Implementation of alternative dispute resolution mechanisms in cross border mergers: International legal study

Parg2: the Mediation clause significance

On efficient way to use the Mediation clause (A) is to draft the clause in a way to fit with particularities of the dispute involved , and to improve the legal framework regarding the settlement agreement enforcement.(B)

A- strong point : the draftin

There are basic issues to consider when drafting a Mediation clause in a merger contract,

First, Mediation should be defined by the parties in order to avoid any cultural misunderstandings. This is important because parties from different countries may have different ideas on the definition, structure, and format of Mediation. The definition can be as easy as "Mediation (as) administered by the name of the Arbitration institution¹⁹² ," or it can be assembled from each party^,s expectations if a more detailed definition is needed. Second, parties should establish a clear obligation to mediate before using other dispute resolution alternatives, such as Arbitration or litigation. A drafter should also design this provision to guard against a party using Mediation to delay Arbitration. One solution would be to use a model clause, modified for the parties^, specific needs, provided by the international organization whose rules have been selected for use by the parties¹⁹³. If parties wish to clarify a model rule, other clauses should be

¹⁹² American Arbitration Association under its Commercial Mediation Rules, the Tunisian Arbitration and Conciliation Centre under its Mediation rules, etc...

¹⁹³ Example of mediation clause inspired from the CPR Institute for Dispute Resolution:

If the dispute has not been resolved by negotiation within [45] days of the disputing party^,s notice, or if the parties failed to meet within [20] days, the parties shall endeavor to settle the dispute by mediation under the

considered, such as a clause to establish a procedure for selecting a mediator. According to Mr. Demeyere, member of the Antwerp Bar and Partner in Allen & Overy LLP, "it is better to use a mediator who has been fully trained and with at least some experience in Mediation..."¹⁹⁴

In other words, it is important to distinct the mediator from other interveners, such as experts. In this regards, Routier quoted that "generally mediators are appointed among experts, and consequently, the mediation clause could overlap the expertise clause..."¹⁹⁵

We don't totally agree with this because, both clauses are necessary and the choice to include both will help the balancing of the contract in case of disagreement. Third, parties should consider whether they want the mediator of their dispute to also serve as the arbitrator if the dispute progresses to Arbitration. Most international institution rules prohibit the mediator from also acting in the capacity of the arbitrator on the same dispute unless the parties explicitly agree¹⁹⁶. Mediator may have difficulty with maintaining the integrity of each separate mechanism. Fourth, parties should consider using one of the international institutions set of rules. Although formulating ad hoc rules creates a process specifically suited to the parties^, needs, drafting the rules can waste time and resources, especially when there are systems that have been used and tested. A successful method is to select an organization^,s model rules and then adapt them to meet the parties^, needs.

In this regards, before Mediation can become a viable mechanism for the resolution of international disputes, it must provide the parties with a sense of comfort with regard to the process. The parties must be able to understand what the Mediation process entails, and they must be

[[then current] CPR Mediation Procedure [in effect on the date of this agreement]. Unless otherwise agreed, the parties will select a mediator from the CPR Panels of Distinguished Neutrals.

¹⁹⁴ Demeyere, L., "Swot Analysis for cross border litigation", International business law Journal , n°4, August 2005,

195 Routier, R. les Fusions de Sociétés Commerciales, Prolégomènes pour un nouveau droit des rapprochements op. Cit note 1 page 14

¹⁹⁶ Tunisian international Centre of Arbitration and Conciliation

convinced that the Mediation process will be governed by rules that will ensure a fair and confidential mechanism for resolving the dispute. This seems to be taken into consideration at the European level.

In October, 22^nd 2004, the European Commission adopted a proposal for a directive of the European Parliament and of the Council, on certain aspects of Mediation in civil and commercial matters. The proposal recognizes that: "Mediation holds an untapped potential as a dispute resolution method and as a means of providing access to justice for individuals and businesses"¹⁹⁷. The proposal contains two types of provisions. Firstly, provisions that aims at ensuring a sound relationship between Mediation and judicial proceedings, by establishing minimum common rules in the Community on a number of key aspects of civil procedure. Secondly, provisions providing the necessary legal tools for the courts of the member states to actively promote the use of Mediation, without making Mediation enforceable or subject to sanctions. The directive is likely to have a significant impact on the promotion of Mediation throughout Europe. This proposal is a follow-up initiative to the Green Paper, the European Code of Conduct for Mediators that contained a study on the existing situation at national, European and International level and launched a consultation on possible measures to be taken.

However, the scope of the proposal is narrower than might first appear in that it doesn't provide anything regarding the enforcement settlement issue of the mediation clause.

The resolution of disputes in business field in Europe should become more flexible and should create a market for the services of mediators as was the case in the US, to assist parties independently of lawyers and other representatives of the companies involved in the deal. In the same way European negotiators and draftsmen of the contract should be

¹⁹⁷ Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on certain aspects of mediation in civil and commercial matters (2004). See appendices n°9

educated to frequently insert dispute resolution clauses during the phase of negotiation¹⁹⁸ of the contract to manage the potential risks associated with the deal in order to establish a permanent relationship of trust and confidence between the parties.

Although there is general interest in Mediation and initiatives are taken both by the US and the EU, there are still many misunderstandings and much amateurism regarding the settlement agreement enforcement of this dispute resolution mechanism. Reforms regarding this matter are particularly important.