10 Questions to Ask When Drafting Dispute Resolution Clauses in Cross-Border Contracts

Well-crafted dispute resolution clauses give corporations a tactical advantage in the event that a dispute arises.

September 18, 2013

While no one wants to think about a dispute when entering into a deal, well-crafted dispute resolution clauses give corporations a tactical advantage in the event that a dispute arises. In "Top 10 Strategic Considerations When Drafting Dispute Resolution Clauses in Cross-Border Contracts," Latham partners Claudia Salomon and Sebastian Seelmann-Eggebert identified 10 key areas parties need to pay attention to when drafting these clauses.

1. What should the governing law clause contain? Every cross-border contract should contain a governing law clause. Otherwise, the parties will waste significant time and costs fighting the issue once a dispute arises.

2. Which set of arbitration rules will be used? Typically parties prefer to adopt an arbitration institution’s rules and recommended clause because this saves the time and expense of developing an ad hoc procedure.

3. How should arbitrators be selected? The number of arbitrators that are appropriate depends on the amount in dispute and the complexity of the case. If parties wish to choose a method for selecting the arbitrators that differs from the method provided in the selected arbitral rules, the clause may set forth how the arbitrators should be selected.

4. Where should the venue be? The legal place, or “seat,” of the arbitration determines the arbitration law, and the courts of that jurisdiction will have a supervisory function over the arbitration. A venue in a country which is a signatory to the New York Convention and is known to respect the arbitration process should be selected.

5. What should the language be? Contracts between parties who use different languages should specify the arbitration language — most commonly English.

6. Is a tiered dispute resolution process necessary? Parties should consider whether a tiered dispute resolution process is necessary or helpful for their type of contract. A tiered clause will provide for negotiation or mediation before a party can file for arbitration.

7. What method of discovery will be used? The method for obtaining and submitting evidence in an international arbitration falls within the tribunal’s discretion, unless the parties agree otherwise. To the extent any party wants to utilize a particular method for obtaining and submitting evidence, the method should be specified in the clause.

8. Should interim measures be specified? It is not incompatible with an arbitration agreement for a party to request, before or during arbitral proceedings, from a court an interim measure of protection and for a court to grant such measure.

9. How can time and costs be reduced? If time is of the essence, parties should address this issue in the dispute resolution clause. Reducing the time and costs of an international arbitration can be accomplished through various steps, including specifying the time permitted for each stage of the arbitration, the time when the hearings should take place, the time when the award should be issued after the tribunal has been constituted, and a limit on the number of written submissions. The clause can also provide that the dispute be decided on the papers, rather than hold an evidentiary hearing.

10. Is confidentiality necessary? Although frequently cited as a benefit of arbitration, confidentiality is not guaranteed unless the parties expressly provide for it. If parties desire confidentiality, they should specify so in the dispute resolution clause, except where disclosure may be required by law.

For more information on why these 10 areas are so important to consider when drafting a dispute resolution clause, read the full article here.

 

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