A clause requiring mediation before arbitration is not boilerplate. Under French law, a mandatory prior conciliation or mediation clause, provided it sets precise conditions for its implementation, makes any action brought without complying with it inadmissible, and this inadmissibility cannot be cured once proceedings are under way. Well drafted, the clause offers a real chance of settling the dispute within a few weeks. Badly drafted, it becomes a delaying weapon, or a trap for the party that forgot it.
A packaging machinery manufacturer from Normandy sells a complete line to a dairy producer in Lombardy. The contract provides that “any dispute shall be submitted to prior mediation and, failing agreement, settled by arbitration under the ICC Rules”. Nothing else: no mediation institution, no time limit, no form of request. After commissioning, the customer withholds 30% of the price for output-rate defects. The manufacturer, under cash-flow pressure, files a request for arbitration. The customer replies, through its Milan lawyers, that the arbitration is premature for lack of mediation, asks for the proceedings to be stayed, and proposes a mediation that will start, it says, “as soon as possible”. Four months have already passed since the withholding.
1. Why provide for mediation before arbitration
International arbitration is effective, but it takes more than a year on average and is expensive: institution fees, arbitrators’ fees and counsel fees. A mediation takes a few weeks, for a fraction of that cost, and settles a significant share of commercial disputes, especially those in which the parties still have an interest in working together. So-called multi-tier clauses organise this progression: negotiation between senior executives, then mediation, then arbitration.
The benefit is not limited to cost. Mediation can deal with what arbitration cannot: a schedule of future deliveries, a discount on a later order, a technical modification. The Normandy manufacturer’s dispute concerns 30% of the price, but the real question is whether the line will ever reach the promised output rate, and no arbitrator can settle that question the way the engineers of both companies can around a table.
2. The effect of the clause under French law
The French Supreme Court (Cour de cassation) has held that a clause establishing a mandatory conciliation procedure prior to referral to the court constitutes a fin de non-recevoir, a bar to proceedings, which the court must apply if the parties invoke it (Cass. ch. mixte, 14 February 2003, No. 00-19.423). It then specified that this bar cannot be cured by implementing the clause once proceedings are under way (Cass. ch. mixte, 12 December 2014, No. 13-19.684): an action brought too early is inadmissible, and it has to be started again.
The clause must, however, be sufficiently precise. A general clause that contains no particular conditions of implementation does not have this effect (Cass. com., 29 April 2014, No. 12-27.004). The wording “the parties shall endeavour to settle their disputes amicably” is therefore not enough to make an action inadmissible. A clause that names an institution, a time limit and a form of referral is.
Before an arbitral tribunal, the sanction is assessed by the arbitrators themselves, who may stay the proceedings to allow mediation, declare the claim premature or draw consequences in their decision on costs. French case law tends to treat compliance with the prior clause as a question of admissibility, decided by the arbitrators, rather than a question of jurisdiction capable of grounding an action to set aside the award. In practice, failing to comply with the clause costs time and money, rarely the merits of the case.
3. The five elements of an effective clause
A useful clause first designates the mediation process and, preferably, an institution: the 2014 ICC Mediation Rules, the CMAP in Paris, or another recognised centre, which will appoint the mediator if the parties cannot agree. It then sets the form of the trigger: a written request, sent to the other party and to the institution, which marks the starting point.
The third element, the time limit, is the most important provision and the one most often forgotten. The mediation must have an end: for example, if the dispute is not settled within sixty days of the request, or if the other party does not take part in the mediation within thirty days, either party may commence arbitration. Without a time limit, the party with an interest in gaining time can stretch the mediation out for months.
The fourth element is the carve-out for urgent measures. The clause must state that the prior mediation does not prevent a party from seeking protective or interim measures from a court or an emergency arbitrator. A conservatory attachment or a court-ordered expert examination cannot wait two months.
The fifth element is the language, seat and confidentiality of the mediation, which must be consistent with those of the arbitration, otherwise the parties spend their first meeting discussing the language in which they are going to discuss.
4. Limitation periods during mediation
Under French law, Article 2238 of the French Civil Code suspends the limitation period from the day on which, after a dispute has arisen, the parties agree to use mediation or, failing a written agreement, from the day of the first mediation meeting. The period starts running again for at least six months when the mediation ends. But if the contract is governed by another law, the rule may be different, and a short limitation period or a contractual claims deadline may expire while the parties negotiate, which is one more reason to provide in the clause itself that time limits are suspended during the mediation, to date the mediation request precisely, and never to let a time bar run while relying on the other party’s good faith or on the understanding of an arbitrator who will apply a law you have not studied, especially since some foreign laws recognise no suspension linked to mediation, others confine claims for non-conformity within very short deadlines, and a party acting in bad faith has every interest in dragging out the discussions until the day after expiry.
5. What becomes of the mediated settlement
A settlement reached through mediation is a contract. To make it enforceable in France, the parties may ask the court to approve it (Article 1565 of the French Code of Civil Procedure) or, where arbitration proceedings have already begun, ask the arbitral tribunal to record it in an award by consent, which will then circulate under the New York Convention. The 2019 Singapore Convention on International Settlement Agreements Resulting from Mediation facilitates their enforcement in the States that have ratified it, but neither France nor the European Union is a party to it at present.
6. What should have been done in the Normandy case
The arbitral tribunal stayed the proceedings for sixty days to allow the mediation, and ordered the manufacturer to bear the costs of the incident. The mediation, conducted by an engineer-mediator, led to an upgrade plan for the line and the payment of half of the withheld amount. With a clause setting a forty-five-day mediation period and designating the ICC as appointing authority, the manufacturer would have referred the matter to the mediation centre on the day of the withholding, and the arbitration, had it been necessary, would have started three months earlier.
Drafting or enforcing your clause
The firm drafts dispute resolution clauses in international contracts and assists companies in mediation as well as in arbitration. See our international commercial litigation page and our article on the ICC arbitration clause. For an initial discussion, use the contact page.
Further reading: Protecting a French investment abroad with bilateral investment treaties; ICC arbitration clause in a maritime contract: what it settles, what it leaves to the court.
Frequently asked questions
Is a prior mediation clause binding?
Yes, when it is precise. Under French law, a clause organising mandatory prior conciliation or mediation with particular conditions of implementation makes any action brought without complying with it inadmissible.
Can the defect be cured by starting mediation after going to court?
No. Since 2014, the French Supreme Court has held that the bar to proceedings arising from failure to implement the clause cannot be cured once proceedings are under way. The action must be brought again.
What time limit should be set for the mediation?
A short and precise one, often thirty to ninety days from the written request, after which either party may commence arbitration. Without a time limit, the clause can be used to delay the dispute.
Does mediation prevent a party from seeking urgent measures?
It should not. The clause must expressly reserve protective or interim measures before a court or an emergency arbitrator.
How can a mediated settlement be made enforceable?
In France, by court approval. If arbitration has already begun, the parties can have the settlement recorded in an award by consent, enforceable in the countries party to the New York Convention.
On the same subject: the ICC arbitration clause, five decisions before signing, governing law and jurisdiction clauses in international contracts and exporter disputes, six situations, six answers.