Portland, USA

How to write a bad international alternative dispute resolution clause

By Jihee Ahn, Harris Bricken

Many of our clients believe alternative dispute resolution (ADR) clauses are little more than boilerplate, but well-drafted ADR clauses can not only put you on the winning side in any litigation, they can also cause your counterparty to back away from litigation entirely. Unfortunately, a poorly drafted alternative dispute resolution clause can be worse than no clause at all.

My firm has a strong international litigation practice, and we are seeing an increase in alternative dispute resolution provisions – particularly, arbitration provisions – that are truly awful for our clients. Why? In recent years many international lawyers have strengthened these provisions to protect their own clients. Here’s a sampling of what we are seeing in contract drafts:

  1. The agreement requires the parties first try to resolve any disputes on their own, without any elaboration on what that should entail. Even worse, the agreement may require the parties do this for a set period of time (anywhere from 60 to 180 days), oftentimes in person in the foreign country.
  2. The agreement requires that if the parties are unable to resolve their differences on their own, they must turn to mediation. Again, the agreement is silent on what constitutes mediation, how the aggrieved party should initiate mediation, and the procedure for the mediation.
  3. The agreement requires that if mediation fails, the parties must resolve their dispute via arbitration. The agreement is often silent on how to initiate the arbitration, which forum should be utilised, and in which language the arbitration should be conducted. In some countries, the lack of specificity surrounding the language of the proceedings means they will be conducted in the country’s offcial language; in other countries, it means they will be conducted in the language of the agreement.

Bottom line, we are increasingly seeing alternative dispute resolution (arbitration, litigation, mediation) provisions that were designed not to resolve business disputes, but to make it confusing and impractical (i.e., too expensive) for one party to sue the other. Your ADR provisions should be drafted so they protect you, not the opposing party, and they should be practically enforceable.


Jihee Ahn

Jihee Ahn

GGI member firm
Harris Bricken
Law Firm Services
Portland (OR), Seattle (WA), USA
T: +1 503 207 7313
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Harris Bricken is an international law firm with lawyers in all over the globe. From its offices in the United States, Europe, Asia, and Latin America, Harris Bricken focuses on representing cutting edge businesses that operate internationally.

Jihee Ahn co-chairs Harris Bricken’s Dispute Resolution/Litigation practice. She primarily represents companies in international and domestic business, intellectual property, and real estate disputes.
 


Published: Litigation & Dispute Resolution Newsletter, No. 15, Autumn 2021 l Photo: paulacobleigh - stock.adobe.com

 

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