Arbitration and mediation: a shift in commercial dispute resolution?

Posted by Matthew Pascall, legal director – head of commercial at Legal Futures Associate Temple Legal Protection

The Arbitration Act 2025 came into force last week and, with growing judicial momentum behind mediation as well, commercial litigation solicitors will need to consider how these changes could affect both their working practices and clients.

There are a number of factors at play here – a decline in Commercial Court claims, uncertainty surrounding third-party funding following the PACCAR ruling, and increased judicial and legislative support for alternative dispute resolution (ADR). Recent court decisions are also reinforcing ADR’s role – not just as a voluntary option, but in some cases, as a judicially mandated step.

While these changes may not amount to a seismic shift, they are significant enough to warrant close attention.

The Elphicke ruling: courts mandating ADR for costs disputes

The case of Charles Elphicke v Times Media Ltd has further highlighted the courts’ willingness to impose ADR in litigation. In what can be seen as a landmark decision, the court ordered the parties to engage in ADR to resolve their dispute over legal costs. This ruling underscores a growing judicial trend: ADR is no longer merely an option – it can, in some circumstances, be a requirement.

For commercial litigation solicitors, this ruling presents several key considerations:

• ADR for costs disputes – the Elphicke decision suggests that ADR mechanisms, including mediation, may increasingly be used for disputes over costs. Even after a case has concluded, parties may be compelled to mediate rather than litigate over costs recovery;
• Judicial encouragement of ADR at all stages – the decision aligns with broader judicial efforts to embed ADR into the litigation process. Courts now have greater discretion to order ADR, reinforcing the idea that litigation should be a last resort; and
• Cost sanctions for refusal to mediate – Following Elphicke, parties who unreasonably refuse mediation in costs disputes could face adverse costs orders. This mirrors previous decisions penalising parties for rejecting ADR in substantive claims.

Arbitration reform in 2025

In response to these broader changes, arbitration in England and Wales is also evolving. The Arbitration Act 2025 aims to modernise the framework established by the Arbitration Act 1996, improve efficiency and reinforce London’s reputation as a leading arbitration hub. Key provisions within the act include:

• Streamlining procedures to reduce delays and ensure arbitrations remain cost-effective;
• Clarifying the role of the courts in supporting arbitration without unnecessary interference; and
• Strengthening the enforcement of arbitral awards, ensuring decisions are respected both domestically and internationally.

For commercial litigation practitioners, these changes will likely make arbitration an even more attractive option for clients seeking swift and reliable dispute resolution. The reforms could also encourage greater adoption of arbitration clauses in commercial contracts, reducing the number of cases heading to court.

The increasing role of mediation

Mediation has long been seen as a voluntary alternative to litigation, but recent judicial comments suggest a stronger push towards its use.

The courts are becoming increasingly supportive of mediation, with several decisions indicating that parties may face costs consequences for unreasonably refusing to engage in the process.

The Lady Chief Justice has suggested the creation of a mediation council to oversee standards and encourage wider adoption across civil and commercial cases. Such a body could bring greater structure and consistency to mediation in England and Wales, aligning it with international best practices.

While mediation remains distinct from arbitration, both processes share the advantage of providing parties with greater autonomy and flexibility compared to court proceedings. For solicitors, this means advising clients on the full range of dispute resolution options, rather than ‘defaulting’ to litigation.

What does this mean for commercial litigation solicitors?

As ADR’s profile rises, commercial litigators will need to be prepared for this changing environment. Some key considerations to think about include:

• Advising clients on ADR clauses – reviewing contracts to ensure dispute resolution clauses reflect the best strategic options for each case;
• Keeping up-to-date with arbitration reforms – understanding the implications of the Arbitration Act 2025 will be very important;
• Engaging with mediation developments – keeping up to date with judicial guidance, including potential regulatory changes; and
• Strengthening relationships with ADR professionals – collaborating with experienced arbitrators and mediators can enhance your dispute resolution strategies.

The Temple perspective

While litigation remains an essential tool, arbitration and mediation are becoming increasingly attractive options in an uncertain economic and legislative climate.

Read the complete article here.