Key takeaway
A poorly drafted multi-tiered dispute resolution clause can still require compulsory arbitration if that is the commercial effect of the agreement as a whole. In Toziwepi Ropa v Kharis Solutions Limited [2026] EWHC 259 (Comm), the Court held that an optional-sounding mediation provision did not make arbitration optional, while the mediation step itself was too uncertain to operate as an enforceable condition precedent. The decision also confirms that notices to arbitrate are approached with an emphasis on substance rather than technical form.
If you've ever looked at a multi-tiered dispute resolution clause and thought “this is a mess, but everyone knows what it means,” you were right, and the Circuit Commercial Court in Birmingham has just confirmed it.
In Toziwepi Ropa v Kharis Solutions Limited, HHJ Charman was handed a clause that used the word “may” where it should have said “must,” said nothing about how mediation should actually happen, and gave a party every opportunity to argue their way out of arbitration entirely. The Court was not having it. Arbitration was compulsory, the mediation step was too vague to block it, and the notice to arbitrate stood despite some sloppy drafting of its own.
Here's what happened, and what it means for anyone drafting, or trying to escape, a dispute resolution clause.
What happened in Toziwepi Ropa v Kharis Solutions Limited?
Two joint venture agreements. A domiciliary care business. One party puts in the money, the other runs the operation, profits get split. Standard stuff, until a dispute arose over profit share and the Claimant went straight to arbitration without bothering to propose mediation first.
The clause in question, clause 56, provided for a three-stage process: friendly consultation, then optional mediation, then, if mediation failed or was “unavailable,” binding arbitration.
The Defendant threw everything at the wall: the notice to arbitrate was invalid, it had not been served properly, there was no compulsory arbitration obligation in the first place, and even if there was, mediation was a condition precedent that had never been satisfied.
None of it worked.
Can an arbitration clause be compulsory if it says “may”?
This was the headline issue. The clause said mediation “may” happen, permissive language that, read literally, arguably left the whole dispute resolution process optional.
The Court wasn't interested in a literal reading. Applying Arnold v Britton and Lukoil Asia Pacific v Ocean Tankers, it asked what commercial parties would actually have intended, and found three good reasons why the Defendant's reading made no sense.
You can't have different disputes going to different forums under one contract. Nothing in these agreements suggested the parties wanted litigation for some issues and arbitration for others, and the subject matter, a care business, wasn't the kind of technical dispute that might justify carving out a specialist forum.
An arbitration clause only means something if it's compulsory. Parties can always agree to arbitrate a dispute if they both fancy it; they don't need a clause for that. The whole point of putting an arbitration clause in the contract is to let one side force the other into arbitration, particularly where confidentiality matters.
If your dispute resolution clause is ambiguous, courts will look past the wording to what the clause is actually for.
When is mediation a binding condition precedent to arbitration?
The Defendant's fallback was that the Claimant should have mediated first. The Court agreed the clause did impose an obligation to try mediation before arbitrating, but held it was not precise enough to actually stop the Claimant going straight to arbitration.
Following Holloway v Chancery Mead, a mediation clause needs three things to bite as a condition precedent:
- A clear commitment to start a defined process;
- Identifiable steps each side has to take; and
- A workable test for knowing when the process is over.
Clause 56 had none of these. No mechanism for appointing a mediator, no word on who pays for it, and no detail on what “unsuccessful” or “unavailable” actually meant in practice. The Court also found, in the alternative, that mediation had not even become “unavailable,” because the Claimant had never clearly proposed it in the first place.
For a broader discussion of staged dispute resolution, see our article on mediation, arbitration and cross-border disputes.
What makes a notice to arbitrate valid?
The Defendant also went after the notice to arbitrate itself, arguing it did not require the Defendant to appoint an arbitrator and did not identify the dispute precisely enough.
Applying the flexible approach from Finmoon Ltd v Baltic Reefers Management Ltd, the Court read the notice alongside the prior correspondence between the parties and found the dispute was identified with enough precision to satisfy section 14(4) of the Arbitration Act 1996. Service was also found to be valid.
Notices to arbitrate do not need to be a work of art. If the substance is there and the other side clearly understands what is being invoked, technical nitpicking won't save them.
Can procedural defects in an arbitration claim be cured?
For good measure, the claim form itself was defective: it didn't specify the relevant section of the Act or the question for the court to determine, breaching CPR 8.2 and CPR 62.4.
The Court waived the defects under CPR 3.10, applying the Denton test by analogy. The breach was serious and came down to plain solicitor error, but the remedy sought was obvious from the face of the form, the Defendant clearly understood what was being claimed, and throwing the case out at this stage would have served no one. The errors weren't fatal.
They will, however, be reflected in costs. A useful reminder that “no harm done” and “no consequences” aren't the same thing.
What does Toziwepi Ropa mean for drafting multi-tiered dispute resolution clauses?
Three practical points come out of this decision:
- Draft your dispute resolution clause properly, or do not be surprised when a court fills the gaps for you. Commercial common sense will be used to rescue a poorly drafted clause and make it work the way sensible parties would have intended, usually in favour of compulsory arbitration.
- A mediation precondition is only as strong as its detail. Name the mediator or the rules, allocate costs, and define completion. Anything vaguer and it will not stop the other side going straight to arbitration.
- Do not rely on procedural defects to derail a claim. Courts will forgive genuine but non-prejudicial errors in a notice to arbitrate or a claim form, though your opponent's costs bill may thank you for the mistake.
If you're reviewing existing joint venture or shareholder agreements with multi-tiered dispute clauses, now's a good time to check whether yours would survive this level of scrutiny, or whether it needs tightening before a dispute forces the question. For more on the importance of getting dispute resolution provisions right at the drafting stage, see our article on why boilerplate clauses matter.
Barnes Law’s Arbitration team advises clients on arbitration agreements, multi-tiered dispute resolution clauses, notices to arbitrate and disputes concerning arbitral jurisdiction and procedure. For more information, please contact our Arbitration team to discuss how we can support you.
Written by Barnes Law Managing Partner Yulia Barnes.
