Bound by mediation clause?

Mediation voluntary?

The Supreme Court ruled in a decision in 2006 that, given the nature of the mediation remedy, both parties are free at any time to withhold their cooperation or terminate it for reasons of their own. In light of that ruling, it was assumed for years by most authors and also by courts and tribunals that a mediation provision was unenforceable.

New developments in mediation

The case the Supreme Court considered at the beginning of the summer concerned the setting aside of an arbitral award, on which the Court of Appeal of The Hague had previously ruled. The case involved a share sale between two professional parties called [PPSB] and [CWS]. The mediation clause in question read as follows:  

"(...) Any disputes between the parties arising out of this agreement will be resolved by the parties in the first instance through mediation. Should the parties be unable to resolve such disputes in this manner, they will be submitted to arbitration (by a single arbitrator) to the exclusion of the ordinary courts, unless the interim relief judge in case of urgent interest."

PPSB requests the interim relief judge to appoint an arbitrator, with the defendant CSW invoking the mediation clause and arguing that PPSB should first attempt to resolve the dispute through mediation. The interim relief judge rejected the defence and appointed an arbitrator. Also in the arbitration, CSW argues that the arbitrator lacks jurisdiction. The arbitrator does consider himself competent after which CSW starts annulment proceedings of the arbitral interim and final awards, again relying on the mediation clause in question and the defense that mediation should have been tried first and the arbitrator was incompetent (at least until the end of the mediation). The Court of Appeal of The Hague interpreted the mediation clause using the well-known Haviltex standard: what meaning could those parties reasonably attribute to the clause in the given circumstances?  

Judgment of the Hague Court of Appeal

The Court of Appeal held that - also given the generally voluntary nature of mediation - PPSB was reasonably entitled to construe the arbitration clause as not containing a binding obligation to try mediation. The point of view here is that the dispute resolution clause was drafted unilaterally by CSW and not jointly by the parties.

Supreme Court

The case then comes before the Supreme Court. Which then considers in its ruling of 12 July 2024 that a mediation clause can be mandatory or non-compulsory. The voluntary nature of mediation does not generally prevent a mediation clause from being mandatory. The character (mandatory or not) and scope of the mediation clause must be determined by interpretation using the Haviltex standard. If a mediation clause is mandatory, parties will have to try mediation before going to court or arbitrator. If that obligation is not complied with, the judge or arbitrator may adjourn the case to give the parties an opportunity to still try mediation, but the judge or arbitrator is not obliged to do so.

Significance of new case on mediation in practice

It is now clear that a mediation clause can indeed be mandatory, depending on the circumstances. It is also clear that the court can decide to stay the case to give the parties the opportunity to try mediation as yet. It is therefore not required. We will have to wait and see how lower courts will deal with this in practice. The question remains whether, in a situation where the parties are diametrically opposed and reject mediation, a court will force the parties to try mediation first. If it is already clear from the parties' attitude at the hearing that one of the parties will not give mediation a real chance, the judge or arbitrator may still rule out invoking the compulsory mediation clause. Mediation would then be a waste of time. At the same time, it is conceivable that judges will try even harder to convince parties to at least make an attempt anyway, under the guise of 'if it doesn't work, it won't hurt'.

How to agree on a mandatory mediation clause?

Whether a mediation clause is mandatory or not and, if so, to what extent this obligation extends, is thus a matter of interpretation. The specific facts and circumstances are always important for this, but it is in any case certain that a mediation clause can indeed be mandatory. So what should a mediation clause look like to make it mandatory? Our advice is to make as specific as possible that the parties have intended a mandatory mediation clause. This can be done by specifying what a party is obliged to do, for instance by including the minimum number of interviews with a mediator and the minimum duration of those interviews. Agreements on legal assistance during the mediation can also be considered.

Need advice?

In doubt about whether a specific mediation clause is mandatory? Do you want to know how to word a mediation clause or other escalation clause? Or do you want to bypass a mediation clause? If so, please contact Dorine or Merel.