A new Mediation Law for smarter dispute resolution of civil and commercial disputes

The Mediation (Civil and Commercial Disputes) Bill  was passed by the Parliament on 11 June 2026.  Justice and National Integration Minister Harshana  Nanayakkara introduced the Bill, and explained its provisions and value for Sri Lanka and global developments in the use of mediation. Encouragingly, it was passed unanimously.  

Sri Lanka’s commitment to provide legislative support for the use of mediation is timely and most welcome. Given that the backlog of cases pending before courts is over a staggering 1.1 million, it is clear that Sri Lanka is yet another country that remains challenged to find responses to make  dispute resolution more efficient. The impact of laws delays is serious and damaging not only to the disputants personally, but also for businesses and the economic development of the country. The delays in concluding cases impacts the economy adversely both directly and indirectly,  but are often seen only as an access to Justice concern. This is unfortunate. In many jurisdictions across the globe, alternative dispute resolution processes (ADR) such as mediation, have been introduced to alleviate laws delays. While Sri Lanka enacted legislation (1988) to provide for mediation in respect of minor community disputes of a low monetary threshold, the enactment of the new law heralds a commitment to provide for the recognition of a disciplined regime for its use for higher value civil and commercial disputes.  

The new law provides for the recognition of mediation as a dispute resolution option that can be voluntarily selected by parties, and for a governance regime to ensure that mediations are conducted in compliance with globally accepted standards. It provides statutory recognition to the principle that a mediated settlement agreement that has been signed by the disputants, is valid in law. It does not provide for any management control by Government or establish entities. The law  provides that a  court can refer disputes to mediation, at its discretion, on a consideration of all  circumstances and if considered appropriate, sans any compulsion on the parties to settle against their will. The law sets out the obligations of Mediators, disputants and the Service Provider. It provides that certain categories of disputes cannot be settled by mediation conclusively. These are disputes the settlement of which requires the inclusion of terms that can be given effect to, only on a decree of court, such as the termination of a marriage or a declaration of nullity of marriage or the adoption of a child or the partition of land to obtain rights in rem.  A schedule sets out eleven (11) categories of actions that cannot be settled by mediation. However,  matters relevant to such disputes may be mediated for the purpose of submitting terms of settlement to court for consideration of incorporation in a judgement, decree or order in compliance with applicable law.

The new law also provides that, in a mediation, certain  key principles of the process must be complied with, including confidentiality and the without prejudice rule in respect of matters discussed at the mediation; the  neutrality and impartiality of the Mediator; the party centric nature of the process that provides primacy to the wishes of the disputants including that it is they that determine the outcome and that a settlement is reached only if all disputants agree to the terms ; the non-coercive role of the mediator who’s duty is to facilitate and manage the process using mediation specific skills and techniques, but is debarred from imposing a decision. Although a settlement agreement is valid in law, provision is included to obtain a decree of court based on the terms of the settlement. A mediated settlement agreement can be set aside on an application made to court, on specific limited grounds which are provided for, including that it is offensive to the public policy of the country. The provisions of the law are based on international best practices and principles articulated in the 1988 UN Mediation Convention  (the Singapore Convention) and the UNCITRAL model law. 

The popularity of mediation has grown for its value in being time efficient, cost effective and party centric. Parties have control over the outcome and have the space to discuss their concerns, fears and interests and need never agree to settle unless fully satisfied that settlement terms address their interests. Disputants are free to walk out of a mediation process at any time, if dissatisfied with the progress. The discussions are confidential and a valuable feature is that the process offers opportunity to reduce acrimony which is prevalent in most disputes, and to restore fractured relationships which is very important in family  and  business related disputes. This benefit and the prospects for Governments to reduce the cost of the administration of justice by using mediation,  is articulated in the preamble to the 2018 UN Convention on International Settlement Agreements Resulting from Mediation (2018) which states that the use of mediation results in significant benefits. 

Pursuant to the interest generated within the country regarding the value of using Mediation for commercial dispute resolution, and heralding what we like to see as the initial steps of a Mediation boom in the country, several positive advancements have taken place -

• Parties have opted to include mediation in the dispute resolution clause in contracts. The  dispute resolution clause can adopt one of several designs for out of court resolution of conflicts arising from a contract, such as  mediation or arbitration or a hybrid or tiered processes (eg. Med-Arb ; Arb-Med-Arb) that entrench the use of one or a combination of these processes;
• The interest in undertaking mediation training. Given that mediating disputes requires  very specialised techniques and skills, many professionals including predominantly Lawyers, have engaged in training programs offered by international training bodies that offer accreditation;
• Trained Mediators are engaged in an effort to form themselves as a professional Organisation;
• Mediation  Advocacy training programs have been held to train Lawyers on their niche role in the mediation process. That role is distinctly different to that of a court Lawyer who’s obligations are centered on an adversarial approach where the dispute is adjudicated in terms of the law alone.  Hence lawyers need training to be useful within a non-adversarial process which is party centric and has a focus on reaching a settlement based on the interests of disputants. 
• Sri Lanka enacted the Recognition and Enforcement of International Mediated Settlement Agreements Act No. 5 of 2024 (the UN Mediation Convention Act) and ratified the Convention becoming the 14th country to do so. Sri Lanka will be seen as an investor friendly country in respect of dispute resolution where mediation is used, since it offers an enforcement regime which is recognised universally.
•  The landmark determination of the Supreme Court (SC SD 22 of 2025) in the challenge by the Bar Association to the constitutionality of the Mediation (Civil and commercial Disputes) Bill, found that none of the provisions of the Bill were unconstitutional and gave a judicial sign off to statutory provisions that seek to ensure that mediation services are provided in this country, in a disciplined manner in compliance with universally accepted standards. 
•  Perhaps inspired by the statutory obligation imposed on judges to attempt pre-trial settlement of disputes, in terms of the Small Claims Court Act and the Small Claims Court Procedure Act (both of 2022) and the  the Civil Procedure Code provisions on Pre- trial Conference and Pre-trial Orders, 125 District Judges were recently trained (with support from the ADB) in Mediation. The training provided a dual benefit – it provided training in  skills that are required to settle disputes and equally importantly, provided a comprehensive understanding of how mediation will function when judges themselves refer disputes for settlement by private mediators.
•  Trained Mediators are already conducting mediations with success.
•  A not for profit guarantee company, the International ADR Center - www.iadrc.lk ) was established in 2018  as a joint venture of the Ceylon Chamber of Commerce and the Institute for the Development of Commercial Law & Practice (ICLP) to promote ADR and is actively engaged in promoting mediation through training, disseminating information and creating awareness among stake holders including the business sector.   In addition to the International ADR Center, “Udecide”  is a project that promotes training of mediators and other activities that enrich the mediation culture.  
• Commercial Mediation has been included in the Masters level program at the Colombo University;
• The Sri Lanka Law College offers a component on Mediation in the Post Attorney Diploma program, that commenced recently.  

The private sector was actively engaged in the drafting of the  Mediation Bill under the leadership of the International ADR Center, which held many stakeholder consultations to obtain feed back from those that were conversant with the subject. The Center had previously assisted Government to draft the UN Mediation Convention Act (Act No. 5 of 2024). 

Several international organisations that previously provided for resolution of disputes by arbitration, have provided for institutional rules to provide mediation services. These include WIPO and the ICC. Specifically in relation to Investor State dispute resolution (ISDR), the  International Bar Association (IBA) adopted its  Mediation  Rules in 2012 and ICSID (of the World Bank group) adopted its Mediation Rules in 2022.  UNCITRAL  which is currently working on reforming  ISDR, promotes mediation, observing that the use of mediation could reduce the costs of ISDS and also preserve relationships between the investor and the State. UNCITRAL has formulated provisions on and Guidelines for, Mediation for investor state dispute resolution.

An examination of how some of the other countries have institutionalised mediation to address the problem of laws delays shows that an array of institutional devices have been adopted to provide for mediation not only as a voluntary option but also in some jurisdictions, as a mandatory requirement prior to litigation, to respond to serious issues of delays due to congestion in courts.

In the UK, in March 1994 the Lord Chancellor commissioned Lord  Woolf to review the Rules of civil procedure with a view to improving access to Justice, reducing the cost of litigation and removing unnecessary complexity. The resulting  Access to Justice Report (1996) triggered a series of reforms to improve the civil justice system primarily through the ciivl procedure rules (1999) which articulated that its overriding objective is to enable the court to deal with cases justly and at proportionate cost. In 2023, the Court of Appeal judgment in Churchill v. Merthyr Tydfil County Borough Council [2023] EWCA Civ  1416, decided that English courts do have the power to stay civil proceedings for, or order, parties to engage in mediation or another non-court- based dispute resolution process. The Rules were thereafter amended in 2024 to provide for the use of alternative dispute resolution (ADR) more proactively. These included rules that recognised that - 

• promoting  or using ADR is a means of achieving the overriding objective;
• the court has a duty to actively manage cases to further the overriding objective, including by ‘ordering or encouraging the parties to use, and facilitating the use of, alternative dispute resolution’ and ‘helping the parties to settle the whole or part of the case’ ;
• in deciding a costs order, a court will have regard to all the circumstances of the case, including the conduct of the parties, including whether a party failed to comply with an order for ADR or unreasonably failed to engage in ADR.

An ADR pledge made by the UK Government in 2001 was renewed in 2011, by the Dispute Resolution Commitment (DRC) requiring departments to use mediation, arbitration and conciliation. At that time, the then Justice Minister Jonathan Djanogly said: ‘I believe that Government should be leading by example by resolving issues away from court using alternatives which are usually quicker, cheaper and provide better outcomes. We want people to see court as a last resort rather than a first option, and cut down on the amount of unnecessary, expensive, painful and confrontational litigation in our society. In many cases methods like mediation are simply a common sense solution which benefits everyone involved. Although they will not be suitable in every case, they are already saving taxpayers millions every year and can save much more.’

The judicial dicta on the power of the courts to order mediation and the imposition of costs on even a successful party for unreasonable refusal to mediate, provides clear acceptance of a pro mediation approach by the UK courts. 

The Indian Mediation Act, 2023  articulates a pro mediation policy and provides for mediation via a court annexed scheme for which detailed statutory provisions are included. The Act states that parties may voluntarily, and whether there is a mediation agreement or not, take steps to pursue court annexed pre litigation mediation and provides for the steps to be taken therefor (section 5). The Act provides further that, even if such pre litigation mediation is unsuccessful, a court or tribunal may, at any stage of the proceedings, refer parties to undertake mediation and that when a court so refers a dispute, there is no obligation on the parties to come to a settlement (section 7). In respect of high value commercial disputes however,  a plaintiff is required to exhaust ‘the remedy of  pre institution mediation’ prior to instituting action, unless urgent interim relief is sought – section 12A introduced by the Commercial Courts, Commercial Division, and Commercial Appellate Division of High Courts (Amendment) Act, No. 28 of 2018.

Singapore has emerged as a global leader in the practice of mediation. The Mediation Act 2017 provides for a framework for the use of mediation and for enforcement of a mediated settlement agreement as a decree  of court. Mediation is well entrenched in the legal system of Singapore and enjoys the support of Government as well as the judiciary. Singapore played a key role in UNCITRAL in the deliberations that led to the drafting of the text for the 1998 UN  Mediation Convention and was host to the Convention signing ceremony in August 1999 where a historical number of 46 countries, including Sri Lanka, signed the Convention on the very first day. Many of the training programs for Sri Lankans that have been arranged by the International ADR Center, have been conducted by the Singapore International Mediation Centre (SIMC) which is renowned for its programs and for services to handle international commercial disputes. 

It is clear therefore, that jurisdictions around the world, irrespective of the legal system, have sought to recognise mediation for its value not only for minor community dispute resolution but also for the resolution of high value commercial and other family and civil dispute resolution.  UNCITRALs preparation of the text for the 1988 UN Mediation Convention was inspired by the significant increase in the use of mediation in international trade and the need for a uniform regime for enforcement, such as the UN NY Arbitration Convention provides in respect of arbitration awards. 

 Sri Lanka’s advancements have thus far been driven by the private sector. A holistic approach to find responses to the backlog in courts to relieve the pressure on courts, is desired. The promotion  of ADR including mediation, deserves support from the Government as well, since, clearly, laws delays has an adverse impact on the economy of the country and should not be seen only as an access to justice issue. As articulated in the UN Mediation Convention, among the positive beneficial results of using mediation for dispute resolution, is that there are cost savings for the State. It is a means of resolving disputes without detracting from the quality of the resolution. 

(The author is  an Attorney at Law; former Secretary to the Ministry of Justice; Director and Secretary General of the International ADR Centre)