The content of the dispute resolution clause or clauses should be considered and developed in a conscious and thorough manner to address the particular context and needs of the situation. If you invest time and resources in advance, you can save time, costs and problems later. There is much more latitude for the parties to adapt the proceedings to the needs of a particular litigation in arbitration proceedings than in the courts. In arbitration proceedings, parties are generally free to agree on appropriate proceedings, hold hearings in a neutral country, and appoint arbitrators who are of a nationality other than the parties. Arbitrators may also be empowered to decide a dispute under other material rules and/or other rules that a court is required to follow. It is also possible to use multi-step dispute resolution clauses, which provide for escalation and different approaches when a dispute cannot be resolved. A standard, multi-step clause may provide for direct negotiations between the parties, mediation, and arbitration or litigation. Multi-level dispute resolution clauses may be appropriate where things can be complex and there is an interest in maintaining an ongoing relationship between the parties. There are many different methods of dispute resolution, but they are, on the whole, on one of two sides: non-binding or binding. Dispute resolution clauses must ensure security and establish a clear dispute resolution mechanism.
They must be more than an agreement to agree on dispute resolution. They should provide details on the dispute resolution process and how to proceed. If the clause is not secure, the court may find that the clause is not applicable. In developing the dispute settlement clause, the first decision is to determine the forum to be chosen for the resolution of disputes arising from the agreement. There are several options and parties can choose either a forum or a combination of different forums. The common starting point is to determine whether disputes or arbitration procedures are more appropriate. This requires an understanding of the pros and cons of different forums, as the transaction is better suited to one or the other. The term “split” or “hybrid clause” includes a large number of hybrid dispute resolution clauses, the most common clause providing for both judicial jurisdiction and arbitration in conjunction with a mechanism that allows one or both parties to determine the procedure as soon as a dispute arises. Such clauses are generally used when a party has a superior negotiating position, the strongest party uses the clause to optimize its position in a particular dispute. For example, the clause provides for disputes to be settled in the English High Court, with Part A also entitled to vote in order for the dispute to be referred to arbitration proceedings. Such clauses are increasingly appearing in financing agreements, particularly in international derivatives and credit transactions with counterparties in jurisdictions where English court decisions may not be easily enforced. They have the obvious advantage of allowing the strongest party to control where a proceeding is to be commenced, with the usual choice between arbitration or litigation.