Canada: Drafting A Mediation Clause: Important Factors To Consider

Last Updated: June 25 2018
Article by Jessica Syms and Justine Brien

Introduction

Mediation is now a well established legal practice1. The ambit of the mediation process is no longer confined to traditional contexts2, and its usefulness in civil and commercial matters is widely acknowledged. Whether the parties' intention to take part in mediation is rooted in monetary considerations, a desire for procedural flexibility or confidentiality concerns, mediation has several undeniable advantages.

The inclusion of a mediation clause in a contractual agreement promotes the increased effectiveness of the process, as the parties thereby decide, in advance of any litigious dispute, to participate in the process and how they will do so. It is moreover now common practice to include a mediation clause in several types of contracts in order to encourage the parties, in the event of a disagreement, to consider this alternative.

In order to maximize the effectiveness of a mediation clause, certain important elements must be included in it. For it is not enough to merely provide for a mediation process in a contractual agreement, the terms, conditions and procedural rules must be addressed as well.

Best practices for drafting a mediation clause

A mediation clause, like any other provision in a contract, must be precise. That being said, it is preferable that its content remains summary in nature, so the details of the process are generally spelled out subsequently by the parties in a mediation protocol. While there is no hard and fast formula or "recipe" for drafting a mediation clause – since the wording of the clause will depend on the circumstances and nature of the contract – certain elements are definitely worthy of inclusion, or at least consideration:

1. Confidentiality of the process: While mediation is intrinsically confidential, care must nevertheless be taken to specify the confidentiality of the process in the mediation clause. It should also be pointed out that while the confidentiality of the mediation process is specified in the Code of Civil Procedure3, that rule is subject to an exception4. It is true that the CCP requires the parties to preserve the confidentiality of anything said, written or done during the process5. However, the Supreme Court of Canada has held that a communication that led to a settlement may be disclosed if doing so is necessary in order to prove the existence of the settlement agreement reached through mediation, unless there is a confidentiality clause that clearly excludes that possibility6.

2. Circumstances triggering the mediation process: The clause may indicate the circumstances in which the parties intend to resort to mediation. For example, it is possible to provide that "in the event of a dispute regarding the interpretation or application of the contract, the parties will submit the dispute to a mediator"7. The parties can also elect to exclude certain kinds of disputes from the ambit of the mediation clause.

3. Minimum number of sessions: The parties may agree that the mediation process must be undertaken before any judicial or arbitration proceedings are instituted, and they may even specify that mediation is a precondition to instituting proceedings before any of those forums. In that regard the parties may stipulate that participation in a minimum number of mediation sessions is mandatory before deciding that the process has failed or instituting legal or arbitral proceedings.

4. Venue of sessions: The parties may also specify the venue where the mediation will take place. It is preferable to select a neutral location so as not to needlessly antagonize one of the parties and poison the relationship between them.

5. Choice of mediator: The choice of a mediator may also be dealt with in the mediation clause. For example, the parties can provide that the mediator must have certain qualifications and in-depth knowledge of the sphere of activities to which the contract pertains. The parties can also decide to select their mediator based on the person's experience or approach. The language(s) spoken by the mediator may also be a consideration in some cases. In addition, the parties should consider stipulating that the mediator must be certified, so that he or she can claim the non-compellability privilege8. It is also sound practice to specify the terms, conditions and technicalities of the mediator selection process.

6. Mechanism for triggering the mediation process: It is also important to deal in the mediation clause with the mechanism whereby the mediation process will be triggered and how the mandate will be given to the mediator. For example, the clause could specify that a notice must be sent within a certain timeframe in order to trigger the process.

7. Allocation of costs: In order to avoid any disagreement in this regard, the mediation clause should specify how the costs associated with the mediation are to be shared by the parties.

In the event that the mediation clause does not cover all the conditions by which the parties wish to be bound, the parties can expand upon the terms and conditions of the mediation process in the mediation protocol signed by them.

Including a mediation clause in a contractual agreement is definitely an effective strategy to concretely express the will of the parties, in advance of any litigation, to engage in a mediation process in the event of a dispute. However, it must be borne in mind that mediation remains at all times a voluntary process9.

Conclusion: comments on the enforceability of mediation clauses

Regardless of how well the mediation clause is drafted and how clear and precise its terms, questions can arise as to its enforceability, as mediation is a process that depends entirely on the will of the parties10. Quebec courts have considered this issue on more than one occasion.

In its decision in Alarium Inc. v. De La Rue International Ltd.11 the Superior Court granted the application of one of the contracting parties and ordered the suspension of the judicial proceedings pending completion by the parties of the mediation process stipulated in their contract. The mediation clause provided that the parties must first attempt to negotiate a settlement of any dispute, and that in the event they failed to do so, they were to submit to mediation. The Court found that the wording of the clause left no room for interpretation, and that the dispute-settlement mechanism was mandatory. It therefore suspended the judicial proceeding and ordered the parties to go through the mediation process.

The Superior Court came to the same conclusion in Ceriko Asselin Lombardi Inc. v. Société immobilière du Québec12, where it pointed out the benefits associated with this type of clause in a contract [TRANSLATION]:

[46] The contract and the Regulation provide that a dispute resolution process must be undertaken and pursued before one of the parties can take the other to court. This is a prejudicial obligation which, if not fulfilled in accordance with the applicable contractual or regulatory provisions, must be so performed.

[47] These provisions are included in construction contracts and public contracts for a reason. Mediation can avoid lengthy and very costly litigation, and such a process, with a maximum 60 days' duration, can put an end to this file which would otherwise take years to complete, at a cost of several tens of thousands of dollars for each of the parties. The principle of proportionality, coupled with the inherent powers of the Court, dictates that such contractual or regulatory provisions must be observed, and that the conditions for applying them be interpreted broadly rather than narrowly.

These two decisions underscore the importance for the parties of seriously considering the inclusion of a mediation clause in their contract and devoting particular attention to its terms, since they will possibly be compelled to comply with them in the event of a dispute that comes within its ambit.

While the mandatory nature of the mediation process has been recognized by Quebec courts, it must be remembered that mediation does not compromise the rights of the parties to turn to the courts or an arbitration tribunal if the process fails.

Footnotes

1 Article 1 CCP

2 Such as family law and labour relations.

3 Article 4 CCP

4 Union Carbide Canada Inc. v. Bombardier Inc., 2014 SCC 35, [2014] 1 S.C.R. 800

5 Supra, note 3

6 Supra, note 4

7 Raymond Crête and Stéphane Rousseau, "La mediation" in Droit des sociétés par actions, 3rd ed, LexisNexis Canada, 2011 at para. 1751

8 Article 606 CCP

9 Article 2 CCP

10 Ibid.

11 2013 QCCS 505

12 2013 QCCS 3624

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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