Disputes over dispute resolution clauses – how to avoid commercial nonsense

Contracts routinely contain dispute resolution clauses in which the parties record their binding preferences for the resolution of disputes. This may include referral to a particular court, or arbitration, mediation or expert determination. It may include several steps – negotiation, followed by mediation, followed by referral to court or arbitration and/or an expert.

It is not uncommon, and is perhaps understandable, that when negotiating a contract the parties tend to focus on the commercial opportunities rather than what will happen if things go wrong.

When drafting a contract, it is tempting to adopt the boilerplate dispute resolution clause at hand. However, a poorly drafted clause will do little to solve issues and may actually become the cause of further time consuming and costly dispute.