DRAFTING CONTRACTUAL PROVISIONS FOR DISPUTE RESOLUTION
CD: Would you agree that drafting a dispute resolution process during the formation of a business relationship or investment – well in advance of any actual dispute – is the best time to do so?
Hammes: Disputes are more or less inevitable in a business relationship. They may be destructive but can also induce change and improvement. In any case, companies should have a strategy in place to deal with disputes once they arise. Such a strategy needs to include a method of evaluating which dispute resolution procedure should be applied to the dispute that has arisen in a particular situation. However, in many cases dispute resolution mechanisms are linked to the contract formalising the relationship. In order to avoid sloppy or pathological clauses, dispute resolution clauses should be considered right from the beginning of contract drafting – not left until five minutes before the executives sign the agreement. Any negligence in this regard may put the negligent party in an unfavourable situation if a dispute arises.
Karrar-Lewsley: Once a dispute has arisen it is likely that the relationship between the parties will deteriorate and any suggestion of arbitration or mediation will be rejected. This may leave a party at the mercy of an unfamiliar local court and can lead to concurrent proceedings in different courts being launched. A clear and effective dispute resolution clause will give certainty to the parties and avoid time and money being spent arguing about how the dispute is to be resolved. Dispute resolution clauses can also contain steps which must be followed to see if an amicable solution can be found before a claim can be brought before the courts or an arbitral tribunal. Not only does this help cases settle before the expenses of litigation have been incurred, it also means that parties are aware of disputes before proceedings are filed and have an opportunity to resolve them rather than being ambushed with a claim.
Apr-Jun 2013 issue
Kirkland & Ellis International LLP
Al Tamimi & Company