By the time key commercial terms have been agreed, the choice of dispute resolution mechanism can be seen as a tiresome formality and often little thought is given to whether the mechanism is appropriate, or even whether it works.
This means that parties can be stuck with dispute resolution mechanisms which are unsuited to the actual dispute that has arisen, or may arise.
It is not impossible for parties to agree to vary the dispute resolution mechanism after the contract has been executed and indeed after a dispute has arisen, and in these times of extreme uncertainty there may be good reasons why both parties want this. On the whole, though, this is a difficult negotiation so it is much better to try and get the dispute resolution mechanism right in the contract when first agreed.
Today, when you are entering into a contract, more than ever, do take the time to get your dispute resolution clause right.
But if you are hit with a dispute under an existing contract, do think really carefully before you embark on proceedings under the dispute resolution clause. There may be options out there, that are not in your contract, which might give you a better overall outcome.
Turning to the dispute resolution mechanisms themselves, at the highest level there is often a binary choice between arbitration and court proceedings. Both, of course, have their perceived advantages and disadvantages in principle, but arbitration tends to have the edge in cross-border transactions because the prospects of international enforcement are much better.
You should also think about particular factors which affect your business. For example, if you typically have standard contracts where you are always the seller, do you want to include a wide range of dispute resolution options in your contract that you can unilaterally choose from when a dispute arises, depending on the most effective way of enforcing your rights.
In summary, there is today a much greater range of choices of dispute resolution than there ever has been in modern history. There are some really smart active choices that you can make either when entering into a dispute, or indeed after a dispute has arisen, which may make your experience of the dispute resolution process a lot more satisfactory overall.
In short, we recommend that you set aside a few minutes of your time to think about what you want to achieve and attempt to assess whether your existing dispute resolution provisions fulfil those needs. If they do not, we recommend you consider what steps you should take to put yourself in the best position to address any shortcomings in those provisions.
If you require any guidance in your choices, or in understanding how your preferences can best be reflected in the right dispute resolution clause, we would be very happy to discuss this with you, please contact us.