Understanding The Challenges And Opportunities Involved In The Enforcement Of Mediation Agreements

Introduction:

Mediation is a flexible, confidential process in which a neutral third party, the mediator, actively assists the parties in reaching a negotiated agreement on a dispute. The role of the mediator is to act as the facilitator or honest broker. The mediator also persuades the parties to focus on their underlying interests and concerns and move away from fixed positions that often cloud the real issues.

Parties in several lawsuits and disputes have successfully resolved their disputes through mediation. Once a dispute is resolved through mediation, the parties would execute the Terms of Settlement or Settlement Agreement, which would be binding on them. Section 82 (2) of the Arbitration and Mediation Act, 2023 provides that the settlement agreement resulting from mediation is binding on the parties and enforceable in Court as a contract, a consent judgment, or a consent award.

Challenges in the Enforcement of Mediation Agreements

Mediation, at its core, is a voluntary, confidential, and party-driven process. This unique nature offers significant advantages in dispute resolution, fostering creative solutions and preserving relationships. However, these same strengths can introduce complexities when enforcing Mediation Settlement Agreements.

One of the main challenges of enforcing settlement agreements stems from parties' autonomy in mediation, as some parties often view the settlement agreement as another agreement that can be breached. Therefore, if the settlement agreement is not adopted as a consent judgment of the court, there is usually the possibility that a difficult party might decide not to honour it. If the agreement is not adopted as a consent judgment, the aggrieved party must initiate a fresh lawsuit for breach of contract, incurring the very costs and delays that mediation was meant to avoid.

Another reason some parties usually avoid mediation is that any party has the right to terminate the mediation proceedings at any time. This power is contained in section 78 (e) of the Arbitration and Mediation Act, 2023, which provides that mediation proceedings are terminated by a declaration of a party to the other party or parties and the mediator, if appointed, to the effect that the mediation proceedings are terminated, on the date of the declaration. Therefore, some parties often mistakenly assume that participating in mediation proceedings might amount to a waste of their time, because a party participating in bad faith can terminate the proceedings at any time.

Finally, it should be noted that section 84 (1) (c) (ii) of the Arbitration and Mediation Act, 2023 provides that a Court may refuse to enforce a settlement agreement if the obligations contained therein are not clear or comprehensible and if there was a failure by the mediator to disclose to the parties' circumstances that raise justifiable doubts as to the mediator's impartiality or independence and the failure to disclose had a material impact or undue influence on a party without which failure that party would not have entered into the settlement agreement.

Opportunities in the Enforcement of Mediation Agreements

The inherent nature of mediation provides unique opportunities that simplify and encourage compliance.

The first opportunity in the enforcement of settlement agreements is that it allows the parties to propose solutions to their disputes on their own, through the mediator's facilitation. Unlike other dispute-resolution mechanisms, which involve a third-party resolution, mediation allows the parties to resolve their disputes on their own, since they are in the best position to know their respective interests and issues.

The enforcement of settlement agreements usually allows the parties to retain their business relationships, as they jointly agreed to the terms of the settlement. Indeed, research has shown that people are more likely to implement settlement agreements they helped draft. Accordingly, settlement agreements are more likely to be voluntarily complied with because the parties would have participated in developing them.

Furthermore, it is usually easier and more straightforward for the parties to enforce a settlement agreement if they agree to have it adopted as a consent judgment in court. A consent judgment bypasses the need to sue on the contract and allows for immediate enforcement similar to a regular court judgment. In addition, reaching a settlement agreement through mediation is usually faster than resolving a dispute in court.

Finally, the confidential nature of mediation proceedings makes it more appealing for parties to discuss their matters and reach a settlement freely, because they know that whatever they say during mediation cannot be used against them as evidence in other proceedings. It should, however, be noted that the exceptions to the rule on confidentiality as provided in section 76 of the Arbitration and Mediation Act, 2023, are where the disclosure is required under the law, if it is necessary in the interest of preventing or revealing a crime or necessary to protect public order.

Conclusion

Notwithstanding the challenges that might arise in a mediation proceeding, it remains one of the most effective, efficient, and relationship-preserving mechanisms for resolving disputes between parties.