In today’s business climate, a difficulty or disagreement between parties can quickly escalate, evolving into a full-blown commercial dispute. These disputes can often be expensive, extremely time consuming for all parties involved, and catastrophic to the parties’ working relationship.

Accordingly, it is vital that companies, particularly those embarking upon mergers and acquisitions or joint ventures, pay close attention to the definition and signing of robust and comprehensive dispute resolution clauses as early as possible. Dispute resolution clauses can provide crucial protection to a firm’s interests in the event that any deal eventually turns sour.

Unfortunately, despite their importance, dispute clauses are often treated as a mere formality at best, and an afterthought at worst. Following months of negotiation, exhausted and exasperated parties and their legal teams often fail to include a comprehensive dispute resolution clause, opting instead to insert a generic ‘boilerplate’ agreement at the last minute. Important details which could prove vital to the resolution of any potential dispute are inexplicably overlooked by these broad agreements. Key features such as whether a potential dispute will be decided by a panel of arbitrators or a judge, the location of any future hearing, and how long any dispute will take to be resolved, are passed over by boilerplate agreements. However, these issues and others, could, and should, be clarified during the course of drafting a bespoke dispute resolution clause. Ideally, firms should be able to utilise appropriate dispute resolution clauses, including governing law, to settle any issues which may arise. As such, particular attention should be paid to the terms and conditions of the dispute resolution clause.

Oct-Dec 2014 issue

Richard Summerfield