Writing Dispute Resolution Clauses in Contracts - a Webinar with the London Chamber of Arbitration and Mediation


On Thursday 21 January the London Chamber of Arbitration and Mediation (LCAM) hosted a webinar featuring Duncan Bagshaw, partner at Howard Kennedy, and Gill Mansfield, Commercial Mediator, and led by Peter Bishop (Deputy Chief Executive of LCCI) on writing dispute resolution clauses in contracts.

These bullet points summarise the areas of the discussion. 

A link to the video of the session is here:

What is a dispute resolution clause?

  • Often viewed as boilerplate.
  • Can have very serious implications if a dispute arises.
  • Difference between governing law & jurisdiction and dispute resolution clauses (use of ADR).
  • Benefits of using a dispute resolution clause – opportunity to control how disputes are dealt with (timing, forum, location, language, who makes the final decision and the process used, and the ease of enforcement).


Mediation is process where a highly skilled neutral third party (the mediator) works with parties who are in dispute to help them find a solution that everyone can live with. 

It has a number of benefits:

  •  Firstly, you remain in control of the process – the location, date and timing of the meeting are all determined by the parties themselves;
  • It’s a flexible process that can be built around the needs of the parties, and it is usually quicker and cheaper than litigation;
  • And most importantly, the parties are the decision makers.  The mediator doesn’t impose any judgement or make a decision in relation to the dispute – the parties remain in control of the decision-making process and determine the outcome; 
  • In mediation the parties can agree to any form of outcome they want.  That might include renegotiating the terms of a contract in a commercial dispute, agreeing to the transfer of shares or property in a shareholder dispute or the transfer of assets or the licensing of IP in an IP dispute;
  • Litigation can be very damaging to business relationships. Mediation can help preserve commercial relationships and even help repair business relationships that have broken down;
  • Court proceedings usually are public.  In contrast mediation is a private process.  Everything that is said in a mediation remains confidential and so there is far less risk of adverse publicity; 
  • It’s also a “without prejudice” process so nothing that is disclosed in a mediation can be used in any subsequent court proceedings.  You can safely explore ideas for settlement knowing that you won’t be bound by them if you can’t reach a settlement.

Finally, the outcome of a mediation doesn’t set a legal precedent (unlike litigation) so you need not worry about prejudicing your position against other clients.

  • Should you choose court or arbitration?
    • Court: a binding decision by a judge in a national court. You can choose the courts of a particular country. Normally the level of court will be determined by the amount in dispute.
    • Arbitration: a binding decision by a non-judge or three, chosen according to the parties' agreed mechanism, in a private tribunal procedure organized by the parties.
      • To be clear: arbitration is a binding decision on a disputed case. It is not a method of helping the parties to agree – unlike mediation.
  • Pros and cons of the two systems:
    • In court proceedings, the judge is not chosen by the parties at all. He or she is whoever is randomly allocated the case by the court.
    • In arbitration the arbitrator(s) are chosen by the parties or by some neutral person they have appointed to do so. The arbitrator will generally be experienced in cases relating to the particular subject matter, for example construction or engineering, finance or IT. In a very technical case, you can choose a real expert to be the arbitrator.
    • In court proceedings, you can always appeal on the grounds that the judge got the law wrong. You can even appeal on the grounds that the judge got the decision wrong by misapplying the law to the facts. That appeal might go through 2 or 3 levels of appeal court and take several years. But at least you have a way to challenge if you feel the judge went wrong (or if the law in the area is not clear).
    • In arbitration, generally there is no appeal at all. Unless you have agreed to it, the arbitrators' decision on the law and the facts will be totally final and cannot be appealed. You can challenge the decision on very narrow grounds like there was no arbitration agreement at all, or the arbitrator was biased. But that is very, very hard to do.
    • In court, the judge's salary is paid by the state. So you don't pay him or her any fees. There are court fees which can be quite expensive (for example to start a claim for more than £200,000 costs £10,000 just to get it going). But the court fees are less than the arbitrator's fees in almost every case.
    • In arbitration, you have to pay the arbitrators' fees. Those can add up to a lot (for example in a large case I am doing at the moment with 3 arbitrators, the arbitrators will probably be paid £300,000). However, they are paid professionals who have agreed to work as arbitrator. They are therefore generally quicker to respond, and can fit the hearings into their diary earlier than the court usually can.
    • This means that usually arbitration cases are resolved more quickly than court cases. Not always but usually. Some cases take several years but typically arbitration is rather faster. Typical time for an arbitration even in a large case: less than a year. Most large court cases take longer.
    • However, contrary to popular belief, arbitration is not cheaper. Because you have to pay the arbitrators' fees, and lawyers fees are usually comparable (and sometimes even more), arbitration is usually more expensive unless it is a very straightforward arbitration done in a great hurry.
    • Also note that arbitration generally does not allow for summary dismissal of hopeless cases. It is therefore not very popular for things like enforcing straightforward loan agreements – because sometimes the debtor is really just buying time, and the creditor just wants to go to court and ask the judge to throw out the defence without a long procedure. That is very rare in arbitration.
    • Arbitration will generally be confidential. If you want, you can agree that it will be fully confidential. Court proceedings are generally not confidential unless the court can be persuaded that confidentiality will somehow infringe upon the rights of one of the parties, which is quite rare.
    • Finally, but by no means least (and maybe the most important) is international enforcement. Unlike a court judgment, an arbitration award can be immediately enforced under the New York Convention in almost every country in the world. Court judgments are subject to a variety of different regimes for enforcement and almost none of them are as effective as the New York Convention.

To sum up – simple contracts for financial arrangements, sales or services, or dealing with parties in only one country: court will usually be your best bet.

But if more than one country is involved, or complex contracts, or technical matters, arbitration is generally preferable.

Types of clauses 

What should a dispute resolution clause cover? 

  • If court: 
    • Which court will have jurisdiction?
    • Exclusive jurisdiction or non-exclusive?
    • Any asymmetric or one-way provision?
  • If arbitration:
    • Try to Keep It Short and Simple (KISS)!
    • Institutional recommended clauses are the best for simplicity.
    • They make a lot of the decisions for you. They are used to agree that an arbitration will take place under the rules of an institution like the LCIA.
    • They include [blanks] where you really must specify. Those are:
      • Seat (legal place)
      • Language
      • Number of arbitrators

But there are many variables that you can choose to incorporate if you would like to do so: Our advice is, if you don't need to, don't say anything, but if there is anything you are really bothered about, spell it out.

  • These are just some of them:
    • Any qualifications of the arbitrators?
    • Any special provision for appointment beyond default process under chosen Rules (or law of seat)? EG list and strike procedure or similar.
    • What rules?
    • Any opt-ins or opt-outs (EG LCIA Emergency Arbitrator)?
    • What institution (if any)?
    • Specify place of hearings?
    • Provide for any adjustment to legal powers of courts (such as granting interim injunctions, or hearing appeal on a point of law?)
    • Provide any maximum time-limit before the award (and power to adjust it)?

Tiered Dispute Resolution Clauses? 

These clauses (which are sometimes referred as dispute escalation clauses) provide for the use of different processes at different stages of a dispute.

  • You might begin with a provision requiring informal negotiations as stage 1, If so:
    • What is the contractual mechanism or “trigger” for these negotiations?
    • Who will be meeting (project managers / commercial leads / senior management / MDs / CEOs)?
    • Will it be a single stage or multi-stage process ?
    • How long are parties required to negotiate before moving to the next stage?
  • The next stage might provide for the use of mediation:
    • Consider how the mediator will be appointed;
    • Whether the administration of the mediation and the appointment process will be governed by an institution (such as LCAM);
    • What happens if the parties can’t agree on who the mediator should be? 
  • If rules not chosen, or if you want to adjust rules:
    • Any specific provision for costs of ADR/mediation stage?
    • Select means for final adjudication (options discussed above)

The final stage would be some form of final adjudication (either by the courts or arbitration) if the attempts at settlement don’t work.

The beauty of these clauses is that you can build the process that you want to use in the event of a dispute and use the combination of processes that best suits your business.

How important is it to get the clause right? 

The jurisdiction/dispute resolution clause often gets left until last and then rushed through. Don't make it the "midnight clause". Ask a dispute lawyer to look over your dispute clause to identify any problems.

Excessive attempts to compromise in this clause can be messy or even fatal to your dispute resolution procedure. Try to find a clear, agreed solution.

Other considerations 

  • You may wish to include a separate confidentiality provision for contracts relating to very sensitive matters.
  • Contracts often provide for any state or state-owned party to give a Sovereign immunity (suit and execution) waiver to get around their immunity.
  • It can be helpful to nominate an agent or an address for service of documents in a convenient jurisdiction to avoid lengthy formal service of court or arbitration documents.

If you need help with a dispute resolution clause, whether your contract is currently being drafted or you need assistance in understanding such a clause in a pre-existing contract, please do contact Duncan Bagshaw or a member of the dispute resolution team at Howard Kennedy.

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Don't make the dispute clause the "midnight clause" in your contracts. Ask a dispute lawyer to look over your dispute clause to identify any problems.

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