This actually happened, and the filmmakers are keen to show us the consequences of this reprieve from the horrors of war. But it's immaterial whether or not the film is "based on true events."
It's effective because the way in which these events can strike the mind as unbelievable and absurd and yet carry the aura of undeniable, human truth parallels any sane person's attitude towards warfare. It seems impossible that after so many thousands of years, so many billions of lives cut tragically short, we can't resolve our difficulties without resorting to wholesale slaughter. But here we are.
Director Christian Carion's technique has all the subtlety of a shovel to the back of the head, and occasionally he employs a device so laughably ham-fisted that the film becomes momentarily ridiculous. Ultimately, though, the broad swaths of emotion cut by the film are appropriate to the pathos of the question it poses. No one has yet phrased it more succinctly than Bob Dylan: "How many times must the cannonballs fly/Before they're forever banned?"
Near the end of the film a Bishop (Ian Richardson) arrives to relieve the chaplain and to bless a new group of soldiers on their way to the front. During his benediction he asks, "Are those who shell cities populated only by civilians the children of God?" It's a question that the citizens of nearly every nation on earth would do well to ask themselves.
In the end Joyeux Noël points a finger of blame at the Masters of War who send men to die for profit and prestige, while burying these real motives under empty platitudes about God and country. But of course this is a tacit indictment of we who suffer them to rule over us. Perhaps a shovel to the back of the head is just what the doctor ordered.