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

B- weak point : the enforceability

Although the near embryonic stage of Mediation internationally, Mediation clause enforcement has been the subject of academic discussions in many common law countries, and particularly in the US¹⁹⁹. Regrettably, there are many arguments against the enforceability of a mediation clause. They are essentially based on the contractual uncertainty of the mediation clause and on public policy point view.

It is generally accepted that contracts need to satisfy a requirement of certainty before they are considered to be valid. The mediation clause is like any other contractual clause and as such is subject to the requirements of validity imposed by the law of contract. An agreement to mediate would be uncertain because it would be difficult for the parties and the court to ascertain when the conciliation or mediation had been properly determined. By contrast, Arbitration is not subject to an uncertainty argument because the arbitral process will inevitably lead to an award. With processes like negotiation, mediation and conciliation, there is no guarantee of resolution, which raises the uncertainty regarding

¹⁹⁸ Another approach should be to enter into Mediation with a written agreement containing a confidentiality clause signed by all present, including signing in their own names and using a standard wording that is used as guidance in the Mediation process

¹⁹⁹MELNYK, T., "the Enforceability of Multi-Tiered Dispute Resolution Clauses: The English Law Position", International Arbitration. Law. Review. (2002)

termination of these processes²⁰⁰. Where ADR lead to an agreement between the parties, one might question the scope of such an agreement. However, the variety of names used for agreements arising from ADR mechanisms makes the picture particularly complex. ADR can only lead to a simple contractual transaction. (Conciliation and Arbitration Center of Tunis rules, article 6 )

In the US a Maryland court based its denial of the enforcement request on its view that the requesting party failed to show that there were contractual issues in need of Mediation. This court's approach does not augur well for Mediation clause enforcement. "As a matter of fairness and practicality," it deduced, "the court cannot enforce a Mediation clause after determining, with the benefit of perception, that Mediation would have been futile"²⁰¹. What can be deduced from the example herein is that State and federal courts in the US are unwilling to enforce properly Mediation clauses.

In other jurisdictions such as the United Kingdom, arguments against the enforceability of a mediation clause are essentially based on public policy point of view.

In countries where Mediation is firmly well-established or promoted as part of the status quo on the basis of public policy, the intention is to justify the existence and enforcement on a public policy or public interest point of view and proceed beyond that area of argument. As a result, it is first necessary to find out into the reasons to accept or promote Mediation in national systems so as to enforce it. First compared to Arbitration which in nearly all civil law and common law jurisdictions has its own statutes, fewer civil law and common law countries have statutes that govern or regulate Mediation. No statute exists to provide for the non-enforceability of an earlier agreement to seek Mediation in resolving present or future disputes. It is reasonable to enforce the

200 New Brunswick & Canada Railway & Land Co v Muggeridge (1859)

201 Hillock v. Wyman, at (Maryland. Supreme. Court. 2003)

Arbitration clause when it is made after a dispute has arisen than before it. There may therefore be reasons not to enforce a "Mediation clause^, made before a dispute has arisen.

It appears from all these considerations that using mediation process, through the intervention of a transactional mediator during the negotiations of a merger, by virtue of a mediation clause is an attractive idea, however it lack a firmly well-established international legal frame work in civil and common law countries to be completely considered a resourceful action in the resolution of potential merger disputes. The situation is different when it concerns Arbitration.