In a recent judgement, the Court of Justice of the EU (CJEU) has stated that EU Member States can compel parties to mediate before raising an action in court. However, Member States cannot dictate how the mediation is to be conducted.
The facts
Banco Populare obtained a court order from an Italian district court for payment against two consumers, Mr Menini and Mrs Rampanelli. Mr Menini and Mrs Rampanelli tried to appeal. However, under Italian law, parties must first attempt resolution by mediation before an appeal is allowed.
Mr Menini and Mrs Rampanelli argued that this measure was incompatible with the EU Directive on alternative dispute resolution (ADR) for consumer disputes (the Directive). The purpose of the Directive is to ensure that consumers can, on a voluntary basis, submit complaints against traders through ADR procedures. Mr Menini and Mrs Rampanelli argued that that there was nothing voluntary about their forced mediation. The Italian court referred the matter to the CJEU for a preliminary ruling.
What did the CJEU decide?
The court stated that the purpose of the Directive is to ensure that parties maintain a right of access to the judicial system. It endorsed the opinion of the Advocate General and held that the Directive:
- does not prevent national legislation compelling a consumer to mediate before bringing their complaint to court;
- does prevent national legislation requiring parties to be legally represented in the mediation; and
- does prevent national legislation penalising parties from withdrawing from the mediation.
In what way does compulsory mediation remain 'voluntary'?
According to the court, it is not a question of whether the parties are free to decide whether or not to mediate. As stated in the Directive, mediation is voluntary insofar as the parties:
- are in charge of the process;
- can organise it as they wish; and
- can terminate it at any time.
National legislation can therefore require parties to mediate, but it can’t prescribe how parties should mediate.
Is mediation compulsory in the UK?
In both England and Scotland, mediation is not a prerequisite to court proceedings, though parties are encouraged engage in ADR procedures.
In England, the courts can’t order parties to mediate, but they can penalise parties in costs if they refuse to accept an offer to mediate. The general rule is that costs follow success. However, if the unsuccessful party can show that the successful party had: (1) refused to agree to ADR; and (2) had acted unreasonably in doing so; then the court may award some or all of the costs against the successful party.
In a review of the Scottish court system in 2009, the then Lord Justice Clerk rejected the idea of penalising parties in this way. In his opinion, even this would impede access to the courts. Interestingly, however, judges in commercial actions have the broad power to make any order as they see fit if it will bring about the speedy determination of the case. In theory at least, there is nothing to prevent a commercial judge ordering parties to mediate even though, in practice, such orders are not made.
In summary, there is a general consensus in Scotland and England that compulsory mediation would unjustifiably impede access to the courts. No doubt Mr Menini and Mrs Rampanelli would agree. Regrettably for them, this is not the position of the CJEU. According to the court, compulsory mediation (at least in terms of the ADR Directive) does not impede access to the judicial system. Member states may therefore impose mediation as a precondition to bringing a complaint to court.