It is often unavoidable for business operators/owners to find themselves in difficult situations from time to time over non-payment of invoices or breach of a contract with other businesses. The primary goal in such situations is always to find a quick and cost-effective resolution to minimise disruption to business operations.
Whilst arbitration has long been preferred by many over traditional court litigation for resolving commercial disputes, mediation is now emerging as the preferred first step.
What Is Mediation?
Simply speaking, mediation is a way of resolving disputes between commercial parties, using a neutral third person (mediator) to enable the parties to reach an amicable and mutually agreeable solution.
A mediation process may arise from a written agreement within the contract governing the relationship between the parties whereby the parties mutually agree to mediate a resolution to disputes. Such written agreement must state the scope of the dispute to be mediated, the appointment of an independent mediator and the next steps that the parties would follow should the mediation procedure fail. Typically, if a mediation fails, parties proceed with arbitration as stipulated in their underlying contract.
Essentially, the mediator will facilitate discussions between the disputing parties so that they can explore potential solutions. If a resolution is arrived at, then the terms and conditions of a mutually agreeable settlement should be recorded and executed by the parties in the form of a legally valid, binding and enforceable settlement agreement.
Even though a mediation process may not prove to be successful for the parties in terms of entering into a settlement agreement, the mediation process could nevertheless help parties understand each other’s issues and claims before any arbitration clause is invoked.
Why Mediation As Your First Call?
A key advantage of a mediation process is that it allows parties to discuss and agree upon a commercially viable solution that an arbitrator or judge (in such adjudicative mechanisms) may not be able to order.
If mediation is conducted constructively, it can allow parties to effectively and swiftly resolve their conflict and even preserve their commercial relationship.
UAE Mediation Framework
In the UAE, the Federal Decree-Law No. 40/2023 on Mediation and Conciliation in Civil and Commercial Disputes (“Federal Mediation Law”) provides a legal framework for conducting mediation proceedings in civil and commercial disputes that are capable of settlement:
- within the UAE; or
- if parties, in an international commercial dispute outside the UAE, agree to subject mediation to the provisions of the Federal Mediation Law.
Mediation may either be mutually agreed between the parties or the parties referred to mediation by relevant courts.
In the UAE, commercial parties may submit a request for mediating their differences to an institution such as the Dubai International Arbitration Centre (“DIAC”). The DIAC Mediation Rules came into effect from 1 October 2023.
Whether Parties Can Agree to Mediate Following The Occurrence of a Dispute?
Even if the signed commercial contract does not state mediation as a step in the dispute resolution clause, parties can still choose to mediate after a dispute has occurred.
So long as the parties agree to mediate a dispute in writing, they can do so regardless of whether it has or has not been expressly stipulated in their underlying contract.
Article 9 of the Federal Mediation Law stipulates that a ‘mediation agreement’ may be made in writing in one of the following forms:
- It may be made prior to the occurrence of the dispute, whether independently/separately or as included in the underlying contract originally signed between the parties;
OR
- It may be made after the occurrence of the dispute, even if a lawsuit has been filed in relation to such dispute.
DIAC Mediation Rules 2023
The DIAC Mediation Rules would apply to mediation procedures where the parties have agreed to mediate their dispute before DIAC in a pre-existing contract or a party may request or refer a dispute to DIAC even if there is no pre-existing agreement to mediate (“Requesting Party”).
The Requesting Party would have to complete the form (as set out in Appendix I of the DIAC Mediation Rules) and concurrently send a copy of the same to the other party (“Responding Party”).
The Responding Party will then have fifteen (15) days to reply to such mediation application of the Requesting Party confirming if it agrees to refer the subject dispute to mediation at DIAC (by completing the form set out in Appendix II of the DIAC Mediation Rules).
Regarding costs**, the DIAC fee for registration is USD 2,000 (non-refundable). An administrative fee would also be applicable which would vary depending upon the amount in dispute. The disputed amount would be the aggregate value of all claims, counterclaims and setoffs.
Besides the DIAC fees and mediator fees, the parties could also incur other costs for disbursements related to completing the mediation procedures under the DIAC Rules.
**Subject to Change**
Final Thoughts
Increasingly, parties are being encouraged to consider mediation (prior to invoking arbitration or approaching courts) to reconcile and resolve commercial disputes. The pivotal objective for businesses is to prioritise swift and cost-effective dispute resolution.
Hybrid clauses for dispute resolution are often being incorporated in commercial contracts, so that parties resort to mediation as a first step. If the mediation process fails (i.e., parties are unable to arrive at a settlement), then arbitration (or event litigation in court) may commence.
In our next blog on mediation, we will discuss the new mediation framework recently enacted pursuant to the DIFC Law No. 2 of 2025 Concerning DIFC Courts (which came into force in March 2025).
At James Berry & Associates, we possess substantial experience to advise and assist clients with all aspects of commercial dispute resolution, including amicable settlements, mediation and arbitration. Should you wish to seek specific legal advice and assistance, please click here to contact us.
Disclaimer: This blog provides general information as of June 2025 and does not constitute legal advice. For bespoke legal advice and assistance, please consult with a qualified legal professional.
Partner, Head of Litigation, Dispute Resolution, and Real Property
Legal Consultant