Who Pays the Cost of Mediation?

In India, the cost of mediation is generally shared equally by the parties unless they agree on a different arrangement. Section 25 of the Mediation Act, 2023 provides that the fees of the mediator and charges of the mediation service provider are ordinarily borne equally by the parties. However, the exact amount and allocation of costs may vary depending on whether the mediation is private, institutional or court-referred.

Who Pays the Cost of Mediation in India?

The general rule is that both parties pay the cost of mediation equally.

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Section 25 of the Mediation Act, 2023 establishes the statutory framework for mediation costs in India. It provides that, unless the parties agree otherwise, all costs of mediation, including the fees of the mediator and charges payable to a mediation service provider, must be borne equally by the parties.

This means that where two parties enter mediation and there is no separate agreement regarding expenses, each party will ordinarily pay 50% of the common mediation costs.

However, equal sharing is only the default position. The parties are free to decide that:

• one party will bear the entire mediation cost;
• costs will be divided in a different proportion, such as 60:40 or 70:30;
• one party will initially pay the expenses and later receive reimbursement; or
• mediation expenses will be adjusted as part of the final settlement.

The actual arrangement may therefore depend on the agreement between the parties, institutional rules or directions of the court in court-referred mediation.

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What Does Section 25 of the Mediation Act, 2023 Say?

Section 25 of the Mediation Act, 2023 deals specifically with the cost of mediation.

Under this provision, the costs of mediation may include the fee payable to the mediator and charges of the mediation service provider. The provision further states that these costs shall be borne equally by the parties unless they agree otherwise.

The importance of Section 25 lies in two principles.

Equal Sharing Is the Default Rule

Where no agreement exists on costs, each party bears an equal share. This provides certainty and prevents disputes over payment from delaying the mediation process.

For example, if the total mediator and institutional charges amount to ₹40,000 in a two-party mediation, each party may ordinarily be required to contribute ₹20,000.

Parties Have Freedom to Decide Differently

The law respects party autonomy. Therefore, equal contribution is not compulsory where the parties mutually agree on another arrangement.

This flexibility may be particularly useful where there is a major difference in the financial position of the parties or where one party has a greater commercial interest in resolving the dispute quickly.

The mediation agreement may itself specify how the costs of mediation will be divided between the parties.

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What Expenses Are Included in Mediation Costs?

Mediation costs are not necessarily limited to the amount charged by the mediator. Depending on the nature and forum of mediation, different types of expenses may arise.

Mediator’s Fee

The mediator’s professional fee is one of the main costs involved in mediation.

The fee may depend on factors such as:

• the value and complexity of the dispute;
• the number of mediation sessions;
• the experience and professional standing of the mediator;
• whether the mediation is conducted privately or through an institution; and
• the applicable institutional or court mediation rules.

In institutional mediation, the mediator’s fee may be determined through a prescribed fee schedule. In private mediation, the fee may be negotiated between the mediator and the parties.

The manner of appointment of mediators may also depend on whether the parties have selected the mediator themselves or approached a mediation service provider for assistance.

Mediation Service Provider Charges

Where mediation is administered by a mediation institution or service provider, administrative charges may also be payable.

These charges may cover services such as scheduling sessions, providing administrative support, maintaining records, arranging facilities and coordinating communications between the parties and the mediator.

Section 25 expressly recognises charges payable to a mediation service provider as part of mediation costs.

Venue and Administrative Expenses

Physical mediation may require meeting rooms, conference facilities or other infrastructure.

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Depending on the arrangement, these costs may be included within institutional charges or may be charged separately.

Online mediation may reduce some of these expenses, particularly travel and venue costs, although technology or platform-related charges may still apply.

Expert Expenses

Certain disputes may require assistance from specialists such as accountants, engineers, valuers or technical experts.

Where an expert is engaged by one party for its own case, that party will normally bear the expert’s cost unless the parties agree otherwise.

If both parties jointly appoint an expert for the mediation, the cost may be shared.

Document and Communication Expenses

Parties may also incur expenses for preparation, printing, copying, translation or transmission of documents.

These expenses are generally borne by the party that incurs them unless there is a different agreement.

Are Mediation Costs Always Shared Equally?

No. Mediation costs are not always shared equally.

Equal sharing applies only where there is no contrary agreement between the parties.

The words “unless otherwise agreed by the parties” are important because they allow the parties to create their own cost-sharing arrangement.

For instance, in a commercial dispute, a financially stronger company may agree to bear the entire mediator’s fee to encourage early resolution. Similarly, parties may agree that the party receiving payment under the settlement will bear a larger share of mediation expenses.

Such arrangements do not affect the neutrality or independence of the mediator. Payment of a mediator’s fee by one party does not give that party greater control over the mediation process. A mediator is expected to perform the role and duties of a mediator impartially irrespective of the arrangement for payment of fees.

Can One Party Pay the Entire Mediation Cost?

Yes. One party may pay the entire mediation cost if both sides agree.

The law does not require equal payment where a different arrangement has been mutually accepted.

There may be several situations where this happens. For example, one party may have significantly greater financial resources, one party may have proposed mediation, or payment of mediation costs may itself form part of settlement negotiations.

However, it is useful for the cost arrangement to be clearly recorded before mediation begins. A written agreement can prevent later disagreement regarding fees and reimbursement.

Whether the mediation is voluntary or mandatory, the parties cannot ordinarily be compelled to accept a settlement merely because they have participated in the process.

Who Pays the Mediator’s Fee?

The mediator’s fee is normally shared equally between the parties unless a different arrangement has been agreed.

Where mediation is conducted through an institution, the institution may prescribe the mediator’s fee and ask both sides to deposit their respective shares.

In private mediation, the mediator may communicate the fee structure before accepting the appointment. The parties may then decide how the amount will be divided.

Payment arrangements should ideally be finalised at the beginning of the mediation process so that disputes regarding costs do not interfere with settlement discussions.

Who Pays for Court-Referred Mediation?

In court and tribunal referral to mediation, the question of payment depends on the rules governing the mediation centre or court concerned.

Many court mediation systems provide for mediation either at a nominal cost or according to prescribed fee structures. In some situations, mediation services attached to courts may be available without substantial mediator fees being charged directly to the parties.

Where expenses are payable, court mediation rules have traditionally recognised equal sharing of mediation expenses among contesting parties unless the court directs otherwise.

Court-referred mediation has also developed through Section 89 of the Code of Civil Procedure, 1908, which forms an important part of India’s legal framework for alternative dispute resolution in civil proceedings.

The court may also have the power to determine or approve mediator fees and related expenses depending on the applicable rules.

Accordingly, the cost structure for court-referred mediation may differ significantly from private commercial mediation.

Who Pays for Private Mediation?

In private mediation, the parties usually bear the costs themselves.

Private or ad hoc mediation involves the appointment of an independent mediator without placing the entire process under the administration of a mediation institution.

The distinction between institutional and ad hoc mediation is relevant to costs because institutional mediation generally involves administrative charges in addition to the mediator’s professional fee.

Private mediation may involve higher costs than court-annexed mediation, particularly in complex commercial matters where senior mediators or specialists are appointed.

However, private mediation may also provide greater flexibility regarding:

• selection of the mediator;
• timing and location of sessions;
• confidentiality arrangements;
• online or hybrid hearings; and
• procedural organisation.

Unless the parties agree otherwise, the common costs remain equally divided.

Who Pays for Institutional Mediation?

Institutional mediation is administered by a recognised mediation institution or mediation service provider.

The institution may charge administrative fees in addition to the mediator’s professional fee.

Typically, the institution informs the parties about:

• registration or filing charges;
• administrative fees;
• mediator fees;
• advance deposits; and
• additional charges, if any.

The institution may require both sides to make advance payments before the mediator begins substantive work.

Where one party fails to deposit its share, the institutional rules may permit the other party to make the payment so that mediation can continue. Whether that amount can later be recovered depends on the parties’ agreement and the applicable rules.

Does Each Party Pay Its Own Lawyer’s Fees?

Generally, yes.

The cost of mediation and the cost of legal representation are separate.

The mediator’s fee and institutional charges may be shared between the parties, but each party normally pays the fee charged by its own lawyer or legal adviser.

For example, if both parties engage advocates to assist during mediation, each side would ordinarily bear its own advocate’s professional charges.

The same principle commonly applies to consultants, accountants and experts independently appointed by one side.

However, parties may agree in their final settlement that one party will reimburse some or all legal or mediation-related expenses incurred by the other.

Who Pays for Experts and Witnesses in Mediation?

A party that independently engages an expert generally bears the cost of that expert.

For example, a construction dispute may require an engineering expert, while a corporate dispute may involve an accountant or valuation professional.

Where an expert is appointed jointly by both parties, the expenses may be divided equally or according to another agreed formula.

Court mediation rules have also traditionally distinguished common mediation costs from expenses relating to witnesses or experts called by individual parties.

Therefore, equal sharing of the mediator’s fee does not mean that every expense incurred during mediation will necessarily be divided equally.

Are Advance Mediation Fees Required?

Advance payment is common in private and institutional mediation.

A mediator or mediation institution may require the parties to deposit an estimated amount before mediation begins.

The advance may cover:

• the mediator’s expected professional fee;
• institutional administration charges;
• venue costs; and
• other anticipated expenses.

If the mediation lasts longer than expected, additional deposits may be requested.

At the end of the process, the institution may calculate the final amount and either refund any excess deposit or seek payment of the outstanding balance.

Who Pays if Mediation Fails?

The parties usually remain responsible for mediation costs even if no settlement is reached.

A mediator is paid for professional services provided during the mediation process, not only for achieving a successful settlement.

Therefore, failure of mediation does not normally remove the obligation to pay mediator fees or administrative charges already incurred.

For example, if mediation continues for several sessions but ultimately ends without agreement, the mediator is still entitled to payment for the work performed.

The parties would ordinarily bear their respective shares unless a different arrangement applies. Where court-referred mediation fails, the dispute may return to the court or tribunal for adjudication.

Does the Losing Party Pay Mediation Costs?

Mediation does not ordinarily involve a “winning” or “losing” party because the mediator does not decide the dispute.

This is one of the important differences between mediation and arbitration. An arbitrator adjudicates the dispute and renders a decision, whereas a mediator facilitates negotiations without imposing an outcome.

As a result, there is normally no automatic rule that an unsuccessful party must pay the other side’s mediation expenses.

If mediation fails and litigation continues, the court may later deal with costs under the Civil Procedure Code according to the applicable procedural law. However, litigation costs are different from the original arrangement for payment of mediation expenses.

Can Mediation Costs Be Included in the Settlement?

Yes. The parties can deal with mediation costs in the final settlement.

For example, a settlement may provide that:

• each party will bear its own costs;
• one party will reimburse the mediator’s fee paid by the other;
• mediation expenses will be deducted from the settlement amount; or
• one party will bear all costs as part of the negotiated settlement.

This flexibility is one of the practical advantages of mediation.

A successful mediation may result in a mediated settlement agreement recording the terms accepted by the parties.

The final arrangement regarding mediation expenses should be stated clearly so that there is no uncertainty after the settlement is signed.

What Happens if One Party Refuses to Pay Mediation Fees?

The consequences depend on the applicable rules and the stage of mediation.

Where advance deposits are required and one party fails to pay its share, the mediation institution may suspend or discontinue the process.

In some cases, the other party may choose to deposit the unpaid amount to allow mediation to continue.

However, payment by one party on behalf of another does not automatically mean that reimbursement will be available. The issue may need to be addressed in the settlement agreement or under the applicable institutional rules.

A clear cost-sharing agreement at the beginning of mediation can reduce the possibility of such disputes.

Is Mediation Cheaper Than Litigation?

Mediation is generally regarded as a potentially cost-effective method of dispute resolution, although the actual cost depends on the dispute.

Litigation may involve court proceedings lasting several years, repeated legal appearances, documentation expenses, expert evidence and other continuing costs. Mediation, arbitration, conciliation and negotiation form part of the broader framework of alternative dispute resolution.

Mediation may resolve a dispute within a smaller number of sessions, thereby reducing long-term expenditure.

However, mediation is not necessarily inexpensive in every case. High-value commercial disputes involving senior mediators, multiple experts and lengthy negotiations can involve substantial costs.

The important consideration is not merely the mediator’s fee but the overall cost of resolving the dispute.

What Is the Difference Between Common and Individual Mediation Costs?

A useful distinction can be drawn between common mediation costs and individual party expenses.

Common mediation costs generally include:

• mediator fees;
• mediation institution charges;
• jointly agreed venue expenses; and
• expenses of jointly appointed experts.

Individual costs generally include:

• advocate or legal adviser fees;
• travel expenses;
• individually appointed expert fees;
• preparation of documents; and
• costs incurred for witnesses or consultants engaged by one party.

Common costs may be shared equally, while individual costs are usually borne separately.

This means that equal sharing of mediator fees and institutional charges does not necessarily result in both parties spending exactly the same amount on the overall mediation.

Does Section 25 Apply to Community Mediation?

Community mediation is treated separately under the Mediation Act, 2023.

Section 25 distinguishes ordinary mediation costs from community mediation. Community mediation is intended to deal with disputes affecting peace, harmony and tranquillity among residents of a locality or community and operates through a distinct statutory mechanism.

Therefore, the ordinary framework regarding mediator fees and mediation service provider charges under Section 25 should not automatically be applied to community mediation in the same manner as private or institutional mediation.

The Mediation Act, 2023 recognises community mediation as part of the broader statutory framework for mediation in India.

Conclusion

In India, the general rule is that the parties share the cost of mediation equally. Section 25 of the Mediation Act, 2023 expressly provides that mediator fees and charges of the mediation service provider are to be borne equally unless the parties agree otherwise.

However, the final allocation of costs can vary considerably. Private agreements, institutional rules and court directions may determine a different arrangement. Each party also ordinarily bears its own legal fees, expert expenses and individual costs.

Therefore, while equal sharing is the statutory starting point, mediation remains flexible enough to allow the parties to decide who ultimately pays the expenses of resolving their dispute.