Contract Clauses
Dispute Resolution Clauses
The CDP can advise on the appropriate form of Dispute Resolution Clauses to be incorporated into contracts to refer disputes to CDP. Some draft clauses are set out below. They should be read in conjunction with the commentary which follows the clauses.
Clauses for Potential Disputes:
Clause A Arbitration
(x) Any dispute or difference arising out of or in connection with this [Contract] shall be referred to arbitration under the Arbitration Rules of The City Disputes Panel in force at the date the dispute or difference arises.
Clause B Non-binding use of ADR techniques
(x) The parties will consider using alternative dispute resolution (“ADR”) techniques for any dispute or difference arising out of or in connection with this [Contract]. The parties may consult The City Disputes Panel (CDP) for assistance in selecting the most appropriate technique. If [either/any] party does not wish to use, or continue to use, ADR techniques, or such techniques do not resolve the dispute, the parties shall refer the dispute to arbitration under the Arbitration Rules of CDP in force at the date the dispute or difference arises.
(y) The agreement contained in clause [x] above is governed by English law.
Clause C Non-binding reference to Conciliation/Mediation (See Note 1 below)
(x) The parties will consider using conciliation in accordance with The City Disputes Panel (CDP) procedures then in force for any dispute or difference arising out of or in connection with this [Contract]. If [either/any] party does not wish to use, or continue to use, conciliation, or conciliation does not resolve the dispute, the parties shall refer any such dispute or difference to arbitration under the Arbitration Rules of CDP in force at the date the dispute or difference arises.
(y) The agreement contained in clause [x] above is governed by English law.
Clause D Binding reference to Conciliation/Mediation (See Notes 1 & 2)
(w) Any dispute or difference arising out of or in connection with this [Contract] shall be referred to [conciliation/mediation] in accordance with The City Disputes Panel (CDP) procedures then in force before resorting to arbitration.
(x) The [conciliation/mediation] process will be commenced by service by one party on the other(s) of a written notice that the dispute is to be referred to [conciliation/mediation] (the “Commencement Notice”). The parties will then participate in good faith in the [conciliation/mediation]. The [conciliator/mediator] shall be appointed by CDP. In the event that the parties are unable to agree a choice of [conciliator/mediator] within [ ] days of the date of service of the Commencement Notice, the parties shall accept a [conciliator/mediator] nominated by CDP.
(y) If, and only if, the dispute is not resolved within [ ] days of the date of service of the Commencement Notice (or such longer period as the parties may agree) the parties shall refer the dispute to arbitration under the Arbitration Rules of CDP in force at the date the dispute or difference arises.
(z) The agreement contained in clauses [w to y] above is governed by English law.
Optional protective provisions:
(a) Nothing in clauses [w-z] shall prevent [either/any] party from having recourse to a court of competent jurisdiction for the sole purpose of seeking a preliminary injunction or such other provisional judicial relief as it considers necessary to avoid irreparable damage.
(b) In calculating the limitation period for any claim that is ultimately referred to arbitration, the period between the date of service of the Commencement Notice and the date on which the parties are free to refer the claim to arbitration shall be excluded.
Clauses for Existing Disputes:
Clause E Arbitration
(x) A dispute having arisen between AB of .......... and XY of .......... concerning .......... the parties hereby agree to refer that matter to [arbitration/mediation] under the [Arbitration/Mediation] Rules currently in force of The City Disputes Panel.
Dated this ................ day of 20..
Signed on behalf of AB...........
Signed on behalf of XY...........
Notes:
1 These clauses provide for CDP conciliation. If the parties wish to provide for CDP mediation, the same clause can be used, simply replacing the term “conciliation” with the term “mediation” and by replacing “The City Disputes Panel (CDP) procedures” with “The City Disputes Panel (CDP) Mediation Rules”.
2 Although this clause has been drafted with a view to creating binding obligations, it is uncertain under English law whether clauses which require parties to use conciliation before resorting to litigation are specifically enforceable. Please see the commentary which follows the clauses.
Commentary
These clauses are designed to inform draftsmen of some of the dispute resolution options which they may wish to consider. The suitability of each clause to the contract in question will depend on the nature of the contract and is a matter which the draftsman must consider in each case.
Before using any of the clauses set out above, the following important points should be taken into consideration:
1. Clause A is CDP’s standard arbitration clause. Although the clause refers only to arbitration, CDP arbitration is a flexible process and does not necessarily exclude the use of ADR techniques such as conciliation/mediation. The suitability of such disputes can be discussed with the arbitrators at the First Management Meeting or at any time thereafter.
2. Clauses B and C are drafted so as to be non-binding. In other words, if either party wants to commence the arbitration procedure without first trying to resolve the dispute using ADR techniques (Clause B) or conciliation/mediation (Clause C) then it is free to do so. These non-binding clauses have three main benefits:
- the clauses increase, rather than narrow, the dispute resolution options, leaving the parties free at the time the dispute arises to use conciliation/mediation or some other ADR technique if, but only if, it is appropriate for that dispute;
- the clauses bring the option of using ADR techniques to the attention of those handling the dispute, who will often be different managers or lawyers from those who drafted the contract. This ensures that the option of ADR is not overlooked; and
- parties sometimes feel that by proposing ADR they will appear to the other side to lack confidence in the strength of their case. A non-binding ADR clause can overcome this fear, as both parties will have agreed in their contract that ADR is in principle the first option.
3. Clause B states that the parties can consult CDP to assist in selecting the most appropriate ADR technique for the dispute in question.
4. Clause D is drafted using mandatory language. In other words it requires the parties to use conciliation/mediation. Only if conciliation/mediation fails are the parties free to resort to arbitration. Under English law, it is uncertain whether this clause is enforceable. Whilst the English courts have shown that they will where possible require parties to observe a dispute resolution procedure which they have agreed to in their contract they have also made it clear that they will not enforce agreements to negotiate which are too uncertain to have binding force.
Clause D is intended to give certainty to the pre-arbitration steps that the parties must go through. It also provides a cut-off date, beyond which the parties are free to resort to arbitration. These provisions are designed to increase the chances of the clause being enforceable, but this cannot be guaranteed. If Clause D is selected parties should consider what additional protective provisions may be required. Provisions (a) and (b) are two possibilities.
5. Whilst the enforceability of ADR clauses is uncertain under English law, English case law does give some idea of the attitude of the English courts. The law in other jurisdictions may be completely different. Therefore, if the main contract is governed by anything other than English law, and the position under that foreign law is not known, a provision making the agreement in the dispute resolution clauses subject to English law should be considered. Clauses B-D contain such a provision.
6. Although clauses B, C and D provide for CDP arbitration to be the binding process which the parties are to resort to in the event that they fail to resolve their disputes using CDP conciliation or other ADR techniques, these clauses can easily be adapted to provide for litigation to be the process of last resort.
