What Is A Dispute Resolution Agreement
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. Caution should be exercised when such a clause is contemplated. While valid under English law, other legal systems may take a different approach. In some legal systems, split clauses may be considered invalid because they do not provide an appropriate reference to an arbitration procedure (where only one party has the right to refer the matter to arbitration proceedings) or because they are unfair and contrary to public policy (because they strongly prefer a party). If your contract contains a splitting clause, check the applicable law of the contract to make sure it recognizes its use and validity, and also check the law of a competent court, for example. B any jurisdiction in which the execution of a judgment or sentence could be sought. Clarity is essential in the development of these clauses. Also think carefully about how the clause should work. It is important to clearly define the exact circumstances in which the option can be exercised and the extent of control of the strongest party.
For example, is the strongest party an effective veto, so that if the other party initiates proceedings within the indicated forum, the strongest party can intervene to determine whether these proceedings will be suspended and whether the procedure will be initiated when choosing the forum? This guide focuses on the key considerations to be considered in the development of dispute resolution clauses. 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. 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. A staggered dispute resolution clause may provide, for example. B, which the parties negotiate for a fixed period (for example. B 30 days from notification by one party to the other party). If negotiations do not succeed, the parties could end up with a non-binding form of ADR (for example.
B mediation) and, in the absence of a solution, make the dispute a binding dispute resolution procedure for a decision. Risks can be minimized by reflecting on the dispute resolution strategy at the transaction stage. In particular, think carefully about where you need to hear all the quarrels that go to the heart of the transaction. This choice should then be included in the main contracts, which will help to ensure that disputes that may fall under several of the treaties are heard in this forum.