible, are as follows:
- An invitation by a party to mediate a commercial dispute, a party’s willingness or refusal to mediate the dispute, information exchanged between the parties before the mediation commences and any agreement to mediate the dispute.
- A document prepared solely for the purposes of the mediation.
- Views expressed or suggestions made by a party during the mediation concerning a possible settlement of the dispute.
- Statements or admissions made by a party during the mediation.
- Statements or proposals for settlement made by the mediator.
- The fact that a party indicated a willingness to accept a proposal for settlement made by the mediator.
- The fact that a party or the mediator terminated the mediation.
However, the exceptions permitting the information above to be admitted in evidence are to the extent the information is required:
- by law;
- for the purposes of carrying out or enforcing a settlement agreement;
- by a mediator to respond to a claim for misconduct; or
- if all of the parties to the mediation consent and, if the information relates to the mediator, the mediator consents. s.9(2)
The Act seems to anticipate that there be no med-arb unless all parties to the mediation otherwise agree. In the absence of such an agreement “a mediator shall not act as both a mediator and an arbitrator or as an arbitrator after acting as the mediator with respect to,
- the commercial dispute that is the subject of the mediation; or
- another dispute that arises from the same contract or legal relationship or from a related contract or legal relationship between the parties”. s.10
In some jurisdictions this approach might be considered unusual, but in Ontario, med-arb has really only had a strong following in Labour Law, and some very limited following in Family Law.
Settlement Agreements are Binding and Enforceable
Settlement Agreements or Minutes of Settlement are binding on the parties to the mediation who sign them. So long as the Settlement Agreement disposes of one or more issues in dispute in the mediation, the Agreement is enforceable by one party against another party who fails to comply with its terms. The party wishing to enforce, shall give notice to all parties who signed the Agreement and may then apply to a judge of the Superior Court for a judgment or an order. The Rules of Civil Procedure in Ontario apply on such an application. The judge may grant judgment in accordance with the Settlement Agreement, or the Registrar of the court may make an order authorizing the registration of the Settlement Agreement with the court..
No judgment or order shall be granted to a party who did not sign the Settlement Agreement or consent to its terms, or in the case of a Settlement Agreement obtained by fraud or one which does not accurately reflect the terms agreed to by the parties.
A registered order has the same force and effect as a judgment. Costs related to the registration of the Settlement Agreement are recoverable as if they were sums payable under a judgment. s.12 and s.13
Enforcement of Mediator’s Fees
If the mediator is not paid his or her fees and expenses in accordance with the Settlement Agreement, s.13 provides for enforcement by way of judgment or order similar to the enforcement of the Settlement Agreement. This provision applies so long as the Settlement Agreement is signed by one or more parties to a mediation of a commercial dispute and contains an undertaking by one or more parties to pay the fees and expenses of the mediator for the mediator’s functions, and sets out the amount of fees and expenses payable or the manner of calculating the fees and expenses, all the rates and other variables of which have been agreed to in the agreement, minutes or other document. s.14
Most of the provisions that have been codified in this legislation were already matters of fact in practice. However, details such as enforcement of the Settlement Agreement were always pursuant to the common law and/or Rules of Procedure rather than being authorized by legislation. The legislation provides a ready reference for most everyday factors that affect commercial mediations and is a first effort at legislation in Ontario for this important and increasingly busy area of practice.
A version of this article originally appeared in the September 2011 issue of the Newsletter of the Mediation Committee of the Legal Practice Division of the International Bar Association, Vol 7 No. 1, published by the International Bar Association, London, U.K. © International Bar
Paul Jacobs, Q.C., J.D., C.Med., C.Arb.
April 19, 2011
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