THE DISPUTE RESOLUTION CLAUSE

  1. Do you want to try to settle the dispute first?  Then start with a Mediation clause.

    “The parties agree to mediate all disputes, controversies or claims arising out of or in connection with this contract, including issues of its existence, validity or termination.  If the parties fail to agree on the identity of the mediator or the terms of the mediation within 10 days of a party’s request for mediation, the mediator and form of mediation shall be chosen by [ name of dispute resolution institution ] upon the application of either party.”

    Remember, about 80% of disputes that go to mediation DO settle.  Even if your dispute does not settle, chances are the mediation will help to clarify and simplify the issues, probably saving time and money in court or arbitration.

  2. If you have begun with a mediation clause, you must make it clear when a party will have the right to proceed to mediation:

    “If the parties are unable to settle their dispute by mediation within [number ] days of the request for mediation, either party shall be at liberty to commence arbitration proceedings. “

    THEN add the arbitration clause.

  3. Make your arbitration clause as broad as possible to avoid having part of the dispute decided by arbitration and another part going before a judge.  What a waste of time, money and effort! 

  4. Most arbitration institutions have their own recommended clause.  It is usually best not to tamper with the clause, as it has been tried and tested, and it works.

    For example, the Court of Arbitration of the International Chamber of Commerce suggests the following standard clause:

    “All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.” 

  5. However, if you anticipate that you will have to enforce the arbitration award in Mainland China, you should make a slight addition to the ICC recommended clause, specifying the name of the institution under whose auspices the arbitration is to take place.  For example:

    “All disputes arising out of or in connection with the present contract shall be finally settled under the auspices of the International Chamber of Commerce, using its Rules of Arbitration, by one or more arbitrators appointed in accordance with the said Rules.” 

  6. There are other matters to consider stipulating in your dispute resolution clause.  If you want an ad hoc* procedure, rather than an institutional one, it is essential to include in your dispute resolution clause  provisions covering:

    • the number of arbitrators [ one or three, depending on the amount and complexity of the dispute]
    • the place of the arbitration, its legal “seat”, which should be a jurisdiction which is a party to the New York Convention and whose courts have an “arbitration-friendly” attitude
    • the law governing the merits of the dispute
    • the language of the arbitration procedure.

  7. Useful extras. You may wish to add to the dispute resolution clause provisions to keep the matter confidential, to make provision regarding costs, interim measures, production of documents and evidence, or to deal with multiple parties.

    *  It is untrue that ad hoc arbitration is “unadministered arbitration”.  All arbitrations are administered by someone.  With institutional arbitration, the institution provides some degree of administration and/or supervision.  With an ad hoc procedure, it is the arbitral tribunal and the parties’ counsel who do the administration and there is no supervision, except by the relevant state court.

    PLEASE NOTE:  THIS INFORMATION IS NOT INTENDED AS LEGAL ADVICE, BUT MERELY TO PROVIDE AN IDEA OF THE TYPE OF INFORMATION THAT SHOULD GO INTO A DISPUTE RESOLUTION CLAUSE.  FOR QUESTIONS ABOUT ANY ASPECT OF YOUR DISPUTE RESOLUTION CLAUSE, CONTACT US AT ACULEX.