How to insert a Mediation Clause

Mediation Clauses

• A binding mediation agreement must be in writing.

• When parties opt against ad-hoc arbitration, it is essential to choose an arbitration institution to oversee the conduct of arbitration proceedings. This ensures procedural functionality in the arbitral proceedings, including the naming of arbitrators and continuance of administrative assistance.

• In case the parties fail to specify the distinction between ‘venue’ and ‘seat’ of the arbitration in the arbitration agreement, it will substantially affect the time and costs associated with the dispute settlement process

• Steer Clear of vague language and specify the “seat” mainly when the intention is to have a seat outside India and where Indian law is designated to be governing law of the underlying contract.

• It is, of course, advisable to include a ‘governing law’ clause in every contract. Though non-Indian parties may choose to opt for another legal system due to reasons for familiarity, the substance of Indian contract law is, however, to a large extent, within the normal aspirations of the majority of non-Indian parties and can typically be accorded to as a part of a larger settlement.

• Clauses that mandate the parties to take specific steps before the start of arbitration proceedings (such conducting meetings to solve the dispute through other means before referring it to arbitration) are often referred to as “escalation clauses,”

• These clauses should be treated with caution, as they can cause substantial delays while (as is often the case) failing to achieve the objective of effective negotiations.

• If you consider such a clause desirable, or if a counterparty insists, then be mindful that such a clause can prevent the commencement of arbitration until periods set out in the clause have expired – and with that in mind make sure that the relevant timeframe is short and transparent.

• In general, it is a rule of thumb to avoid specifying, in an arbitration clause, qualifications that the arbitrators must fulfil (in particular, a condition that only the retired judges of the Supreme Court of India or the various High Courts of India can be nominated to the tribunal).• This is because such limitations minimize the pool of arbitrators available, sometimes causing significant damage to your interest.

To insert a mediation clause in an agreement, follow these steps:

1. Assess the Need: Determine if mediation is the preferred method of dispute resolution for the agreement. Consider the nature of the relationship, potential disputes that may arise, and the benefits of mediation over other dispute resolution methods.

2. Consult Legal Advice: Seek guidance from a qualified legal professional to ensure compliance with applicable laws and regulations. They can provide specific advice based on your jurisdiction and the nature of the agreement.

3. Draft the Clause: Create a clear and comprehensive mediation clause. Include the following key elements:

a. Agreement to Mediate: Clearly state that any disputes arising from the agreement will be subject to mediation. Emphasize that mediation is a voluntary and non-binding process.

b. Mediation Process: Describe the mediation process, including the role of the mediator, the timeline, and any specific rules or guidelines that will govern the mediation.

c. Selection of Mediator: Outline the process for selecting a mediator. Specify the desired qualifications or criteria for the mediator's selection.

d. Mediation Costs: Address the allocation of mediation costs, including the mediator's fees and any other related expenses. Clarify which party or parties will bear these costs.

e. Confidentiality: Include provisions on the confidentiality of the mediation proceedings and any related documents. Specify that information disclosed during mediation is privileged and cannot be used in subsequent litigation, if applicable.

f. Suspension of Litigation: Consider including a provision that, upon initiation of the mediation process, any ongoing litigation related to the dispute will be suspended.

g. Enforceability: Depending on the jurisdiction, it may be necessary to address the enforceability of the mediation clause and any resulting settlement agreement.

4. Incorporate the Clause: Insert the mediation clause in the appropriate section of the agreement. Ensure it is clearly visible, preferably in a separate section or paragraph, and easily understandable to all parties.

5. Review and Execute: Review the agreement, including the mediation clause, with all parties involved. Seek their agreement and consent to the terms of the agreement, including the mediation clause. Once everyone agrees, execute the agreement by signing it.

Remember that specific legal requirements and considerations may vary based on jurisdiction. Therefore, it is important to consult with a qualified legal professional to ensure the mediation clause is drafted and implemented correctly according to the applicable laws.