Commercial mediation in Luxembourg

There are two kinds of mediation for civil and commercial matters: (i) contractual mediation (suggested by the parties), and (ii) judicial mediation (suggested by the judge). Unless contractually agreed, there is no obligation to mediate, but the court may suggest mediation and certain legal provisions to encourage mediation. Failure to mediate does not attract adverse costs consequences. Mediation is confidential. Settlement agreements are enforced as contracts but both settlement agreements concluded in Luxembourg (whether domestic or cross-border) may be recognised and made enforceable by the President of the District Court.

What is the status of mediation in this jurisdiction?

The law of 24 February 2012 implementing the EU Mediation Directive 2008/52/EC of 21 May 2008 (the “Mediation Directive”) entered into force on 9 March 2012 (the “Mediation Law”). The Mediation Law goes beyond the implementation of the Directive and establishes a domestic commercial mediation framework covering national and EU cross-border civil and commercial mediation (addressing notably key aspects of civil procedure for the enforcement of out-of-court agreements throughout the EU). Provisions of this legislation have been incorporated in the Luxembourg New Civil Procedure Code (“NCPC”).

On 17 April 2016, the law implementing the Directive 2013/11/ EU of 21 May 2013 (“ADR Directive”) entered into force (“ADR Law”), introducing alternative dispute resolution for consumer disputes. Provisions of this legislation have been incorporated in the Luxembourg Consumer Code. Article L. 411-1(1) of this Code defines “alternative dispute resolution for consumer disputes” as any intervention by an entity which proposes a solution or brings together the relevant parties, with a view to facilitating the finding of an amicable solution to a national or cross-border dispute between a consumer and a trader, in connection with a sales or service contract. Unlike under the ADR Directive, both consumers and traders can initiate a mediation procedure.

The law of 5 December 2016, which implements the Directive 2014/104/UE on certain rules governing actions for damages under national law for infringements of the competition law provisions, explicitly provides for the use of civil and commercial mediation established by the Mediation law.

Mediation is a structured process whereby two or more parties, on a voluntary basis, attempt to settle their dispute with the assistance of a mediator. The mediator has no power to make a binding decision on the parties but assists their negotiations. He has no investigatory powers but may, with the parties’ consent, hear third parties who appear voluntarily (art. 1251-2 NCPC).

According to article 1251-1(1) NCPC, any dispute can be mediated except:

(i) rights and obligations which are not under the parties’ control;

(ii) provisions of public order; and

(iii) matters relating to the State’s responsibility for acts and omissions in the exercise of state authority.

How is a mediation conducted?

In civil and commercial matters, two different kinds of mediation exist: contractual mediation and judicial mediation. In both cases, the procedure to be followed depends to a great extent on the parties’ mediation agreement (art. 1251-5(1) NCPC). Parties may decide to end the mediation process at any time.

Contractual mediation can be suggested by any party at any time, unless court deliberations have started (art. 1251-8 NCPC). The parties will either have agreed to mediate in advance by including a contractual agreement to mediate in predetermined situations, or mediation can be entered into when a dispute has arisen. Once the parties have signed a mediation agreement, the limitation period for commencing court proceedings is suspended (art. 1251-9 NCPC).

Judicial mediation refers to mediation that is suggested by the judge while a case is pending. With the exception of the family court, the judge has no power to order mediation but may invite the parties to engage in mediation either upon his own initiative or upon request of any of the parties. In both cases, the parties’ consent to mediation is required before it is commenced (art. 1251-12(1) NCPC).

The duration of the mediation is determined in the court decision which orders it, and it may not exceed a three-month period, although this may be increased by one month at the request of both parties (art. 1251-12(3) NCPC). When the parties jointly request that a mediation be ordered, the time limits in relation to the proceedings are suspended from the date on which they submit their request (art. 1251-12(6) NCPC). Mediation may cover part or the entirety of a dispute (art. 1251-13(2) NCPC). The judge remains seized of the case during the course of the mediation and may, at any time, take whatever measures he considers necessary. The judge may also end the mediation before the specified time limit expires, upon request of the mediator or one of the parties (art. 1251-13(3) NCPC).

Under the ADR Law, a complaint should be filed with the so-called “Consumer Mediator”, a new government body acting as the first point of contact and service for the resolution of consumer disputes (art. L. 421-1 Consumer Code). The Consumer Mediator advises parties on the means available regarding alternative dispute resolution, forwards complaints to the relevant ADR entity or handles complaints itself (if no other specific entity is competent to handle the dispute) (art. L. 421-2 Consumer Code). According to article 6 of the Rules of procedure of the National service of the Mediator of consumption, within three weeks of receipt of the complete complaint file, the ADR entity must notify the parties whether it will consider the dispute or not. Where the ADR entity agrees to consider the dispute, the outcome of the ADR procedure must be made available within a period of 90 calendar days from the date on which the ADR entity receives the complete complaint file. In the case of highly complex disputes, the ADR entity in charge may, at its own discretion, extend the 90 calendar days’ time period. The parties must be informed of any extension of that period and of the expected length of time that will be needed for the conclusion of the dispute. Should the ADR entity be unable to consider the submitted dispute, it must provide both parties with a reasoned explanation of the grounds on which it has declined to consider the dispute.

Is there any obligation on litigants to mediate?

There is no legal obligation on parties to engage into mediation. Mediation remains a voluntary process, chosen by the parties in order to settle their dispute. Mediation is primarily contractual in nature. The parties either include a mediation clause in their contract or decide to engage in mediation once a dispute has arisen. Depending on the circumstances, parties may therefore have a contractual obligation to engage in mediation prior to any other form of dispute resolution. However, an agreement between a consumer and a trader to mediate is not binding on the consumer if the agreement was entered into force before the dispute arose or if it deprives the consumer of his right to bring an action before the court (art. L. 411-3 Consumer Code).

Parties are encouraged to include mediation clauses in their contracts. Where the parties have previously agreed to mediate, the judge hearing the case may stay the proceedings upon request of either party, unless the mediation clause is not, or is no longer, valid. Provisional and protective measures may be ordered despite the existence of a mediation clause. Applications for such protective and provisional measures do not impact on the effect of mediation clauses. In order for a mediation clause to be effective and taken into account in court, its existence must be notified to the court before any defence on the merits is pleaded, failing which the parties are precluded from invoking the clause (unless they both agree otherwise) (art. 1251-5 NCPC).

The court may itself suggest judicial mediation. However, in this case, mediation will only be undertaken if both parties agree (art. 1251-12(1) NCPC).

Does the court have powers to support a mediation?

The legal framework provided by both the Mediation Law and the Mediation Directive may encourage parties to engage in mediation rather than to initiate judicial proceedings. Courts may themselves suggest judicial mediation as long as their deliberations have not started. Mediation, however, remains a voluntary process as the court does not have the power to order mediation.

Are mediations confidential?

Mediation is carried out in a manner which respects confidentiality: documents, disclosures and communications made during the process of mediation or for its purposes are confidential. The court must refuse to admit any mediation-related information that is or would be disclosed without both parties’ consent. Mediators may not be compelled to testify in judicial proceedings as to information obtained during the mediation process. A party in breach of the confidentiality obligation may be ordered to pay damages (arts. 1251-6 and 1251-7 NCPC).

Does a failure to mediate attract adverse cost consequences?

Failure to mediate does not result in adverse cost consequences. No legal basis currently exists which enables a court to take failure to mediate into consideration when making an award of costs.

How are settlement agreements enforced?

A mediation agreement will usually impose a contractual obligation on parties to abide by what may be decided in the settlement agreement resulting from mediation. As a result, settlement agreements will be enforced as any other contract (art. 1251-21 NCPC).

However, settlement agreements concluded in Luxembourg, both domestic and cross-border, may be recognised and made enforceable by the President of the District Court (Tribunal d’arrondissement) upon request of all or one of the parties (provided that, in cases of cross-border disputes, all other parties agree to such a request). The Law sets out an exhaustive list of grounds for the recognition of a settlement agreement to be refused by the President of the District Court (art. 1251-22 NCPC).

Recognition and enforcement of settlement agreements reached and made enforceable in other EU states (other than Denmark) abide by the same procedure as that provided for in Luxembourg for the implementation of Council Regulation No. 1215/2012 on the recognition and enforcement of judgments in civil and commercial matters (art. 1251-23(1) NCPC).

Under certain conditions, the President of the District Court may also make settlement agreements reached in another Member State of the European Union enforceable despite their not having yet been made enforceable in their country of origin (art. 1251-23(2) NCPC).

Is there a system of accreditation and/or regulatory body for mediators?

No regulatory body for mediators currently exists. However, certain organisations for commercial mediation do exist, such as the ALMA (Association luxembourgeoise de la médiation et des médiateurs agréés) and the CMCC (Centre de médiation civile et commerciale). The Commission de surveillance du secteur financier (“CSSF”, which is the financial supervisory authority) and the Association des Compagnies d’Assurances (“ACA”, which is the association for mediation in insurance disputes) are the other Luxembourg ADR bodies accredited by the European Commission. Their appointment of mediators depends on several selection criteria such as professional competence, experience in the field of business, and skills to carry out mediation. The Luxembourg ADR bodies will only accept mediators with a degree of training or experience in the field, thereby creating a certain form of accreditation.

According to article 1251-3 NCPC, the mediator can either be certified or not. It defines a “certified mediator” as a natural person certified for that purpose by the Ministry of Justice. Only certified mediators, or mediators from another Member State of the European Union who fulfil similar requirements, can act in judicial mediation. In any case, the mediator is required to be impartial, independent and diligent (art. 1251-2 NCPC).