The Mediation-First Court: Redrafting Dispute Resolution Clauses for Commercial Certainty

For decades, dispute resolution clauses in commercial contracts have followed a familiar pattern: a governing law, a jurisdiction clause, and perhaps a short escalation provision requiring senior representatives to meet before proceedings are issued. That model is under strain. The courts in England and Wales have moved away from the view that mediation is purely voluntary, and 2026 is likely to see further pressure on parties to attempt alternative dispute resolution before litigation.

The Court of Appeal's decision in Churchill v Merthyr Tydfil County Borough Council confirmed that a court may stay proceedings to require parties to engage in non-court-based dispute resolution, provided that the stay does not impair the right of access to a court. Since that judgment, costs orders and case management directions have increasingly reflected whether a party has been willing to mediate. The Civil Procedure Rules already permit costs consequences where a party unreasonably refuses to engage in ADR. A dispute clause that is silent, vague or unworkable may therefore leave a business exposed to adverse costs even where it ultimately succeeds on the merits.

The direction of travel

Policy discussion continues about whether formal ADR requirements should be introduced for certain commercial claims. Even without legislation, the practical message is clear: parties are expected to consider mediation seriously, and a contractual clause that ignores that expectation may be difficult to defend. The clause should not be treated as boilerplate. It is a risk-allocation mechanism that can determine how quickly a dispute is resolved, how much it costs and whether urgent relief remains available.

What a modern clause should achieve

A well-drafted dispute resolution clause should do five things. First, it should define the disputes to which it applies, including whether it covers tort claims, statutory claims and claims against affiliates. Second, it should set out a structured escalation path, usually beginning with negotiation between senior representatives and moving to mediation if negotiation fails. Third, it should impose clear time limits, with a long-stop date after which either party may commence proceedings. Fourth, it should protect confidentiality and without prejudice privilege. Fifth, it should carve out urgent applications for injunctive relief, debt recovery and other claims where delay would cause irreparable harm.

Drafting points for mandatory mediation

A clause that simply states that the parties 'shall attempt mediation' is unlikely to provide sufficient certainty. It should specify how a mediator is to be selected, who bears the mediator's fees, where the mediation will take place, and what happens if the parties cannot agree. A common approach is to require the parties to agree a mediator within a fixed period, failing which a named appointing body may appoint one. The clause should also state that mediation is a condition precedent to litigation, subject to the carve-outs for urgent relief.

Costs provisions deserve particular attention. The clause can record that each party will bear its own costs of the mediation unless otherwise agreed, and that the mediator's fees will be shared equally. It can also state that compliance with the escalation procedure will be taken into account in any subsequent costs order. Such provisions reinforce the seriousness of the obligation without turning the clause into a trap.

Enforceability is another consideration. English courts are generally reluctant to enforce vague agreements to negotiate in good faith, but they are more willing to enforce clear procedural steps. The clause should therefore focus on process rather than on an unenforceable obligation to reach agreement. It should also make clear that mediation does not prevent either party from issuing proceedings if the time limits expire or if the mediation is terminated.

A checklist for reviewing existing contracts

• Does the clause impose a clear obligation to mediate, or merely permit it?
• Are the time limits realistic and capable of extension only in writing?
• Is the mediator appointment mechanism workable if the parties disagree?
• Are urgent injunctions, debt recovery and intellectual property claims carved out?
• Does the clause address confidentiality, without prejudice privilege and admissibility?
• Is there a long-stop date after which litigation may proceed?
• Are costs consequences addressed?
• Does the clause sit coherently with any arbitration agreement?
• Have procurement and sales teams been trained not to undermine the clause through direct correspondence?

Preserving the right to litigate

Mandatory mediation does not mean mandatory settlement. The clause should state expressly that if mediation fails or the time limits expire, either party may commence proceedings. It should also preserve the court's jurisdiction and avoid language that could be construed as an exclusive remedy. A carefully drafted clause gives the parties a credible route to settlement while ensuring that litigation remains available where mediation is unsuccessful.

Conclusion

The shift towards mediation is not about forcing settlements. It is about procedural discipline. In 2026, a dispute resolution clause should reflect the court's expectations, allocate costs risks and give parties a workable route to resolution before litigation. Businesses should review existing contracts now, prioritise high-value and high-risk relationships, and update templates before the next negotiation cycle.