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Enforceability of mediation clauses

by | Nov 12, 2024 | Mediation

Is a dispute resolution clause providing for mediation enforceable? What is the legal basis for enforceability?

A dispute resolution clause that provides for mediation is enforceable in principle provided that the usual legal requirements of contract law are met. However, such a clause in practice can be undermined if it is not well-drafted, particularly if it is not adequately prescriptive about the process, to avoid the need for any further agreement by the parties. Otherwise, such a clause is uncertain, so unenforceable: Sulamerica Cia Nacional de Seguros SA v Enesa Engelharia SA [2012] EWCA Civ 638.

There is a growing body of English case law developing on this topic, much of which was helpfully summarised by the High Court in Ohpen Operations UK Ltd v Invesco Fund Managers Ltd [2019] EWHC 2246 (TCC). On that basis, when a party seeks to enforce an ADR provision, usually, by means of an order staying legal proceedings or, for foreign proceedings commenced contrary to the ADR provision, through an anti-suit injunction:

  • the agreement must create an enforceable obligation requiring (ie, it is mandatory for) the parties to engage in ADR;
  • the obligation must be expressed clearly as a condition precedent to proceedings in court or arbitration (this aspect was doubted in Children’s Ark Partnership Ltd v Kajima Construction Europe (UK) Ltd [2022] EWHC 1595 (TCC) but the issue was immaterial because the judge concluded that the obligation in that case was a condition precedent);
  • the dispute resolution process to be followed does not have to be formal but must be sufficiently clear and certain by reference to objective criteria, including machinery to appoint a mediator or determine any other necessary step in the procedure without the requirement for any further agreement by the parties; and
  • the court has the discretion to stay proceedings commenced in breach of an enforceable dispute resolution agreement. In exercising its discretion, the court will have regard to the public policy interests in upholding the parties’ commercial agreement and furthering the overriding objective of assisting the parties to resolve their disputes. The High Court has since had further opportunities to consider this topic, in the context of multi-tiered dispute resolution clauses that culminate in arbitration, in Sierra Leone v SL Mining Ltd [2021] EWHC 286 (Comm) and NWA & Another v NVF & Others [2021] EWHC 2666 (Comm). The upshot is that arbitral tribunals also have powers to enforce valid ADR agreements, if appropriate in the circumstances of the case, before allowing the arbitration proceedings to progress substantively.

    • In most cases, the usual presumptive order would be to stay the proceedings in breach of the ADR provision, and the burden would be on the party seeking to resist an order to give a good reason why discretion should not be exercised to order a stay. For example, where there are related multiparty disputes before the court, if the involvement of another of those parties may be expected to enable the related disputes to be resolved and if enforcing a bilateral ADR provision may adversely affect case management, as happened in Lancashire Schools SPC Phase 2 Ltd v Lendlease Construction (Europe) Ltd and Others [2024] EWHC 37 (TCC), the court may, in balancing the competing considerations involved, conclude that a bilateral ADR provision should not be enforced.