A Mediation Agreement is a written contract signed by disputing parties and their appointed mediator before a formal mediation session begins. It sets out the ground rules for the mediation process, including the role of the mediator, the confidential and without-prejudice nature of all communications, the costs arrangements, and the formalities required to make any settlement legally binding. In England and Wales, mediation is one of the most widely used forms of alternative dispute resolution (ADR) in both commercial and civil proceedings, and the courts actively encourage its use through the Civil Procedure Rules (CPR) and the associated Pre-Action Protocols.

Mediation in England and Wales is a voluntary, without-prejudice, and confidential process in which a neutral third party — the mediator — assists disputing parties in reaching a mutually acceptable settlement. Unlike a judge or arbitrator, the mediator does not impose a decision. The mediator's role is to facilitate communication, identify common ground, assist the parties in evaluating their respective positions, and help them to reach a negotiated resolution. The process is entirely flexible and confidential, and settlements reached in mediation can address a far wider range of remedies than a court can award.

The legal framework for mediation in England and Wales is shaped by the Civil Procedure Rules 1998 (in particular CPR Part 1 and the Pre-Action Protocols), the common law rules of without-prejudice privilege, and the decisions of the English courts in cases such as Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576 and Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416. The Centre for Effective Dispute Resolution (CEDR) and the Civil Mediation Council (CMC) publish widely-used model procedures and accreditation standards for mediators in England and Wales.

A Mediation Agreement is distinct from a settlement agreement: the Mediation Agreement is the contract that governs the process itself, while a settlement agreement is the binding document produced if the mediation is successful. A Mediation Agreement is the essential starting document for any formal mediation in England and Wales and should be signed by all parties and the mediator before the mediation session begins.

A Mediation Agreement is required any time two or more parties agree to resolve a dispute through formal mediation in England and Wales. It is appropriate for a wide range of commercial, civil, property, employment, and neighbourhood disputes and is used whenever the parties wish to attempt to settle without the cost, delay, and uncertainty of court or arbitration proceedings.

The most common circumstances in which a Mediation Agreement is used in England and Wales include: commercial contract disputes (breach of contract, payment disputes, construction defects, supply chain disputes); property disputes between landlords and tenants or between co-owners under TOLATA 1996; professional negligence claims against solicitors, accountants, surveyors, and other professionals; employment disputes including unfair dismissal, discrimination, and breach of employment contract (note: employment tribunal claims have their own ACAS Early Conciliation requirements); partnership and shareholder disputes; construction disputes governed by the JCT or NEC standard form contracts; intellectual property and licensing disputes; and neighbour disputes including boundary disagreements and nuisance claims.

Under the Pre-Action Protocols set out in the Civil Procedure Rules, parties to civil litigation are expected to have considered ADR (including mediation) before issuing court proceedings. A failure to do so, or an unreasonable refusal to engage in mediation when invited to do so by the other party, can result in adverse costs orders under CPR Part 44, as established in Halsey v Milton Keynes [2004] and reinforced by Churchill v Merthyr Tydfil [2023]. The court's power to stay proceedings and order parties to engage in ADR was confirmed by the Court of Appeal in Churchill, which now represents the leading authority on this issue.

Mediation is also frequently required under standard commercial contracts — including many JCT construction contracts, commercial lease dispute resolution clauses, and financial services agreements — as a pre-condition to arbitration or litigation, making a Mediation Agreement not merely advisable but contractually mandatory in those cases.

A well-drafted Mediation Agreement for use in England and Wales should contain several key provisions that protect all parties — including the mediator — and provide a clear framework for the mediation session and any resulting settlement.

The parties and mediator identification clause clearly identifies who is participating in the mediation and in what capacity. In commercial mediations, parties often attend through authorised representatives, and it is important that those representatives have full authority to settle the dispute, as a settlement agreement signed by a representative without authority may not bind the party they represent.

The scope of the dispute clause sets out the subject matter of the dispute to be mediated. This is important because it defines the scope of the mediator's appointment and ensures that the without-prejudice protection applies specifically to the identified dispute. A broad or vague description of the dispute may cause problems if the parties disagree about whether a particular issue is within the scope of the mediation.

The without-prejudice and confidentiality clause is the most legally significant provision in a Mediation Agreement. It establishes that all communications, statements, documents, and disclosures made during the mediation are without-prejudice and confidential, and cannot be referred to or relied upon in subsequent court or arbitration proceedings. The leading case is Brown v Rice and Patel [2007] EWHC 625 (Ch).

The mediator's fees and costs clause specifies the mediator's rates, how costs will be shared between the parties, and each party's liability for their own legal costs. The costs clause should also address what happens to the mediator's fees if mediation is cancelled or the mediator withdraws.

The settlement formality clause specifies the steps required to make any settlement reached during mediation legally binding — typically the execution of a written settlement agreement signed by all parties. This is critical: oral agreements reached during mediation are generally not binding under English law.

The costs consequences clause acknowledges the principle from Halsey v Milton Keynes [2004] and Churchill v Merthyr Tydfil [2023] that unreasonable refusal to engage in mediation can result in adverse costs orders in subsequent proceedings, encouraging good faith participation by all parties.

The governing law clause confirms that the Agreement is governed by the laws of England and Wales and that any disputes about the Agreement itself (rather than the underlying dispute) will be resolved by the courts of England and Wales.