Mediation is a well-intentioned judicial tool that is often a waste of money. In light of recent news coverage, the Hong Kong courts may want to reconsider the policy of effectively forcing litigants to engage in the process.
On its face, mediation is an appealing idea. Before the parties to a lawsuit spend time challenging each others' evidence, filing applications and motions, and conducting an expensive trial, they sit down and try to resolve the dispute. The negotiations are led by a mediator, who is, at least in theory, a skilled third party who will not take sides.
When the conditions are right, mediation works. When the mediator is versed in the law and in human psychology, when the parties know the strengths and weaknesses of their respective positions, when everyone has voluntarily decided to invest face and faith in the process - under those conditions, cases settle.
The problem is that mediation in the principal Hong Kong trial courts is not truly voluntary. Since January last year, the Court of First Instance and the District Court have implemented a practice direction which creates a powerful incentive for litigants in certain cases to conduct mediation whether or not the circumstances warrant it.
Hong Kong is a 'loser pays' jurisdiction, one where the losing party has to pay the winner's legal fees. Under the practice direction, a winner can have the costs award reduced if he or she unreasonably refused to mediate.
The result, as revealed recently in this paper, should have been predictable. Parties who have no intention of settling their disputes now pantomime their way through mediation so that, in the event of ultimate victory, they can protect themselves from any cost reduction.