Mediating International Commercial Disputes: Differences in U.S. and European Approaches

Dispute Resolution Journal, Aug-Oct 2005 by Cairns, David J A

Mediation is an accepted item on the menu of commercial dispute resolution in the United States and many other common law jurisdictions. In contrast, the state of development of ADR and mediation in continental Europe is uneven and many years behind the United States. In these circumstances, how useful is it for the English or US legal adviser to draft a multi-tiered dispute resolution clause, committing their client to a period of mediation with a party from a jurisdiction where mediation might barely be known? To what extent is mediation better avoided where the parties do not share the same cultural perceptions of mediation? This article offers some guidelines for drafting multi-tiered dispute resolution clauses in international contracts between parties from different legal traditions.

Over the last two decades, alternative forms of dispute resolution (ADR), particularly mediation, have become an established feature of the landscape of commercial dispute resolution in the United States. Practitioners might hold different views as to the types of disputes best suited to mediation and the style of mediator they prefer. They may also differ in the amount of enthusiasm they have for the process generally. But all practitioners of commercial dispute resolution must not only be able to advise their clients about mediation (and other ADR processes), they must also know how mediation works and be able to participate in mediation on behalf of their clients.

In the United States, the acceptance of mediation can be seen in the many state mediation statutes, the existence of the Uniform Mediation Law (a model law prepared for enactment by U.S. states), and the numerous court-annexed mediation programs. There are codes of ethics for mediators that the many full- and part-time mediators must follow. Also, a great deal of literature on mediation and numerous seminars and courses exist on the techniques of mediation. In short, mediation is a thoroughly established part of ADR in the United States. While mediation is a more recent development in England (and other common law jurisdictions such as Australia and New Zealand), it has been well received there and is better known there than in continental Europe.

In common law jurisdictions it is common practice to include in commercial contracts a reference to mediation prior to initiating arbitration. Only after the failure of mediation are the parties able to move on to litigation or arbitration in a designated forum. Some sophisticated clauses call first for negotiations at the chief executive level before mediation can take place. The intention is to create a dispute resolution process that explores in a structured manner the possibility of a negotiated solution before a formal adjudicatory process, like arbitration or litigation, can begin. These are called multi-tiered or multi-step clauses.

However, lawyers from civil law jurisdictions tend not to be as familiar as their common law brethren are with mediation. In some cases, they are many years behind in their understanding of mediation and how to use it.

In these circumstances, should U.S. corporations doing business in continental Europe include a multi-tiered ADR clause in the transaction documents? Or should mediation be avoided where the parties do not share the same cultural perceptions of the process?

These issues recently acquired a new dimension through the European Commission's (EC) endorsement and promotion of mediation in civil and commercial disputes. In July 2004, the EC issued the European Code of Conduct for Mediators, for adoption on a voluntary basis by institutions and individual mediators. Then, in October 2004, the EC released the Proposal for a Directive of the European Parliament and of the Council on certain aspects of mediation in civil and commercial matters (Proposed European Directive). The EC's objective is to establish some common rules throughout the European Union (EU) for mediation and its relationship with judicial proceedings.

The Proposed European Directive sets a deadline for Member States to make their domestic laws comply with its terms. That date is September 2007. This is likely to increase the profile of mediation in Continental Europe. Therefore, it is an appropriate time to address possible cultural limitations on the use of mediation of international commercial disputes.1

While considering these issues, this article provides a brief overview of the current status of mediation in continental Europe, and then discusses the extent to which mediation, depending as it does on the good faith and cooperation of the parties, is more vulnerable than international commercial arbitration to difficulties arising from cultural clashes. The final section offers some guidelines for drafting mediation and step clauses in order to make the best use of ADR.

Mediation in Continental Europe

The term "mediation" does not have the same significance in continental Europe as it does in the United States and the United Kingdom. This can now be expected to change given the EC's Proposed European Directive.