Mediation in Hong Kong Civil Cases: Practice Direction 31 and the Cost of Saying No

There is a moment in every Hong Kong writ action when the court stops asking who is right and starts asking a different question: what have you done to settle this? Since 2010 that question has been institutional, not rhetorical. It arrives in prescribed forms with capital letters — the Mediation Certificate, the Mediation Notice, the Mediation Response — and it carries a sting in its tail. A party who unreasonably refuses to mediate can win at trial and still be punished in costs.

Most litigants meet this system mid-stream, when their solicitor slides a certificate across the table for signature, or when the other side serves a Mediation Notice and a 14-day clock starts running. Self-represented parties often meet it later and harder, when a judge asks why no mediation was attempted and the honest answer is not a good one.

This guide explains how mediation is wired into Hong Kong civil procedure: what Practice Direction 31 actually requires, how much participation is enough, what an unreasonable refusal can cost, how the Mediation Ordinance (Cap. 620) keeps the process confidential, what happens in the room, and the situations in which mediation is the wrong move.

Why Hong Kong pushes mediation so hard

The Civil Justice Reform of April 2009 rebuilt Hong Kong civil procedure around a set of underlying objectives, and one of them is the facilitation of settlement. Mediation is the machinery constructed for that objective. Practice Direction 31, which took effect on 1 January 2010, applies to civil proceedings in the Court of First Instance and the District Court begun by writ — that is, most contested civil litigation of any size. Specialist lists such as construction and personal injuries have their own mediation arrangements, but the philosophy is uniform: settlement is not a private afterthought, it is part of the court's management of the case.

Two things PD 31 does not do. It does not make mediation compulsory: mediation in Hong Kong remains a voluntary process, and no court will force you to settle. And it does not let the judge see inside the mediation itself: what is said in the room stays in the room, as explained below. What it does instead is subtler and more effective. It requires the parties to confront the question of mediation on the record, early, in writing — and it arms the court with costs consequences against a party whose refusal to engage was unreasonable. You are free to say no. You are not free to say no carelessly.

The paperwork: certificate, notice, response

The Mediation Certificate

Where a party has solicitors, they must certify that the client has been advised about mediation — what it is, how it works, and the costs risk of an unreasonable refusal — and the party states on the certificate whether it is willing to attempt mediation. The certificate is filed at the case-management stage of the action, alongside the timetabling questionnaire, once the pleadings have closed. (If you are still at the earlier stage of answering the claim itself, see our guide to filing a defence in Hong Kong.) Certifying that you are unwilling to mediate is permitted; it simply means your stated reasons had better survive scrutiny when costs are decided at the end.

The Mediation Notice

A party who wants to mediate serves a Mediation Notice on the other side. It is a short, structured document: it proposes the rules under which the mediation will run, a mediator or the body that will appoint one, a timeframe, and the minimum level of participation the serving party proposes. Self-represented litigants can serve one too, and against a represented opponent it is often a shrewd early move — it puts the other side's willingness to engage squarely on the record.

The Mediation Response

The recipient must answer with a Mediation Response within 14 days, agreeing or counter-proposing on each point: yes to mediation but a different mediator; yes, but after discovery; no, for stated reasons. Silence, or a bare refusal without reasons, is dangerous. Where the parties reach agreement on the arrangements, they record it in a Mediation Minute. Where they cannot agree, the court can give directions at a case management conference — and it will remember, when costs fall to be decided, who was dragging their feet.

How much is enough? The minimum level of participation

The most practical concept in PD 31 is the minimum level of participation. The direction does not fix it in the abstract: it is set case by case, either by agreement between the parties or by direction of the court. In practice it is usually expressed as agreeing a mediator and attending at least one substantive mediation session — a real negotiating session, not merely a preliminary meeting about logistics.

The concept exists to separate genuine engagement from theatre, in both directions. A party who participates up to the agreed minimum level and then walks away without settling is protected: the mediation failed, but the attempt was real, and nobody is punished for declining a bad deal. Conversely, a party who technically attends but sends someone with no authority to settle, or sits through the opening session and refuses to negotiate at all, is courting a finding that its participation was not genuine. The safe course is unglamorous: turn up, with authority, prepared, and negotiate in good faith for at least the agreed session.

The cost of saying no

Costs in Hong Kong litigation ordinarily follow the event — the loser pays most of the winner's assessed bill (our guide to costs orders covers the general machinery). PD 31 adds a proviso: the court may take an unreasonable refusal to mediate, or unreasonably minimal participation, into account when exercising its discretion on costs. The paradigm sanction lands on a winner. A plaintiff who succeeds at trial but refused mediation without good reason may recover only part of its costs, or be deprived of costs for the period after the refusal.

The leading Hong Kong authority is Golden Eagle International (Group) Ltd v GR Investment Holdings Ltd [2010] 3 HKLRD 273, which adopted the approach of the English Court of Appeal in Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576: an unreasonable failure to engage with mediation can be reflected in the costs order, even against a party who has won. The factors a Hong Kong court weighs are broadly the Halsey factors: the nature of the dispute, the merits, whether other settlement methods were attempted, whether mediation had a reasonable prospect of success, and the cost and delay a mediation would have involved.

PD 31 builds in two safety valves. A party is not at risk if it has participated up to the minimum level of participation. And a party with a reasonable explanation for not mediating is protected — the classic example being parties already engaged in active, genuine settlement negotiations by another route. But that shelter is temporary: if those negotiations collapse, the expectation of mediation revives. A well-judged Calderbank offer or sanctioned offer is powerful costs protection in its own right, but it is a complement to mediation, not a substitute for answering a Mediation Notice properly.

Two cautions complete the picture. First, reasonableness is judged at the time of the refusal, not with hindsight: a party who reasonably believed mediation was hopeless — say, because the opponent's position was total capitulation or nothing — can defend its refusal. Second, the court decides all of this without ever seeing the mediation itself. What it sees is the certificates, the notices, the responses, and the open correspondence around them. That paper trail is the whole game; build it as events happen, not after judgment.

Confidential twice over: Cap. 620 and without prejudice

Mediation only works if the parties can speak freely — float numbers, concede weaknesses, apologise — without handing the other side ammunition for trial. Hong Kong protects that candour in two layers.

The first layer is the common-law without-prejudice rule: communications made in a genuine attempt to settle a dispute cannot generally be put before the court as admissions. Mediation is settlement negotiation in concentrated form, so the rule covers substantially everything said and produced in it. We have a full guide to without-prejudice communications, including the narrow exceptions where the cloak comes off.

The second layer is statutory. The Mediation Ordinance (Cap. 620), in force since 2013, defines mediation as a structured process in which an impartial third party helps the parties negotiate, and makes mediation communications confidential — not merely inadmissible between the parties, but protected against disclosure to the outside world, subject to limited exceptions (such as the consent of the parties concerned or disclosure required by law) and, for use in court proceedings, the court's leave. The protection extends to what is said to and by the mediator. The short point for a worried commercial party: Hong Kong law takes the confidentiality of the room unusually seriously.

One boundary is worth marking. The content of the mediation is confidential; the fact of it is not. PD 31 expressly contemplates the court being told whether a mediation happened and whether a party participated to the minimum level, because the costs jurisdiction depends on knowing that much. You cannot hide a refusal behind confidentiality.

Choosing and paying a mediator

Hong Kong mediators are accredited principally through the Hong Kong Mediation Accreditation Association Limited (HKMAAL), and parties typically choose from panels maintained by bodies such as the Hong Kong International Arbitration Centre, the Hong Kong Mediation Council, the Law Society and the Bar Association. Many accredited mediators are solicitors or barristers; others come from accountancy, construction or other fields, which matters when the dispute is technical. The parties are free to agree on anyone suitably qualified, and it is legitimate to review candidates' experience before agreeing. For smaller disputes, the Joint Mediation Helpline Office runs a referral service matching parties with a mediator at modest cost.

The money works like this: the mediator charges by the hour or by the session, the parties normally share that fee equally unless they agree otherwise, and each side bears its own preparation costs, all recorded in a mediation agreement signed before the session begins. For a typical commercial dispute, a full-day mediation costs each party a small fraction of what a trial — or even a single heavyweight interlocutory application — would cost. That arithmetic, as much as any practice direction, is why the courts expect parties to try.

What actually happens in the room

Most Hong Kong civil mediations are listed for a day or half a day. The shape is fairly standard. The parties sign the mediation agreement, then meet in a joint opening session at which the mediator explains the ground rules and each side states its position briefly. The parties then separate into private rooms, and the mediator shuttles between them — testing each side's case in private, probing what each party actually needs as opposed to what it has pleaded, and carrying offers back and forth. Nothing said to the mediator in a private session is repeated to the other room without permission.

The mediator is not a judge. He or she decides nothing, imposes nothing, and — in the facilitative style that predominates in Hong Kong — will usually not even express a view on the merits. The pressure in the room comes from reality, not authority: questions about what trial will cost, how long it will take, and what the documents actually show. Preparation follows from that: a short position paper, the key documents, your realistic best and worst outcomes at trial, your costs to date and projected to judgment — and above all, a person with authority to conclude a settlement on the spot. Mediations fail more often from absent decision-makers than from absent arguments.

If you settle: the agreement and enforcing it

A settlement reached at mediation is a contract, and standard mediation agreements provide that no settlement is binding until reduced to writing and signed. Take that seriously: draft and sign the settlement agreement before anyone leaves the building, however late the hour. Deals that are left to be papered next week have a way of shrinking overnight.

Where proceedings are already on foot, the settlement is usually embodied in a consent order — commonly an order staying the proceedings on agreed terms, with the terms themselves in a confidential schedule — so that if one party defaults, the other can enforce in the existing action rather than start fresh litigation. A settlement agreement standing alone is still enforceable, but only by a new action for breach of contract. The difference matters when performance is in doubt, so choose the mechanics deliberately.

When mediation is the wrong move

Mediation is a tool, not a sacrament, and there are cases where reaching for it first is a mistake:

Urgent relief. If assets are about to vanish or a wrong is ongoing, you need an injunction, not a joint opening session. Secure the position first; mediate afterwards, often from a much stronger seat.
Pure points of law. Where the whole dispute turns on the construction of a clause or a question of law, and one side needs an authoritative ruling — because the same issue will recur across other contracts or counterparties — a judgment may be the only product worth having.
Fraud and dishonesty. Where the core issue is whether someone lied, credibility must be tested in a witness box, and a compromise can feel like — and function as — a licence. Many fraud cases still settle, but usually only after disclosure shifts the balance of fear.
Limitation about to expire. Mediation does not stop the limitation clock. If a deadline is close, issue protective proceedings first and mediate afterwards; a claim lost to time cannot be revived by goodwill.
Mediation as a delaying tactic. Some opponents propose mediation to buy time or to fish for your evidence. The answer is rarely outright refusal — that plays into the costs trap — but engagement on a tight timetable, with your disclosure guarded and the litigation still moving.

Even in these cases, note the pattern: the sensible response is almost never a flat, reasonless no. It is a reasoned no-for-now, in writing, that a costs judge will later read with sympathy.

The audit-trail mindset

The way to work with PD 31 is to treat it not as a hoop but as an audit trail. At every stage, imagine a future judge reading the file with the costs order in hand. Propose mediation early and in writing. Answer any Mediation Notice within the 14 days, constructively. If you decline, decline for reasons that will read well in two years' time; if you attend, attend with authority and negotiate as if you mean it. The parties who get hurt by this regime are almost never the ones who mediated and failed. They are the ones who never properly engaged at all.

This article is published by CommonBench for informational purposes only and does not constitute legal advice. If you are deciding whether to serve a Mediation Notice, how to answer one, or whether refusing mediation will cost you at the end of your Hong Kong case, try CommonBench — AI-powered legal research with verified citations across five common law jurisdictions.