Explanatory Memorandum to COM(2004)718 - Aspects of mediation in civil and commercial matters

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dossier COM(2004)718 - Aspects of mediation in civil and commercial matters.
source COM(2004)718 EN
date 22-10-2004


1. Scope and objectives of the proposal

1.1. Objective

1.1.1. Ensuring better access to justice

Better access to justice is one of the key objectives of the EU’s policy to establish an area of freedom, security and justice, where individuals and businesses should not be prevented or discouraged from exercising their rights by the incompatibility or complexity of legal and administrative systems in the Member States. The concept of access to justice should, in this context, include promoting access to adequate dispute resolution processes for individuals and business, and not just access to the judicial system.

The proposed directive contributes to this objective by facilitating access to dispute resolution through two types of provisions: first, provisions that aim at ensuring a sound relationship between mediation and judicial proceedings, by establishing minimum common rules in the Community on a number of key aspects of civil procedure. Secondly, by providing the necessary tools for the courts of the Member States to actively promote the use of mediation, without nevertheless making mediation compulsory or subject to specific sanctions.

Provisions touching the mediation process or the appointment or accreditation of mediators have been excluded from the proposed directive. Having regard to the reactions to the Green paper of 2002 and current developments at national level, it is not clear that legislation is the preferred policy option as regards this type of provision. While excluding regulatory measures concerning the mediation procedure itself from this proposal the Commission has instead sought to encourage self-regulatory initiatives and is seeking to continue to do so through the proposed directive also.

In the consultations on the preliminary draft of this proposal most respondents endorsed the overall approach of the draft concerning the issues covered as well as the issues excluded from it. Compared to the preliminary draft certain changes, mainly of a technical nature, have been made to specific provisions and are further explained in the annex.

1.1.2. A sound relationship between mediation and civil proceedings

What have been retained for this proposal are essentially matters which cannot be adequately addressed through market-based solutions. This concerns notably civil procedural rules which may impact on the use of mediation as well as on its effectiveness. The interaction between mediation and traditional civil proceedings can take place at several occasions, for example:

- The parties consider use of mediation immediately after the dispute has arisen, as an alternative to launching civil proceedings; if the parties do chose to use mediation and fail to reach a settlement agreement, civil proceedings are launched after the termination of the mediation;

- If a settlement agreement is reached through mediation, one of the parties may fail to honour the agreement, calling for civil proceedings to be launched anyway;

- The parties launch civil proceedings immediately after the dispute has arisen, without having (yet) considered the possibility of mediation.

At present the interaction between mediation and civil proceedings presents a number of uncertain elements, due to the absence of or discrepancies between national procedural laws, elements which make themselves known with particular force in situations involving cross-border elements. Even if mediation may be the most suitable form of dispute resolution in a given case the parties may therefore opt for traditional civil proceedings in view of these uncertainties. A stable and predictable legal framework should contribute to putting mediation on an equal footing with judicial proceedings where factors related to the specific dispute play the most significant role for the parties in determining their choice of dispute resolution method. Such a framework should also help to preserve the possibility for the parties to solve their dispute through judicial proceedings even if mediation is attempted.

1.1.3. Promoting the use of mediation

The value of increasing the use of mediation rests principally in the advantages of the dispute resolution mechanism itself: a quicker, simpler and more cost-efficient way to solve disputes, which allows for taking into account a wider range of interests of the parties, with a greater chance of reaching an agreement which will be voluntarily respected, and which preserves an amicable and sustainable relationship between them. The Commission believes that mediation holds an untapped potential as a dispute resolution method and as a means of providing access to justice for individuals and business.

The role of the Community in directly promoting mediation is however by necessity limited and the only concrete measure to promote mediation contained in the proposal is the obligation for Member States to allow courts to suggest mediation to the parties. Ensuring a sound relationship between mediation and judicial proceedings will however indirectly contribute to promoting mediation also.

The pursuit of the objectives of this proposal can not take in place in isolation without regard to the very provision of mediation services. The question of quality of mediation services must therefore be addressed together with, and as a function of, the other provisions of the proposed directive which must operate with a sufficient level of mutual trust between the Member States in cross-border situations.

1.1.4. The relationship with the organisation of the judicial systems of the Member States

One of the often quoted benefits of mediation is that its increased use can offload pressure on the court system, thereby reducing what are often long delays in case-handling and possibly allowing for savings of public resources. As the proposed directive seeks to promote the use of mediation, it could indeed have a positive impact in this sense. This is however not pursued as an independent objective, for several reasons. First, the organisation of the judicial system is the sole competence of the Member States. Secondly, and most importantly, mediation has a value in itself as a dispute resolution method, to which citizens and business should have easy access and which deserves to be promoted independently of its value in off-loading pressure on the court system. The Commission does not see mediation as an alternative to court proceedings; it is rather one of several dispute resolution methods available in a modern society and which may be the most suited for some, but certainly not all, disputes. Moreover, it should be stressed that the availability of ADRs in general can not in any way detract from the obligation of Member States to maintain an effective and fair legal system that meets the requirements of the European Convention of Human Rights, which forms one of the central pillars of a democratic society.

1.1.5. Impact assessment

A preliminary impact assessment of this proposal was carried out in the context of the Commission’s annual policy strategy for 2004. The proposal has not been selected for an extended impact assessment. The proposed directive aims at increasing the use of mediation in the EU, which will have beneficial economic effects by lowering transaction costs for individuals and business, through a quicker and more cost-efficient resolution of disputes. Mediation can also contribute to more sustainable economic and social trends in preserving the relationship between the parties after the dispute has been solved, in contrast to the often disruptive effects of solving a dispute through an adjudicatory process. The consultation process and other preparatory steps are described in the annex. In terms of alternative policy options the proposed directive contains mainly rules on civil procedure, and the results can not be achieved using another policy instrument.

1.2. Legal basis

The objective and content of this proposed directive fall squarely within the scope of Article 65 TEC since it concerns civil procedural rules, where the provision on quality and training in Article 4 is ancillary to the other provisions. The proposed directive is necessary for the proper functioning of the internal market in view of the need to ensure access to dispute resolution mechanisms for individuals and business exercising the four freedoms and in view of the need to ensure the freedom to provide and to receive mediation services.

As has been stressed in the description of the objectives of the proposal the need for Community action in this field stems from the need to ensure legal certainty throughout the duration of a dispute regardless of the presence of cross-border elements at one stage or another. To ensure a coherent legal framework it is therefore necessary to address key aspects of the whole chain of possible events that can follow after the dispute has arisen, having regard to any possible scenario (success/failure of the mediation, settlement agreement followed by both parties or not, etc).

In the context of ADR the impact of cross-border elements is potentially greater than when considering measures relating to civil proceedings in isolation, since it is necessary to have regard to relevant factors at the time of the mediation as well as at the time of any subsequent civil proceedings, including the circumstance that these factors may change in the meantime. For example, cross-border elements may come from the domicile or place of business of one or both of the parties, the place of the mediation, or the place of the competent court. The agreement to mediate may in itself be governed by a different law than that which governs the original legal or contractual relationship between the parties, and an ensuing settlement agreement may be governed by the law of yet another third country. The settlement agreement may have to be enforced in yet another Member State depending on, for example, the location of the debtor’s assets at the time when enforcement is sought.

However, it would not be feasible to restrict the scope of the proposal so as to only aim at removing obstacles created by cross-border elements or to ease the resolution of only those disputes displaying a cross-border element, however defined.

In assessing the suitability of mediation as a dispute resolution method for a given dispute, cross-border elements make up for only one of several relevant circumstances to be taken into account. Other circumstances include the nature of the dispute and the merits of the case as well as factors related to costs, delay and prospects of success. Promoting mediation in relation to those disputes that display a cross-border element only would therefore be arbitrary and create a risk of discriminatory effects, since the courts would suggest mediation to some parties only depending on their place of residence. A restriction of this type will undoubtedly entail a substantial reduction in the practical impact of the proposed directive also. Making the applicability of the civil procedural rules contained in the proposed directive subject to the presence of cross-border elements would rather lead to increased legal uncertainty. Alternatively such a restriction in scope may leave the applicability of the directive in the hands of the parties, who could introduce cross-border elements through their choice of mediator or court for the dispute in order to benefit from the rules laid down by the directive.

The proposed directive will form an important part of the legal framework for mediation services in the Community, as concerns the freedom to provide services in another Member State as well as the freedom to receive services. A limitation in scope to cross-border situations would lead to the creation of two parallel legal regimes, possibly even different standards as concern the provision and receipt of mediation services, with a risk of discriminatory effects for users as well as providers of mediation services. Such effects run counter to the principles of the internal market as well as the efforts of the Community to simplify the regulatory framework for individuals and business.

In conclusion the Commission considers that introducing an explicit condition of cross-border implications would invalidate the objectives of the proposed directive and be counterproductive to the proper functioning of the internal market. The directive must therefore apply to all situations regardless of the presence of cross-border elements at the time of the mediation or at the time of the judicial proceedings.

1.3. Subsidiarity and proportionality

In view of the need for legal certainty and predictability in situations involving the relationship between mediation and civil proceedings in situations displaying a cross-border element and the need to ensure the proper functioning of the internal market for the provision of and receipt of mediation services the objectives of this proposal cannot be sufficiently accomplished by the Member States. Measures taken at Community level will be more effective compared to individual initiatives taken by each Member State, for reasons of coherence and reasons of providing certain basic uniform rules applicable in cross-border situations as well as in domestic cases.

The provisions of the proposal are strictly limited to what is necessary to reach the objectives. A directive has been chosen as the most appropriate instrument since the provisions are designed to achieve certain specific objectives while leaving the means for how to reach those objectives to Member States’ discretion. The proposal also confines itself to issues which can only be solved through legislation while inversely issues where market-based solutions are feasible have been excluded from the scope.

2. Background to the proposal, consultation with interested parties, and comments on main provisions

The staff working paper annexed to this proposal provides further information on these issues.