The escalation clauses introduce a number of preliminary steps before the establishment of an arbitration procedure and attempt to avoid lengthy and costly judicial or arbitration procedures.
The contracting party drawing up a contract may provide for preliminary steps before an arbitration clause for the resolution of future disputes, may agree:
- negotiation for an amicable settlement of the dispute, including through recourse to a higher level of management;
- a conciliation/mediation procedure entrusted to a third party.
The friendly solution
The introduction of a clause providing for an express obligation to negotiate in advance risks becoming an obstacle to the settlement of the dispute rather than an instrument to avoid it.
Indeed, when either party (or both) does not intend to negotiate seriously, the clause in question is likely to remain ineffective and may even be a means of preventing or delaying the use of arbitration or of challenging the arbitration ruling at a later date.
Moreover, if the contractors are responsible, they will carefully consider the possibility of a settlement of the dispute between themselves, without the need for a contractual clause providing for such an obligation.
In the company you can create agreements that would not be possible between the stakeholders, but those less involved in the matter may have more possibilities to find transactional solutions that can avoid bringing the dispute before the arbitrators or the judicial authority.
For this reason, it is sometimes provided, in contracts involving more structured companies, that the dispute should be brought to a higher level of management (central services, parent) before initiating judicial or arbitration proceedings.
Conciliation/mediation by a third party
The most advanced forms of ADR (Alternative dispute resolution), such as mediation, are very valid tools that allow to reach, with the help of the third party, an amicable resolution of the dispute.
The most effective form of ADR is that in which the mediator through the deepening and the development of particular techniques, facilitates the attainment of a transactive solution, not deciding who is right and who is wrong, but seeking solutions, together with the parties, to resolve the dispute.
Techniques are essentially reduced to:
- facilitative mediation in which the mediator is essentially limited to facilitating communication between the parties, helping them to find a solution of common interest
- and an evaluative mediation, in which the mediator expresses an opinion on the possible alternatives and therefore tends to guide more actively the parts towards a specific solution.
A characteristic feature of mediation is the full freedom of the parties to be able to reject the mediator’s proposals without this having an impact on any subsequent procedure (arbitration or judicial procedure). Unlike arbitration, the mediator’s proposals are not binding and the parties are always free not to reach an agreement. On the contrary, the arbitrator has the specific task of resolving the case through a decision binding the parties.
The drafting of the mediation clause
In drafting a mediation clause, efforts shall be made to convince the parties of the need to use and participate in a mediation procedure, On the other hand, however, it is necessary to ensure that the provision of a compulsory form of mediation does not encourage delaying measures, thereby hindering the transition to the next arbitration procedure.
It may be useful to provide for the possibility of recourse to mediation, without any obligation for the parties, such as: “The Parties may at any time, without prejudice to any other proceedings, attempt to resolve any dispute arising from or in connection with this contract in accordance with the CCI’s Mediation Regulation“.
At the other extreme, we find the mandatory provision of the mediation procedure before starting arbitration such as: “In the event of any dispute arising from or in connection with this contract, the parties shall submit the dispute to a proceeding in accordance with the CCI’s Mediation Rules. In the event that the dispute is not settled pursuant to that Regulation within  days of the submission of a request for mediation or within the different period of time that the parties may agree in writing, such dispute shall be settled by arbitration in accordance with the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with such Rules of Arbitration.“
This clause provides that, after 45 days (or other period agreed between the parties) from the beginning of the mediation procedure (which can only be initiated by one of the parties) the arbitration procedure may be triggered, without the failure to conclude the mediation having any relevance. One might argue that this solution is not sufficiently effective since it leaves no part free to participate (even if it violates a contractual obligation) or, by participating in it, to hinder its functioning.
If, however, mediation does not work, whatever the reason, it must be possible to start the arbitration procedure without delay and this is guaranteed by the clause in question.