Select Committee on European Scrutiny Sixteenth Report

3 Mediation in civil and commercial matters



+ ADD 1

COM(04) 718

Draft Directive on certain aspects of mediation in civil and commercial matters

Legal baseArticle 61(c) EC; co-decision; QMV
DepartmentConstitutional Affairs
Basis of considerationMinister's letter of 14 March 2007
Previous Committee ReportHC 34-xi (2005-06), para 2 (23 November 2005); HC 34-x (2005-06), para 4 (16 November 2005); HC 34-v (2004-05), para 10 (12 October 2005); HC 38-ix (2004-05), para 2 (23 February 2005): HC 38-i (2004-05), para 6 (1 December 2004)
To be discussed in CouncilNo date set
Committee's assessmentLegally and politically important
Committee's decisionNot cleared; information on progress awaited


3.1 We considered this proposal on the mediation of civil and commercial disputes twice in November 2005, when we held the document under scrutiny. At that time, the Parliamentary Under-Secretary of State at the Department for Constitutional Affairs (Baroness Ashton of Upholland) informed us that the informal Justice and Home Affairs Council in Newcastle in September 2005 had agreed that proposals under Article 65 EC[6] (of which this was one) should be limited to cross-border disputes. This accorded with the view which we and the previous Committee had taken on the proper scope of measures under Article 65 EC.

3.2 We agreed with the Minister about the benefits of mediation and alternative dispute resolution, but we noted that the question of defining what constituted a cross-border dispute remained in issue. We had no further questions of principle to raise on the substance of the proposal, but remained concerned about the use of Article 65 EC to propose measures which would affect matters which were purely internal to a Member State. In reply to the Minister's request, we agreed that the Minister could move towards reaching a general approach on the text during the UK Presidency, except for the definition of the cross-border restriction. The Minister informed us that the effect of this would be to reach a position where the content of the Articles was effectively "frozen" while the opinion of the European Parliament was awaited and that, in the meantime, negotiations would continue within the Council's Civil Law Committee to resolve the issue of restricting the proposal to cross-border disputes. We agreed that this was a reasonable way of proceeding and accepted the Minister's undertaking to keep us informed of these negotiations.

The Minister's letter of 14 March 2007

3.3 In her letter of 14 March 2007, the Parliamentary Under-Secretary of State at the Department for Constitutional Affairs (Baroness Ashton of Upholland) informs us that there has been no further consideration of the proposal since the UK Presidency and that the opinion of the European Parliament is still awaited, although the latter is expected with the next few weeks.

3.4 The Minister further explains that it is likely that the European Parliament will call for the proposal to be restricted to cross-border disputes and that, with a large majority in the Council, the Government is hopeful that the scope of the measure will be limited in this sense. The Minister explains that a definition of the cross-border restriction will be more difficult for mediations, by reason of their flexibility, than it is for court based procedures.

3.5 The Minister refers to the problematic nature of a definition based on the place of the mediation, because "there are no rules to determine where that should be". The Minister remarks that parties may choose to mediate wherever they wish, with no constraints as to jurisdiction and "could choose to mediate in a particular country to ensure either that the Directive did or did not apply" and refers to the "added complication" that if the mediation were by telephone or video conference the parties could all be in different Member States. The Minister acknowledges the argument that, mediation being a consensual process, the parties should be able to decide whether or not the Directive will apply, but believes that this "will lead to legal uncertainty and a lack of consistency in the way cross-border disputes are settled by mediation within the internal market". The Minister is also concerned to avoid a situation where a party could inadvertently consent to a mediation in a place which would lead to the Directive not being applicable. In the Minister's view, this might happen because the parties were unaware of the consequences of choosing to mediate in a particular place, or because one party who was aware of those consequences took advantage of the other party who was not so aware. The Minister further comments that, as neither the parties nor the mediator may be lawyers, "it is in the interest of everyone for the restriction to be simple and to provide legal certainty".

3.6 The Minister informs us that the European Parliament is considering a definition of a cross-border restriction along the following lines:

    "1. The provisions of this Directive shall apply in cases having cross-border implications; in particular;

    (a) Article 5 shall apply where an agreement resulting from mediation, to which this directive applies, must be enforced in a Member State other than that in which the agreement in question was rendered enforceable;

    (b) Article 6 shall apply where the competence of the court seised of a claim arising from a dispute which the parties have tried to resolve by mediation results from the application of Community instruments on judicial competence, such as Regulation 44/2001 or Regulation 2201/2003;

    (c) Article 7 shall apply where a claim arising from a dispute which the parties have tried to resolve by mediation must be brought, in the course of civil or commercial proceedings, before a court which is competent as a result of the application of Community instruments on judicial competence, such as Regulation 44/2001 or Regulation 2201/2003.

    2. This Article shall be without prejudice to rules of national law that provide for the enforceability of settlement agreements, the confidentiality of mediation or the effect of mediation on limitation and prescription periods in cases other than those having cross-border implications within the meaning of this Article."

3.7 The Minister considers that the above text does not provide the necessary certainty or transparency. In relation to paragraph (a) the Minister points out that there are no rules determining the place of the mediation or stipulating the Member State whose judicial authorities are to declare an agreement enforceable. The Minister refers to the danger of parties not knowing whether the Directive will apply, and to the risk of the parties influencing the applicability of the Directive by their choice of the place where the mediation is held or where its results are declared enforceable.

3.8 The Minister agrees that Article 6 (which provides that mediators cannot be compelled to give evidence in subsequent proceedings) and Article 7 (which ensures that the claims of the parties do not become time-barred by reason of having resorted to mediation) provide important safeguards. However, the Minister also considers that, rather than relying only on the jurisdiction of the courts under Regulation 44/2001or Regulation 2201/2003 (as is done in paragraphs (b) and (c) of the European Parliament text), it would be preferable to have another cross-border connecting factor, such as domicile or habitual residence of the parties.

3.9 The Minister notes, in this regard, that there may be occasions where the Directive would not apply to the mediation, but where there would be a cross-border element in subsequent proceedings, should the mediation fail. Such occasions could arise where the court having jurisdiction under Regulation 44/2001 or Regulation 2201/2003 was in another Member State. In those circumstances, the parties should still have the protection of the safeguards under Articles 6 and 7.

3.10 To meet these concerns, the Minister is proposing a provision along the following lines;

    "1. This Directive applies if at the time the parties agree to mediate at least one of the parties is domiciled or habitually resident in a Member State other than the Member State of any other party.

    2. Notwithstanding paragraph 1, Articles 6 and 7 of this Directive apply in relation to court proceedings following a mediation where the court seised is in a Member State other than a Member State in which at least one of the parties is domiciled or habitually resident."

3.11 The Minister considers that the proposed draft would make it clear that the Directive would apply to a mediation (or in relation to any subsequent court proceedings) only where the parties are domiciled or habitually resident in different Member States, or in a different Member State from that in which the court is seised. The Minister notes that it is "theoretically possible" for parties to a dispute who are domiciled or habitually resident in different Member States to decide to mediate in a third country in which they happen to be living or staying. The Minister does not consider that such a mediation would be caught by the Directive, "because the Community cannot legislate for mediations outside the EU".

3.12 In conclusion, the Minister considers that the suggested definition has the value of being "clear and simple", of respecting the limitations imposed by Article 65 EC, whilst not being too restrictive. The Minister also points out that it follows the model of the European Order for Payment[7] in relation to the provisions on court proceedings in Articles 6 and 7.


3.13 We thank the Minister for her helpful letter. We think it important that the provisions of Article 65 EC are strictly complied with. Accordingly, it is essential that the scope of the proposal should not include purely internal cases, but apply only to those having cross-border implications and then only to the extent necessary for the proper functioning of the internal market.

3.14 We also think it important that the process of mediation should not be obstructed, and we are less concerned than the Minister about the situation where parties choose a place for mediation which has the effect of causing the Directive not to apply. In our view, this is merely a consequence of party autonomy, which is particularly important in a process which is essentially consensual at all stages.

3.15 We agree with the Minister that the Directive should not apply to mediations conducted in third countries, even where the parties may be domiciled or habitually resident in the Member States.

3.16 We are grateful to the Minister for showing us the proposed definition which the UK will seek to advance in order to limit the scope of the proposal, as required by Article 65 EC. We support the general approach, and agree that a reference to domicile or habitual residence of the parties, whilst possibly giving rise to the occasional anomaly, will nevertheless produce a clear and simple rule for the generality of cases.

3.17 We look forward to a further account, in due course, of further negotiations on this point. In the meantime we shall hold the document under scrutiny.

6   Article 65 EC provides for the adoption of measures in the field of judicial cooperation in civil matters 'having cross-border implications and in so far as necessary for the proper functioning of the internal market'. Back

7   See (27688): HC 41-iv (2006-07) para 4 (14 December 2006). Back

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