Mediation Clauses – A Time and Cost-Saving Measure

Why do mediation clauses matter, and why should they be included in every contract?

The answer lies in both their legal effectiveness and their commercial value. To achieve those benefits, however, mediation clauses must be deliberately and carefully drafted.

Traditionally, English contract law treated litigation as the default dispute resolution mechanism, with arbitration as the principal contractual alternative. Until the 1990s, mediation had little formal recognition in English legal practice and was often regarded as informal, non-legal, or peripheral.

That position shifted significantly with the introduction of the Civil Procedure Rules 1998 (CPR). The CPR actively encourage parties to consider alternative dispute resolution (ADR) and empower courts to stay proceedings for that purpose. The courts have gone further still, penalising unreasonable refusals to mediate through adverse costs orders. The senior courts continue to reinforce this principle. In Northamber Plc v Genee World Limited & Ors [2024] EWCA Civ 428—a case in which I represented the claimant—the Court of Appeal imposed a costs sanction on the defendant for failing to engage meaningfully in mediation.

Bare agreements to negotiate should not be relied upon; they are generally unenforceable. By contrast, mediation clauses should be specific, comprehensive, and clearly identify the mechanisms by which mediation is to take place. Well-drafted clauses should:

(i) clearly and unequivocally mandate mediation before proceedings may be commenced;(ii) identify the applicable procedures, rules, and, where relevant, the appointing body (for example, CIArb or CEDR);

(iii) specify timings and escalation mechanics; and

(iv) avoid discretionary language in favour of mandatory terms such as “shall”.

Why does this matter? There are, of course, circumstances in which litigation is unavoidable, and there are cases where the public nature of court proceedings has a profound strategic impact. However, those cases are the exception rather than the rule.

Most disputes benefit from the confidentiality and without-prejudice nature of mediation. Mediation facilitates dialogue in a way that parties rarely achieve once entrenched in adversarial court proceedings. It is faster and often leads to a significant narrowing of issues or quantum within hours rather than months. The resulting cost savings can be substantial.

That said, mediation clauses must be drafted with care and expertise. Poorly drafted clauses can have the opposite effect—delaying proceedings, reducing the prospects of settlement, or being exploited tactically by bad-faith parties. In some cases, an arbitration clause may be more appropriate than mediation. For these reasons, professional advice should always be sought.

Kyle Lecuona

Barrister

London

The above article does not constitute legal advice. Every dispute is unique and expert advice should be should in respect of your specific circumstances.