Conflict of Interest and Disclosure by Mediators Under Mediation Act, 2023

Mediation depends greatly on the confidence of the parties in the mediator. A mediator must remain independent, neutral and impartial throughout the proceedings. Any personal, professional or financial connection that may affect this neutrality must be disclosed. The Mediation Act, 2023 creates a clear framework for identifying conflicts of interest, making disclosures, obtaining consent from parties and replacing a mediator where necessary.

Meaning of Conflict of Interest in Mediation

A conflict of interest arises when a mediator has a personal, professional, financial or other connection with a party, representative, dispute or possible outcome that may affect the mediator’s independence or impartiality.

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The existence of a conflict does not always mean that the mediator is actually biased. A conflict may also arise where the circumstances create a reasonable appearance of bias. Therefore, the legal standard is not limited to actual partiality. It also covers situations that may give rise to justifiable doubts regarding the mediator’s neutrality.

For example, a conflict may exist where the mediator:

• Has previously represented one of the parties in another legal matter;
• Has a financial interest in a company involved in the dispute;
• Is closely related to a party, lawyer or authorised representative;
• Has provided professional advice regarding the same dispute;
• Has a continuing business relationship with one of the parties;
• Has publicly expressed views regarding the subject matter of the dispute; or
• May receive a direct or indirect benefit from a particular settlement outcome.

A mediator must examine the surrounding circumstances carefully before accepting an appointment. The purpose is to ensure that the mediation process remains fair and commands the confidence of all parties.

Importance of Independence, Neutrality and Impartiality

The concepts of independence, neutrality and impartiality are closely connected, but they are not identical.

Independence

Independence refers to the absence of relationships or circumstances that may influence the mediator. A mediator should not be financially, professionally or personally dependent upon any party participating in the mediation.

For instance, regularly receiving mediation appointments from one company may raise concerns if that company is a party to the present dispute. The concern becomes stronger where the appointments form a substantial source of the mediator’s professional income.

Neutrality

Neutrality means that the mediator does not have an interest in the dispute or its outcome. The mediator must not favour a particular settlement merely because it benefits one party, protects an existing relationship or advances the mediator’s own interests.

Impartiality

Impartiality concerns the mediator’s conduct towards the parties. Each party must receive a fair opportunity to explain its position, identify concerns, consider settlement options and participate in negotiations.

A mediator may be independent at the time of appointment but later behave in a partial manner. Similarly, a mediator may intend to act impartially but have a relationship that creates reasonable doubts regarding independence. The legal framework therefore addresses both actual conduct and surrounding circumstances.

Conflict of Interest Under Section 10 of the Mediation Act, 2023

Section 10 of the Mediation Act, 2023 specifically deals with conflict of interest and disclosure by mediators. It imposes duties before the mediation begins and throughout the proceedings.

Under Section 10(1), a person appointed as a mediator must disclose in writing any circumstance or potential circumstance that:

• May constitute a conflict of interest; or
• Is likely to give rise to justifiable doubts regarding independence or impartiality.

The provision expressly covers personal, professional, financial and other circumstances. This broad wording prevents the disclosure requirement from being confined to a fixed list of relationships.

The mediator must make the disclosure before conducting the mediation. Therefore, disclosure is not a formality to be completed after substantive discussions have begun. It forms part of the parties’ decision on whether they are comfortable proceeding with the appointed mediator.

What Constitutes Justifiable Doubt?

The expression “justifiable doubts” introduces an objective element into the assessment. A party’s unsupported suspicion may not be sufficient. At the same time, proof of actual bias is not necessary.

The relevant question is whether the circumstances are serious enough to cause a reasonable person, aware of the material facts, to doubt the mediator’s ability to act independently and impartially.

The following factors may be relevant:

• The nature and closeness of the relationship;
• The duration of the relationship;
• Whether the relationship is continuing or has ended;
• The financial importance of the connection;
• The mediator’s earlier involvement in the dispute;
• The frequency of appointments received from one party;
• The mediator’s connection with the lawyers or advisers involved;
• The possibility of personal or professional benefit; and
• Whether the circumstance may affect the perception of fairness.

Not every remote or insignificant association creates a disqualifying conflict. However, where there is reasonable uncertainty, disclosure is generally safer than silence. Disclosure allows the parties to assess the matter rather than leaving the mediator to decide the issue privately.

Types of Conflicts That Require Disclosure

Conflict of interest may arise in several forms. Section 10 is wide enough to include both direct and indirect conflicts.

Personal Relationships

A mediator should disclose close personal relationships with a party, lawyer, representative, witness or other significant participant. Family relationships, close friendships, serious personal disagreements and other connections may affect the perception of neutrality.

A casual acquaintance may not always create a conflict. Its significance depends on the closeness and frequency of interaction.

Professional Relationships

Prior or continuing professional relationships commonly require disclosure. These may include situations where the mediator:

• Previously acted as a lawyer, consultant or adviser for a party;
• Is currently associated with the law firm representing a party;
• Has worked with a party’s legal representative;
• Has served as a mediator, arbitrator or expert in a related dispute;
• Has advised on the transaction from which the dispute arose; or
• Has a professional partnership with a person connected to the matter.

Even where earlier work was unrelated to the present dispute, its nature and recency may still be relevant.

Financial Interests

A mediator must disclose any financial interest that may be affected by the dispute or its settlement. Examples include ownership of shares, investments, debts, commercial agreements or expected financial benefits connected with a party.

An indirect interest may also be relevant. For example, a financial interest held through a closely connected business entity or immediate family member may create concerns regarding independence.

Prior Involvement in the Dispute

A person who previously advised either party about the same dispute may have received confidential information or formed views about its merits. Such involvement can make it difficult to appear neutral even where the person believes that impartial mediation remains possible.

Prior involvement may include drafting disputed documents, participating in negotiations, conducting an inquiry, giving an expert opinion or representing a party in related proceedings.

Repeat Appointments

Repeat appointments are not automatically prohibited. Experienced mediators are often appointed by the same institutions, businesses or legal professionals. However, the frequency and financial significance of repeat appointments may require disclosure.

A pattern of appointments from one party may create concern that the mediator has an incentive to maintain that professional relationship.

Public Statements and Predetermined Views

Public comments about a dispute, party or legal issue may create doubts about impartiality. A mediator who has already expressed a definite view on the conduct of one party may appear to have prejudged important questions.

General academic writing or professional discussion does not necessarily establish bias. The language, specificity and connection with the dispute must be considered.

Duty to Make Written Disclosure Before Mediation

The disclosure under Section 10(1) must be made in writing. An oral statement during a preliminary meeting is not a proper substitute for written disclosure.

A written record serves several purposes. It identifies the exact information communicated to the parties, helps them make an informed decision and reduces later disagreement over whether disclosure was made.

A proper disclosure should ordinarily state:

• The nature of the relationship or circumstance;
• The persons or organisations involved;
• Whether the relationship is past or continuing;
• Its approximate duration and significance;
• Any connection with the subject matter of the dispute; and
• Any other fact required for an informed assessment.

The mediator should provide sufficient detail without unnecessarily revealing confidential information belonging to another person. A vague statement that a “professional connection” exists may not allow the parties to understand the possible conflict.

Continuing Duty of Disclosure During Mediation

The duty of disclosure does not end when the mediation begins. Section 10(2) creates a continuing obligation.

Where a new conflict arises or an existing circumstance comes to the mediator’s knowledge during the mediation, it must be disclosed to the parties in writing without delay.

A conflict may arise during proceedings where:

• The mediator discovers an earlier professional connection that was initially overlooked;
• A party appoints a new lawyer who has a close connection with the mediator;
• The mediator’s firm begins acting for an associated company of a party;
• A financial interest is acquired after the mediation begins;
• A participant reveals facts showing that the mediator was previously involved in a connected matter; or
• A new business or professional relationship develops.

Prompt disclosure protects the integrity of the proceedings. Delay may create the impression that information was deliberately withheld.

Difference Between Disclosure and Disqualification

Disclosure does not automatically disqualify a mediator. Its primary purpose is to place relevant information before the parties.

Some disclosed circumstances may be minor and acceptable to all parties. Others may be serious enough to justify replacement. The parties must decide whether the disclosed connection affects their confidence in the mediator.

Therefore, three distinct questions arise:

1. Whether a circumstance must be disclosed;
2. Whether the circumstance creates a conflict; and
3. Whether the conflict requires replacement of the mediator.

The threshold for disclosure is generally wider than the threshold for disqualification. A mediator should disclose a circumstance where reasonable doubt may arise, even if the mediator believes that impartial service remains possible.

Waiver of Objection by the Parties

Section 10(3) permits the parties to waive an objection after disclosure. Such waiver is valid only when all parties express it in writing.

Written waiver is treated as the consent of the parties to continue with the mediator despite the disclosed circumstance. This reflects party autonomy, which is central to mediation.

Consent must be informed. The parties should receive enough information to understand the nature and possible effect of the conflict. Silence, continued participation or failure to object immediately should not be treated as equivalent to the written consent required by Section 10.

Where even one party does not agree, the mediator cannot rely on the consent of the others.

Replacement of the Mediator After Disclosure

Section 10(4) provides a mechanism for replacing a mediator where either party wishes to do so following disclosure.

Institutional Mediation

In institutional mediation, the concerned party must apply to the mediation service provider for termination of the mediator’s mandate. The institution then deals with the matter in accordance with the Act and the applicable procedure.

Non-Institutional Mediation

In mediation other than institutional mediation, the party may terminate the mandate of the mediator. The parties may thereafter appoint another mediator.

This distinction recognises that institutional mediation is administered through a mediation service provider, while private or ad hoc mediation operates directly between the parties and the mediator.

Termination of the Mediator’s Mandate

Section 11 authorises a mediation service provider to terminate the mandate of a mediator in specified circumstances. These include:

• Receipt of an application from a party seeking termination after disclosure;
• Receipt of information from participants or any other person regarding the mediator’s involvement in a conflict of interest; and
• Withdrawal of the mediator from the mediation for any reason.

Where information about a conflict is received from a participant or another person, the mediation service provider must give the mediator an opportunity of being heard.

Termination may follow where the provider finds justifiable doubt regarding the mediator’s independence or impartiality, the matter has been brought to the notice of the parties and either party wishes to replace the mediator.

This procedure protects both sides. It prevents a mediator from being removed merely on an unsupported accusation while ensuring that genuine concerns are independently examined.

Appointment of a Replacement Mediator

Section 12 deals with the appointment of another mediator after termination of the earlier mediator’s mandate.

In non-institutional mediation, the parties may appoint another mediator within seven days from the termination. Where the mandate is terminated by a mediation service provider under Section 11, the provider must appoint another mediator from its panel within seven days.

A timely replacement helps prevent unnecessary delay. However, the new mediator must independently examine and disclose any possible conflict before conducting further proceedings.

Consequences of Failure to Disclose

Non-disclosure can seriously damage the mediation process. It may cause a party to lose confidence in the mediator, withdraw from negotiations or dispute the fairness of the proceedings.

Possible consequences include:

• Termination of the mediator’s mandate;
• Appointment of a replacement mediator;
• Delay and additional cost;
• Institutional or professional disciplinary action;
• Complaint of professional misconduct or malpractice;
• Damage to the mediator’s professional reputation; and
• Questions regarding the integrity of the resulting settlement.

Section 23 protects mediation communications from disclosure in adjudicatory proceedings, but it creates an important exception. Confidentiality and privilege do not prevent disclosure of information required to prove or dispute a complaint of professional misconduct or malpractice based on conduct occurring during mediation.

This exception ensures that confidentiality is not used to shield unethical conduct by a mediator.

Effect of Non-Disclosure on a Mediated Settlement Agreement

The Mediation Act, 2023 does not expressly state that every failure to disclose automatically invalidates a mediated settlement agreement.

A settlement results from the voluntary agreement of the parties rather than an adjudicatory decision imposed by the mediator. Therefore, non-disclosure by itself may not necessarily destroy the settlement.

However, serious non-disclosure may become legally important where it is connected with fraud, corruption, impersonation or another ground recognised for challenging a mediated settlement agreement. The facts must be examined carefully in each case.

A distinction must be maintained between:

• A breach of the mediator’s ethical or statutory duty;
• Termination or replacement of the mediator;
• A complaint of professional misconduct; and
• A legal challenge to the settlement agreement.

These consequences do not automatically arise together.

Role of Mediation Service Providers

Mediation service providers play an important role in maintaining the integrity of institutional mediation. Their functions should include effective systems for identifying, recording and addressing conflicts of interest.

Good institutional practice may involve:

• Obtaining conflict declarations from proposed mediators;
• Maintaining records of past and present appointments;
• Sharing written disclosures with all parties;
• Allowing parties to raise objections;
• Providing a fair hearing to the mediator;
• Deciding replacement requests promptly;
• Appointing substitute mediators within the statutory period; and
• Maintaining professional and ethical standards.

Institutions should avoid appointing mediators solely on the basis of availability. Suitability, independence, competence and the preferences of the parties must also be considered.

Conflict of Interest in Online Mediation

Online mediation creates additional situations requiring careful disclosure. The mediator may use technology platforms, administrative service providers or professional teams that have connections with one of the parties.

Potential concerns include:

• A technology platform owned or controlled by a party;
• Undisclosed access to documents by persons connected with the mediator;
• Professional relationships between technical service providers and parties;
• Data-management arrangements creating financial or commercial interests; and
• Use of experts or assistants who have conflicts of interest.

The shift to an online format does not reduce the mediator’s duty of independence. The same standards apply, although the relevant connections may arise through technology and data-management arrangements.

Best Practices for Mediators

A mediator can reduce conflict-related disputes by following careful professional practices:

• Conducting a thorough conflict check before accepting an appointment;
• Reviewing the names of parties, affiliates, lawyers, representatives and major participants;
• Making disclosures broadly where reasonable doubts may arise;
• Providing disclosures in clear written language;
• Updating the conflict check when parties or representatives change;
• Avoiding financial or professional relationships that develop during mediation;
• Recording written consent where parties waive an objection;
• Withdrawing where impartiality cannot reasonably be maintained; and
• Protecting confidential information while making adequate disclosure.

The mediator must not decide only whether actual bias exists. The appearance of fairness is equally important to the credibility of mediation.

Conclusion

Conflict-of-interest rules protect the legitimacy of mediation and the freedom of parties to make informed choices. Section 10 of the Mediation Act, 2023 requires written disclosure before mediation and prompt disclosure of newly discovered conflicts. Parties may waive an objection only through written consent. 

Where confidence is lost, Sections 11 and 12 provide for termination and replacement. Transparent disclosure, institutional oversight and continuing ethical vigilance are therefore essential to an independent, impartial and trustworthy mediation process.