The dispute resolution clause is negotiated last and read first. A short guide to drafting one that works when the relationship it governs has broken down.
Dispute resolution clauses are negotiated at the end of a deal, when everyone is tired and nobody expects to use them. They are then read at the beginning of a dispute, when the relationship has collapsed and every word is being tested. That asymmetry is why so many of them fail.
Decide the forum once
The most common defect is a clause that gestures at two forums without choosing between them — arbitration in one sentence, the jurisdiction of the courts in the next. The result is a preliminary fight about where the fight will happen, decided months before anyone reaches the merits. If you want arbitration, say so unequivocally and reserve the courts only for interim relief and enforcement.
Escalation clauses need deadlines
Tiered clauses that require negotiation, then mediation, then arbitration are sound in principle. They fail when the tiers have no time limits. A party that wants delay will simply refuse to conclude the first tier. Every step should carry a fixed period after which the next tier opens automatically.
- Name the institution and the rules, or specify an ad hoc framework in full
- State the seat — it determines the supervising court, not merely the venue
- Fix the number of arbitrators and the appointment mechanism, including default appointment
- Specify the language and the governing law of the arbitration agreement itself
- Preserve access to interim relief before a tribunal is constituted
Confidentiality and enforcement
Parties frequently choose arbitration for confidentiality and then draft nothing to secure it. Confidentiality is not automatic in every framework; where it matters, it should be an express obligation with defined carve-outs. Enforcement deserves the same attention: an award is only as valuable as the assets it can reach, and that question is answered by where the counterparty holds them.
A dispute resolution clause is the only part of a contract drafted for the moment when goodwill has run out. Draft it for that day.
This article is general commentary, not legal advice. Speak to our team about how it applies to your circumstances.
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