What Are the Legal and Procedural Rules I Should Know?

The Legal Framework Governing Commercial Mediation

Commercial mediation in England and Wales operates within a legal framework that has developed through statute, case law and professional codes of practice. Understanding that framework is important for any business owner, director or legal adviser engaging with commercial mediation, both because it defines the protections and obligations that apply throughout the process and because it determines the legal consequences of decisions made before, during and after the mediation.

This page is part of the Commercial Mediation Knowledge Guide. If you need a commercial mediator see my commercial mediator page.

The Mediation Agreement

Before a commercial mediation begins, all parties sign a mediation agreement. This is a contract between the parties and the mediator that governs the conduct of the mediation. It sets out the mediator’s appointment, the obligations of confidentiality that bind all parties and the mediator, the without prejudice status of communications made during the mediation, the mediator’s fees and billing arrangements, the process for the mediation day, and the circumstances in which the mediator may terminate the mediation.

The mediation agreement should be reviewed and understood before it is signed. Key provisions to pay attention to include the confidentiality obligations and their exceptions, any provisions that limit the mediator’s liability, the fee structure and what happens if the mediation is cancelled or terminated early, and any jurisdiction or governing law provisions. Legal advice on the mediation agreement is advisable in significant commercial disputes.

Authority to Settle

One of the most important practical requirements for a successful mediation is ensuring that the person attending on behalf of each party has genuine authority to settle the dispute. A party that attends mediation without settlement authority, requiring each proposal to be referred back to absent decision-makers who are not engaged in the negotiation, significantly reduces the effectiveness of the process and may frustrate a settlement that would otherwise have been achievable.

The person attending the mediation should have authority to agree settlement on any terms that the party would be willing to accept, or to make a final telephone call to a decision-maker who is available and engaged throughout the day. Where authority needs to be escalated during the mediation, the process must be managed carefully to maintain momentum. Pre-authorising a range of settlement parameters before the mediation day reduces the risk of losing a settlement opportunity because authority cannot be obtained in time.

Internally, the authority to settle should be properly documented in advance, including any board or governance approvals required for a settlement of the value in question. The last thing a party wants at the end of a long and productive mediation day is to be unable to sign a settlement agreement because the proper internal approvals were not obtained in advance.

The Without Prejudice Rule

The without prejudice rule is the principal legal protection for communications made during a commercial mediation. It prevents communications made in genuine attempts to settle a dispute from being admitted as evidence in subsequent proceedings. For a detailed treatment of the without prejudice rule and the confidentiality framework in commercial mediation see the chapter on is commercial mediation confidential.

The Effect of Court Proceedings on Mediation

Where court proceedings have already been issued, mediation can take place while those proceedings continue or the parties can agree to stay the proceedings while mediation is attempted. A stay of proceedings for mediation is routinely granted by courts and is consistent with their expectations that parties will engage with alternative dispute resolution. If mediation results in settlement, the proceedings are discontinued. If not, they continue.

Following Churchill v Merthyr Tydfil [2023], courts can now actively direct parties to engage in alternative dispute resolution as part of the management of civil proceedings. Parties who receive such directions must comply with them or face the risk of sanctions. Legal advice should be obtained immediately on receiving any court direction relating to mediation or alternative dispute resolution.

Enforcing a Mediated Settlement Agreement

A settlement agreement reached at mediation is a binding contract. It can be enforced in the same way as any other commercial contract. Where one party fails to comply with the terms of the settlement agreement, the other party can bring proceedings to enforce it. If court proceedings were ongoing at the time of the mediation, it may be possible to have the settlement agreement made the subject of a consent order or a Tomlin order, which provides a more direct route to enforcement and can include provisions that remain confidential.

The enforceability of the settlement agreement depends on it being properly drafted and executed. Both parties and any relevant corporate entities must sign it, it must identify the specific terms of settlement clearly and completely, any payment obligations must be stated precisely, and any ongoing obligations must be expressed with sufficient clarity to be enforceable. Poorly drafted settlement agreements are a frequent source of post-mediation disputes. For detailed guidance on securing a properly binding agreement see the chapter on how to secure a legally binding settlement agreement.

Published Resources

My book Winning in Commercial Mediation: A Business User’s Guide covers the legal and procedural framework in detail, including the mediation agreement, the authority to settle, the without prejudice rule, the effect of court proceedings and the enforcement of mediated settlements.

See all books.

Frequently Asked Questions

Do I need a lawyer to review the mediation agreement before signing?

For any significant commercial dispute, yes. The mediation agreement is a legally binding contract and its terms, particularly on confidentiality, fees and liability, should be reviewed by a qualified adviser before signing. In practice, mediation agreements from reputable mediators and mediation providers are broadly standard in their terms, but specific provisions should still be understood before commitment.

What if the person who needs to approve the settlement cannot be reached during the mediation?

This is a common and often fatal problem in commercial mediations. The solution is to ensure that anyone whose approval is needed for a settlement is genuinely available throughout the mediation day, either in person or by telephone, and has been briefed in advance on the parameters of acceptable settlement. Attending a mediation without proper arrangements for decision-making authority risks losing a settlement opportunity that may not recur.

Can the settlement agreement be kept confidential from third parties?

Yes. The parties can include confidentiality provisions in the settlement agreement limiting disclosure of its terms to third parties. Where proceedings were pending and the settlement is implemented through a Tomlin order, the schedule of terms can be kept confidential to the parties. Legal advice on the appropriate confidentiality provisions for the specific settlement should be obtained from a qualified adviser.

Get in Touch

If you have questions about the legal framework governing commercial mediation or need a commercial mediator for your dispute, I would be glad to help.

Call 020 4538 0246, use the contact form below, or book a call directly.

Important disclaimer: This page is provided for general information and educational purposes only and does not constitute legal advice. The content relates to the law of England and Wales only. Always seek independent legal advice from a qualified specialist before making decisions that affect your legal rights or commercial interests. The author accepts no responsibility for any decisions made or outcomes arising from use of this material. If you would like specific advice, contact me here.

Mediation – What Are the Legal and Procedural Rules That I Should Be Aware Of?