The Mediation (Civil and Commercial Disputes) Act, No. 13 of 2026 seeks to make mediation a mainstream route for resolving civil and commercial disputes. This article examines what the new law introduces, how it compares with the mediation regimes of Ireland, India and Hong Kong, and where it could be strengthened.
Civil litigation in Sri Lanka for decades has been criticised for its lengthy timelines and procedural delays. It is no secret that a civil dispute can take years before a final Judgment is delivered. While the justice system is designed to ensure fairness, the reality is that justice delayed often becomes justice denied. Lengthy litigation not only increases legal costs but also discourages individuals and businesses from pursuing legitimate claims, while placing an overwhelming burden on the Courts.
Over the years, successive governments and the Judiciary have introduced several initiatives aimed at reducing these delays. Procedural reforms such as Pre-Trial Conferences under the Civil Procedure Code were intended to narrow issues before Trial and encourage early settlements. Likewise, the establishment of the Small Claims Court sought to provide a quicker and simplified avenue for resolving low-value disputes. Although these initiatives have produced some positive results, the backlog of civil cases remains a persistent concern. The search for an effective mechanism to reduce CCourt congestion therefore continues.
A new framework for civil and commercial disputes
Against this backdrop, Parliament enacted the Mediation (Civil and Commercial Disputes) Act No. 13 of 2026, introducing a new framework for resolving civil and commercial disputes outside the courtroom. The enactment of this legislation reflects a growing recognition that litigation should not always be the default option for dispute resolution. Instead, parties should be encouraged to resolve disputes in a manner that is faster, less expensive and more collaborative.
Alternative Dispute Resolution (ADR) is by no means a new concept. Mechanisms such as Arbitration, Negotiation and Mediation have long been recognised internationally as effective methods of resolving disputes without lengthy Court proceedings. Sri Lanka itself introduced the Mediation Boards Act No. 72 of 1988, establishing mediation boards throughout the country. According to the Ministry of Justice, mediation boards have been established in almost every Divisional Secretariat.
However, despite this extensive network, questions remain regarding their accessibility, efficiency and overall effectiveness. If these boards had been functioning to their fullest potential, the significant backlog of civil litigation would arguably not remain one of the country's greatest Judicial challenges.
The Mediation (Civil and Commercial Disputes) Act No. 13 of 2026 therefore represents a fresh attempt to institutionalise mediation specifically within the sphere of civil and commercial disputes. It also repeals the Commercial Mediation Centre of Sri Lanka Act No. 44 of 2000, replacing it with a broader and more comprehensive legislative framework intended to make mediation a mainstream method of dispute resolution.
The purpose and nature of mediation
The central objective of the Act is straightforward: to encourage disputing parties to settle their disagreements without immediately resorting to litigation. Civil and commercial disputes are often time-consuming, expensive and emotionally draining. Businesses in particular depend on continuing commercial relationships, and lengthy Court battles frequently damage those relationships beyond repair. Mediation offers a practical alternative where parties are encouraged to identify the root cause of the dispute and negotiate mutually acceptable solutions with the assistance of an independent mediator.
Unlike a Judge or an Arbitrator, a Mediator does not impose a binding decision upon the parties. Instead, the Mediator facilitates communication, assists the parties in identifying the real issues in dispute, and encourages constructive dialogue. Ultimately, any settlement reached is entirely voluntary and is based on the mutual agreement of the parties rather than a decision imposed by a third party. This collaborative nature of mediation distinguishes it from litigation and enables parties to preserve both personal and commercial relationships.
Key strengths of the new Act
One of the strongest features of the new Act is the emphasis placed upon confidentiality. Information disclosed during mediation is generally protected from disclosure in subsequent legal proceedings. This protection allows parties to negotiate openly without fear that admissions or settlement proposals may later be used against them before a Court. Such confidentiality is one of the cornerstones of successful mediation because meaningful negotiations can only occur where parties have confidence that discussions remain private.
Another noteworthy feature of the legislation is its mechanism for enforcing settlement agreements. While any party to a settlement agreement may apply to the High Court to have the mediated settlement recognised as an order of court, the Act also provides that a settlement agreement is binding between the parties and enforceable in law as a valid contract even without such an application. A party’s rights are therefore not affected by whether or not that application is made.
Where the Act falls short
While these features undoubtedly strengthen Sri Lanka's ADR landscape, the legislation is not without shortcomings. A comparison with jurisdictions that have successfully integrated mediation into their justice systems demonstrates that there remains considerable room for improvement.
Enforcement remains heavily procedural
One of the first concerns relates to the mechanism for obtaining a Court decree. While a mediated Settlement Agreement is binding between the parties and enforceable in law as a valid contract without any application to court, the Act also provides an optional pathway for a settlement to be entered as a decree of the High Court, which then enjoys direct execution in the same manner as a decree under the Civil Procedure Code. That pathway, however, is comparatively procedural: a party must apply to the High Court within twelve months of the Settlement Agreement, by way of petition and affidavit with notice to the other, supported by the agreement duly signed and attested by the mediator or the relevant Mediation Service Provider. While such safeguards help ensure the integrity of settlements, a party seeking the security of a directly executable Court decree, rather than relying on the contractual remedy, must navigate this more formal process — which may be less attractive in commercial contexts that require swift and low-cost implementation.
Ireland offers an instructive comparison. Under the Mediation Act 2017, a mediated settlement operates primarily as a contract between the parties, with judicial intervention generally arising only where enforcement becomes necessary or where the Court is asked to consider the validity or fairness of the agreement.
Sri Lanka's framework is, in substance, similar at the contractual level, since a settlement is enforceable as a contract in both jurisdictions; the distinction lies in the additional, more formal decree procedure that Sri Lankan parties may invoke to secure direct enforceability as an Order of Court.
No general timeline for mediation
A second issue concerns the absence of a general statutory time limit for voluntary or agreement-based mediations. The very purpose of mediation is to offer a quicker alternative to litigation. The Act, however, does not prescribe any period within which a voluntary or agreement-based mediation must be concluded; it sets a default period only for court-referred mediations, where the Mediation Service Provider must have the mediation concluded within sixty (60) days from the date of receipt of the Order of Court. The most the Act does for voluntary mediations is to permit the parties to stipulate a time period in their mediation agreement — leaving the question of duration entirely to private agreement rather than any statutory backstop.
India adopts a different approach under the Mediation Act, 2023. The Act provides that mediation proceedings must be completed within 120 days from the date fixed for the first appearance before the Mediator, extendable by a further period, not exceeding 60 days, where the parties mutually agree. This statutory timeline reinforces the objective of mediation as a speedy dispute-resolution mechanism and guards against unnecessary delay within the mediation process itself.
Sri Lanka's legislation contains no comparable provisions. While flexibility may be valuable where disputes are especially complex, the absence of any statutory timeframe for voluntary mediations leaves the duration of the process uncertain and dependent on the diligence of the parties and the Mediator. A process designed to reduce delay may, paradoxically, become protracted unless proceedings are actively managed.
The Certificate of Non-Settlement as a Gateway to Litigation
The gateway to litigation presents another area that deserves closer consideration. Under the Sri Lankan framework, where the parties have agreed to mediate, no proceedings in respect of that dispute may be instituted in, or entertained by, a Court unless a certificate of non-settlement is produced, confirming that mediation was attempted and a settlement was not reached. While this ensures that mediation is genuinely attempted before a party turns to the courts, it also creates the possibility of a procedural bottleneck: if the mediation stalls, or the issuing of the certificate is delayed, a party's access to the Court may be held up.
Ireland adopts a more flexible model. Rather than making a certificate a precondition to litigation, Irish Courts encourage mediation while retaining discretion over case management: parties are steered towards mediation through judicial encouragement and potential adverse costs consequences for an unreasonable refusal, rather than through a mandatory procedural gateway. Such an approach arguably preserves the voluntary character of mediation while avoiding the delay that can arise where access to the Court is made contingent on a certificate.
Regulating Mediation Service Providers
Perhaps the most significant lacuna in the new legislation concerns the regulation of Mediation Service Providers. The Act recognises MSPs as the institutions responsible for administering mediation, and each MSP to adopt rules for the conduct of mediations and a code of ethics for mediators, failing which it may not administer mediation services. What the Act does not do, however, is establish any external framework for their accreditation, supervision or accountability. Standard-setting is left to each MSP individually: there is no independent national body responsible for accrediting or supervising MSPs, maintaining uniform standards, overseeing professional ethics, or ensuring the continuing professional development of mediators.
India has addressed this far more comprehensively. The Mediation Act 2023 of India establishes the Mediation Council of India, whose functions include registering mediators and recognising and grading mediation service providers and institutes. Chapter IX then governs Mediation Service Providers: a provider is recognised only where it falls within a designated category — a body or organisation recognised by the Council, an authority under the Legal Services Authorities Act 1987, a court-annexed mediation centre, or another notified body — and its statutory functions include maintaining a panel of accredited mediators, appointing mediators, providing administrative facilities and infrastructure, promoting professional and ethical conduct, and facilitating the registration of mediated settlement agreements. This layered structure of a central regulator overseeing recognised providers underpins consistency, accountability and public confidence.
Hong Kong illustrates that comparable ends can be pursued by a very different route. Its Mediation Ordinance, in force since 2013, deliberately adopts a light-touch approach: it provides a framework for the conduct and confidentiality of mediation but does not establish a statutory regulator or a mandatory accreditation regime. Instead, standards are maintained by industry-led bodies — principally the Hong Kong Mediation Accreditation Association Limited (HKMAAL) — supported by institutions such as the Hong Kong International Arbitration Centre and by the Department of Justice's long-standing "Mediate First" initiative, which together have fostered a culture in which mediation is regarded as an integral part of dispute resolution rather than a mere alternative.
The contrast for Sri Lanka is instructive: it has established neither a statutory regulator, as India has, nor — as yet — the mature institutional ecosystem on which the Hong Kong model depends, leaving no mechanism to ensure consistent standards across Mediation Service Providers.
A further strength: suspension of prescription
Another commendable feature of the Sri Lankan Act is the suspension of prescription during mediation. Parties should not be discouraged from attempting settlement merely because limitation periods continue to run while negotiations are ongoing. By suspending prescription during mediation, the Act protects parties from losing their legal rights solely because they attempted to resolve their disputes amicably. This reflects international best practice and encourages genuine participation in mediation without fear of procedural prejudice.
Weak cost consequences
Nevertheless, the legislation remains comparatively weak regarding cost consequences. The Act merely provides that a Court shall take into account an unreasonable refusal to participate in mediation when making orders relating to costs. While this is a positive step, the provision remains largely discretionary and lacks significant deterrent value.
Nevertheless, the legislation remains comparatively weak on cost consequences. Under the Act, a Court, when awarding costs in a civil or commercial matter, must take into account whether a party has unreasonably refused to participate in mediation. The obligation to consider the refusal is mandatory, but the consequence is left wholly to the Court's discretion: the Act prescribes no presumptive sanction, and its practical deterrent value is correspondingly limited.
Ireland offers an instructive comparison — though the difference lies less in the width of the costs power than in the architecture surrounding it. In bare terms, the Irish provision is similar, a Court may, where it considers it just, have regard to a party's unreasonable refusal to consider or attend mediation when awarding costs. What gives that provision force is its statutory setting. The Act obliges a solicitor, before issuing proceedings, to advise the client to consider mediation and to swear a statutory declaration confirming that this was done, failing which the Court may adjourn the proceedings. The costs consequence can operate even against a wholly successful party, and the courts have begun to apply it in practice.
By contrast, Sri Lanka's provision stands largely alone, without a comparable pre-action advice-and-declaration regime or an established costs practice, so litigants may disregard mediation with little practical financial consequence — limiting the legislation's effectiveness.
Conclusion: a welcome first step
Despite these shortcomings, the enactment of the Mediation (Civil and Commercial Disputes) Act No. 13 of 2026 is a welcome development for the legal profession. It represents an important shift in the country's approach to dispute resolution. Rather than treating litigation as the primary solution to every civil dispute, the legislation recognises that many conflicts can be resolved more efficiently through dialogue, negotiation and compromise.
Legislation alone, however, will not transform Sri Lanka's dispute resolution culture. Public awareness, judicial support, properly trained mediators and credible institutional oversight will ultimately determine whether the Act achieves its objectives. Future reforms should consider introducing reasonable statutory timelines for voluntary mediations, establishing a national accreditation and regulatory body for Mediation Service Providers, streamlining the procedure for entering mediated settlements as orders of court, and strengthening cost sanctions against parties who unreasonably refuse mediation.
Sri Lanka has taken an important first step towards modernising its civil justice system. The challenge now lies in ensuring that this framework evolves into a practical, efficient and trusted mechanism capable of reducing Court delays while delivering meaningful access to justice. If implemented effectively and supported by further institutional reforms, mediation has the potential not merely to supplement litigation, but to reshape the way civil and commercial disputes are resolved in Sri Lanka.