DRAFTING AN INTERNATIONAL DISPUTE RESOLUTION CLAUSE
When forging a commercial relationship, parties typically enter agreements with the best of intentions. But commercial disputes can emerge at any time and for a litany of reasons, including project complexity, contractual complications, external factors or communication breakdown.
When conflict does arise, a well-crafted dispute resolution clause can be invaluable. Yet parties often overlook them, or give them minimal attention – even though they may turn out to be the most important aspect of the contract.
“There is a real monetary value attached to a dispute resolution clause: it is worth at least as much as the rest of your contract,” believes Philippe Pinsolle, partner and head of international arbitration at Quinn Emanuel Urquhart & Sullivan, LLP.
“Parties spend hours negotiating fine-tuned substantive provisions, but the key issue is who is going to interpret them in the event of a dispute. If you get the wrong decision maker, you will get a bad decision. Worse, if you draft an arbitration agreement improperly, you may not get any decision at all, at least for a few years, and if ever you do get a decision, it may not be enforceable,” he explains.
Carefully crafted
Too often, pre-existing boilerplate clauses are cut and pasted from existing contracts with little or no assessment made of their suitability to the current agreement. This is done late in the drafting process with no scope for proper review or consideration of the provisions. Unfortunately, commercial parties often view them as ‘champagne’ clauses – drafted last minute when the corks have already been popped in celebration of the deal.
Jul-Sep 2021 issue
Richard Summerfield