Canada: New Commercial Mediation Act Makes Ontario A Better Choice For Commercial Dispute Mediation

There are new and important advantages to mediating a commercial dispute in Ontario, as compared to other Canadian jurisdictions. With the October 25, 2010 enactment of the Commercial Mediation Act, 2010, S.O. 2010, c. 16, Sch. 3 ("CMA"), parties settling a commercial dispute through mediation will be able to register their settlement agreement with the court, gaining the advantage of having it treated like a judgment for enforcement purposes. The CMA also provides parties involved in the mediation of a commercial dispute with more certainty about the appointment of mediators, the conduct of the mediation and the confidentiality of the process.

Ontario becomes the second jurisdiction in Canada, after Nova Scotia, to adopt legislation of this nature. Like its Nova Scotia counterpart, the Ontario CMA is based on the UNCITRAL Model Law on International Commercial Conciliation (2002), which is also the basis for similar legislation in Illinois, New Jersey and Ohio. The CMA applies not only to mediations of commercial disputes conducted in Ontario but also to those governed by Ontario law. Accordingly, parties who include dispute resolution clauses in their commercial agreements and wish to avail themselves of this new legislation should consider stipulating that any mediation be governed by Ontario law or be held in Ontario.
Importantly, if an Ontario mediation of a commercial dispute results in a signed settlement agreement with which a party fails to comply, another party wishing to enforce it may now apply to a Superior Court judge for judgment in the terms of the agreement or to the Registrar of the Superior Court for an order authorizing registration of the agreement with the Court. The Registrar must make such an order unless it is shown that a party did not sign the settlement agreement, did not consent to its terms, that the settlement agreement was obtained by fraud, or that it does not accurately reflect the terms agreed to. Once this order has been obtained, the agreement can be registered with the Superior Court, which would have the effect of giving it the same force and effect as a judgment of the Court. Arguably, it could then be registered in other provinces or the United Kingdom under the applicable reciprocal enforcement of judgment rules.

The CMA applies to mediations of commercial disputes only, whether contractual or not, unless parties agree not to have the Act apply to their mediation, or the mediation is governed by the mandatory mediation rule of the Rules of Civil Procedure. Family law disputes or disagreements with insurers over accident benefits are not considered to be commercial disputes. The CMA also does not apply to mediations under or relating to the formation of a collective agreement, a computerized or other form of mediation in which there is no individual acting as the mediator, or to attempts by judges or arbitrators during the course of a legal proceeding or arbitration to promote a settlement. The CMA binds the Crown and also provides parties with the flexibility to choose to have some but not all of its provisions apply to a mediation. Mediations commenced before October 25, 2010, the date on which the CMA came into force, are not subject to the Act.

A further benefit is that parties will have greater certainty that the mediators they select are appropriate. Mediators are required by the CMA to disclose any current or potential conflict of interest and any circumstance that might give rise to a reasonable apprehension of bias. This duty to disclose continues until the mediation is terminated. A conflict of interest is deemed to occur if a mediator has a financial or personal interest in the outcome of the mediation, or has an existing or previous relationship with a party or a person related to a party to the mediation. Once appointed as a mediator, that individual cannot also be an arbitrator of the dispute or a related dispute unless the parties agree.

Once appointed, a mediator has a positive duty to maintain fair treatment of the parties throughout the mediation, taking into account the circumstances of the dispute. Parties cannot relieve the mediator from complying with this obligation. As between the parties, the mediator may disclose to a party any information that he or she receives from another party unless that other party expressly asks the mediator not to do so.

Information relating to the mediation (that is not otherwise public or considered by the parties to be non-confidential) must be kept confidential by the parties, the mediator and anyone else involved in the conduct of the mediation. However, disclosure of such confidential information can be made if the parties agree or if required (a) by law, (b) in order to carry out or enforce a settlement, (c) for a mediator to respond to a claim of misconduct, or (d) to protect health or safety. Similarly, absent consent of the parties (and, if necessary, the mediator), no information concerning the mediation is discoverable or admissible in any judicial, arbitral or administrative proceeding, unless that information is required (a) by law, (b) in order to carry out or enforce a settlement, or (c) for a mediator to respond to a claim of misconduct.

The CMA states that parties can agree not to proceed with arbitral or judicial proceedings before a mediation is terminated. However, an arbitrator or a court may allow the proceedings to proceed if they are necessary to preserve a party's rights or are in the interest of justice (note, however, that agreeing to mediation tolls any applicable limitation period under section 11 of the Ontario Limitations Act, 2002). The commencement of an arbitral or judicial proceeding is not of itself to be regarded as a termination of the agreement to mediate or of the mediation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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