Denmark
In your jurisdiction, are there any formal ADR procedures available for resolving commercial disputes other than litigating (or arbitrating) to a final hearing?
In Denmark, the main types of ADR used to resolve commercial disputes as an alternative to courts or arbitration, are court-based mediation and private mediation.
- Court-based mediation: Court-based mediation takes place within the courts after the case has been filed. Mediation is a voluntary process that both parties must agree to. Court-based mediation is regulated in the Danish Administration of Justice Act, Chapter 27, sections 271-279, and only applies to civil cases. Chapter 27 of the Danish Administration of Justice Act was adopted by the Danish Parliament on 19 February 2008. The mediation process ends if the parties reach an agreement or if the mediator assesses that an agreement cannot be reached.
- Private mediation: The term “private mediation” is used in this context as a collective term for mediation that takes place outside of the courts. It is a voluntary out-of-court dispute resolution procedure that can be facilitated ad hoc or through an institution, e.g. the Danish Institute of Arbitration (“DIA”). The mediator is a private actor and mediation can be initiated at any time without the need for a pending court or arbitration case. If mediation is conducted under DIA’s Rules on Mediation, a request for Mediation may be made to DIA by either party or jointly by the parties. Mediation through DIA requires payment of a fee of EUR 1,300.00.
Does engaging in ADR have any effect on potential or existing litigation or arbitration?
Participation in court-based or private mediation does not automatically result in the suspension of any ongoing court or arbitration proceedings. Thus, it is possible to commence mediation while at the same time scheduling a date for an oral hearing of the litigation or arbitration. However, the parties can agree to suspend the court or arbitration proceedings while the private mediation or court-based mediation takes place. If mediation ends with an agreement, this agreement replaces the court proceedings or arbitration proceedings, if any.
In Denmark, the limitation period is generally three years, according to Section 3 of the Limitation Act. However, the limitation period can be temporarily suspended if the parties engage in ADR, as stated in Section 21, Subsection 5 of the Limitation Act, which reads: “If negotiations concerning the claim have been initiated between the debtor and the creditor, possibly with the involvement of an independent third party, before the expiry of the limitation period, the limitation period will not expire until at least one year after the time when the negotiations are considered to have been concluded.” Therefore, engaging in ADR can temporarily suspend the three-year limitation period.
Is ADR compulsory and if so are there any consequences if a party fails to engage in ADR? If it is not compulsory are there any plans for this to change?
The Danish government has not signed any declarations to use ADR in all cases and ADR is not mandatory in Denmark. However, the Danish courts are currently experiencing long processing times and the Danish Court Administration (in Danish: Domstolsstyrelsen) has stated that court-based mediation helps to reduce processing times because it does not involve the same formal procedural steps as a court case. Therefore, one initiative to encourage parties to engage in court-based mediation is to offer it as an option when the court proceedings are filed. Since 2018, all civil cases, including Supreme Court cases, are instituted and processed through a digital portal and the initiative has been implemented by the Danish courts on the digital portal, by the default position on the checkbox for mediation being set to ‘yes’ instead of ‘no’.
Can the parties agree, in advance of any potential dispute, to engage in ADR?
Yes, the parties can agree in advance to use ADR as a method to resolve any future disputes before commencing court or arbitration proceedings. With respect to private mediation, DIA recommends the following standard clause to be included in the contract:
“All disputes arising out of or in connection with this contract, including disputes concerning its existence, validity or termination , must be settled by mediation administered by the Danish Institute of Arbitration in accordance with the Rules on Mediation adopted by The Danish Institute of Arbitration and in force at the time such proceedings are commenced.”
In accordance with Article 4 of the DIA Rules on Mediation, a party may also submit a Request for Mediation in accordance with the Rules even if there is no prior mediation agreement between the parties.
When does ADR generally take place?
The parties may decide to use private mediation at any stage of the dispute, both before and after court or arbitration proceedings have been initiated. However, court-based mediation can only be initiated after court proceedings have been commenced (by issue of a writ of summons).
Is ADR subject to without prejudice privilege and/or confidential? If not, is there any other means to protect confidential information?
ADR in Denmark is subject to confidentiality and “without prejudice privilege”. For court-based mediation section 277 of the Danish Administration of Justice Act states that “Information obtained during mediation is confidential unless the parties agree otherwise or the information is otherwise publicly available.” This means that the parties and other individuals involved may not unlawfully disclose or use information obtained during the mediation.
The parties in mediation are often more inclined to share personal and sensitive information than during settlement negotiations. Therefore, it is particularly important to protect this information from being used in subsequent court proceedings, and courts will generally reject requests to present evidence from a mediation, at least if the opposing party objects. This principle is also recognised in case law, cf. U.2013.702 Ø.
As for private mediation, it normally follows from the parties’ agreement that the mediation is confidential and subject to the “without prejudice privilege”. Under the DIA rules on Mediation, this follows from Article 13 (1), which sets out that “[t]he mediator, the parties and the DIA shall treat all matters relating to the mediation and to the dispute subject to mediation as confidential, unless the parties agree otherwise. Confidentiality shall also be observed with regard to the settlement of the dispute reached by the parties, unless the parties agree otherwise or where disclosure is necessary for the purpose of implementing or enforcing the settlement reached by the parties or complying with statutory provisions or other public regulations to which a party may be subject”.
Does the output from ADR create precedents?
ADR agreements are based on the individual needs and interests of the parties and therefore cannot establish general legal principles or set a legal precedent.
An ADR agreement has the nature of a contract and is therefore binding and enforceable between the parties, cf. Section 1 of the Danish Contracts Act, but no others.
If a dispute conducted under the DIA Rules on Mediation is settled, the parties can request that the settlement be confirmed in the form of a final arbitral award on agreed terms. This means that the settlement may be enforced by way of the ordinary courts to the same extent as any other arbitral award.
A settlement reached through court-based mediation is enforceable if the judge records the agreement as a court settlement, cf. section 279(2) of the Danish Administration of Justice Act.
Who bears the costs of ADR?
In ADR, each party generally bears its own costs, unless the parties agree otherwise.
For mediation facilitated by DIA, it follows from Article 12(1) of the DIA Rules on Mediation that “[t]he parties are jointly and severally liable for all costs arising out of the mediation and any arbitral award made pursuant to Article 11 above, including, but not limited to, the fee of the mediator. Unless otherwise agreed by the parties, the costs mentioned in the first sentence are to be borne equally by the parties.”
In court-based mediation, the state covers the mediator’s fees.
Is your jurisdiction subject to any specific rules for cross border ADR?
As part of Denmark’s membership of the EU, Denmark is bound by Directive 2013/11/EU on ADR for consumer disputes. Under the Danish Consumer Complaints Act, mediation in consumer complaint cases must be conducted by the Danish Appeals Boards Authority (in Danish: Nævnenes Hus).
Due to Denmark’s opt-out, Denmark is not bound by the Directive on mediation in civil and commercial matters (2008/52/EC).
Denmark has not signed up to the United Nations Convention on the International Settlement Agreements Resulting from Mediation (Singapore Convention).
Are there any particularly unusual features of ADR in your jurisdiction that you are aware are different to other jurisdictions?
In court-based mediation, the mediator is often a judge but may also be an attorney appointed by The Danish Court Administration to act as a mediator in the relevant district court. In private mediation, the mediator is typically a private actor, such as an attorney.
Contacts
© Eversheds Sutherland. All rights reserved. Eversheds Sutherland is a global provider of legal and other services operating through various separate and distinct legal entities. Eversheds Sutherland is the name and brand under which the members of Eversheds Sutherland Limited (Eversheds Sutherland (International) LLP and Eversheds Sutherland (US) LLP) and their respective controlled, managed and affiliated firms and the members of Eversheds Sutherland (Europe) Limited (each an "Eversheds Sutherland Entity" and together the "Eversheds Sutherland Entities") provide legal or other services to clients around the world. Eversheds Sutherland Entities are constituted and regulated in accordance with relevant local regulatory and legal requirements and operate in accordance with their locally registered names. The use of the name Eversheds Sutherland, is for description purposes only and does not imply that the Eversheds Sutherland Entities are in a partnership or are part of a global LLP. The responsibility for the provision of services to the client is defined in the terms of engagement between the instructed firm and the client.