Protecting Your International Contracts Through Effective Dispute Resolution Clauses
Your basic options for dispute resolution:
- Finding a win-win through structured negotiations (e.g., escalation to senior management) and/or mediation (negotiations assisted by a neutral mediator with skills in finding solutions and keeping people talking). Finding a win-win is typically faster and cheaper than arbitration or litigation and is best suited where you are also seeking to save the business relationship. That said, parties are not always able to compromise, so you need an effective safety net to resolve your dispute if negotiations fail.
- Getting a final resolution of the dispute through litigation or arbitration. The trend in international life sciences contracts is to opt for arbitration due to its benefits:
- Neutrality – no litigation on the other party’s home turf
- Enforceability – arbitral awards are often easier to enforce abroad than court judgments, due to a UN Convention spanning almost the entire globe
- Parties’ choice of arbitrators – better chances to get a decision-maker you trust and who understands the industry
- Confidentiality – if you choose the arbitration rules wisely
- Saving the relationship – arbitration is often more civilized than litigation
- Time – if you choose the place of arbitration wisely, arbitration is typically quicker than court litigation (including appeals)
- Cost – arbitration allows for better cost efficiency
- Combining both approaches in a multitier approach, for example, a combination of structured negotiation, mediation and arbitration.
Here are six tips for drafting effective dispute resolution clauses:
- Use the written form. Include a written reference to standard terms and maintain a record of sending them, and of your partner’s written acceptance.
- Choose the best place of arbitration and arbitration rules. Get help from a trusted adviser who can give you a global comparison on these specialized questions.
- Keep things short. Do not change the standard clause of the chosen institution more than necessary, and resist the temptation of adding too much detail.
- Think of confidentiality. Choose arbitration rules with a confidentiality clause, or agree on such a clause yourself.
- Get help on multitier clauses. Ask a trusted adviser to help you combine mediation and arbitration in a way that gets you what you want without risking what you need.
- Avoid conflicting clauses. Costly disputes can arise from conflicting dispute resolution clauses in different documents or carve-out clauses for certain disputes.
The dispute resolution clause may be discussed at the end of tiring negotiations but can later prove key in the success or failure of protecting your contract. You should therefore treat it with the attention that it deserves.
These tips are more fully addressed in a recent article for In Vivo, a well-regarded global publication in the life sciences space, which you find here: Conflict Management Strategies And Dispute Resolution Clauses – Ensuring Your International Contract Will Be Enforced.