Multi-tiered Dispute Resolution Clauses in International Contracts

By Prof. Dr. Renate Dendorfer-Ditges, DITGES PartGmbB

Multi-tiered dispute resolution clauses provide for at least two consecutive stages of dispute resolution and they enable the respective parties full use of the ADR-toolbox. Such clauses, also referred to as “multistep ADR clauses” or “Wedding Cake Clauses” have a filter effect by using the escalation ladder from negotiation without a third party involved, over mediation as an amicable process including a neutral third party, both focusing on “win/win”-results. The ultimate ratio is arbitration as an adversarial “win/loose”-proceeding.

When drafting multi-tiered clauses some standards should be considered (see also: IBA Guidelines for  Drafting International Arbitration Clauses, 2010):

There is a clear choice of the appropriate procedures: A clause such as: “The parties use their good faith efforts to agree upon an appropriate method of non-judicial dispute resolution.” transfers the decision regarding the dispute resolution method to a situation where the parties are rarely able to agree on the further necessary steps:

  • Unquestionable wording, especially to specify a period of time for negotiation or mediation, triggered by an indisputable event (i.e., written request) for the transfer to arbitration
  • Legal certainty and avoiding the trap of rendering arbitration permissive and not mandatory
  • Definition of the dispute to be submitted to the different ADR methods in identical terms

Example for a two-stage multi-tiered clause

In the event of any dispute arising out of or in connection with the present contract, the parties shall  first refer the dispute to mediation according to the ICC Mediation Rules as amended from time to time. Before and for the duration of the mediation proceeding, any court or arbitration proceeding regarding the dispute shall be excluded.

If the dispute has not been settled pursuant to the said Rules within 45 days following the filing of a Request for Mediation, such disputes shall thereafter be finally settled under the ICC Rules of Arbitration by three arbitrators appointed in accordance with the said ICC Rules of Arbitration.

Prof. Dr. Renate Dendorfer-Ditges, Partner
DITGES PartGmbB, Rechtsanwälte Wirtschaftsprüfer Steuerberater, Bonn, Germany
T: +49 228 6046010
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Prof. Dr. Renate Dendorfer-Ditges is a partner at DITGES PartGmbB, admitted to the German and New York bars. Her expertise covers all areas of dispute resolution, especially arbitration and mediation. She is also working as a Professor of Law at the DHBW Ravensburg and as Honorary Professor at the EBS University for Economics and Law in Wiesbaden. New York and New York City.

DITGES is a well-established law firm in Bonn. DITGES offers strong expertise in the areas of bank law, tax law, corporate law, labour and employment as well as for all methods of dispute resolution. The firm’s experienced team is active in a number of domestic as well as international organisations and supervisory bodies and provides services for corporate and private clients in English and German

published: October 2014

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