Since the publication of the Robert Francis report into the Mid Staffordshire Hospital in February, there has been a lot of discussion about the need for a culture of openness, transparency and candour in healthcare services.

On 14 March we specifically reported on the specific issue of so called ‘gagging clauses’ in agreements between staff and NHS Trust, which were seen to prevent individuals from raising concerns about patient safety.

A second issue which has arisen, and ties in with the ‘gagging issue’, is the use of judicial mediation to facilitate settlement of claims brought against NHS Trusts.  In fact, Gary Walker (former chief executive of United Lincolnshire Hospitals Trust (ULHT)), who has infamously broken a so called ‘gag’ to speak about his 2010 dismissal, had his case dealt with through judicial mediation.

In brief, judicial mediation is a form of mediation facilitated by a trained employment judge, to try and settle an Employment Tribunal case, without the need to proceed to a substantive hearing.

Until now, the accepted position had been that any ‘settlement’ sums agreed between parties (of whom one was an NHS Trust) at a Judicial Mediation did not need to be approved by the Department of Health or HM Treasury.  This therefore acted as an exception to the general rule, which was that all settlement sums (or, more appropriately, ‘severance payments’) could not be paid out to employees, unless and until approval had been sought from the relevant bodies.

Yesterday, a note was been received from HM Treasury making it clear that judicial mediation is considered another form of mediation procedure and that, as a result, remains non contractual.  Importantly, therefore, they have made it clear that any sums agreed in settlement between parties at a judicial mediation now require Treasury approval.

This advice is applicable to Foundation Trusts, NHS Trusts, PCTs, CCGs , SHAs and Special Health Authorities.

They have also confirmed that any settlements signed since 11 March 2013 will need retrospective approval by the Treasury.

In terms of practical steps as a result of yesterday’s announcement, it does not prevent judicial mediation from being used as a way of settling claims and avoiding the costly process of continuing to a substantive hearing.  In a number of cases this is a commercially sensible way to proceed.  However, what it does mean is that NHS Trusts and other bodies seeking to pursue judicial mediation will find themselves subject to the same rigorous approval processes as if they were seeking to settle a claim outside of this process.  It therefore causes a question mark to be raised over the benefits to NHS organisations of utilising this process, bearing in mind the same potential outcome can be secured by straightforward (and cheaper) negotiation discussions between the parties, away from the Employment Tribunals.