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A dispute resolution mechanism establishes in advance how you will handle conflicts, so that you do not have to go to court immediately. This saves costs and time, keeps the conflict out of the public eye, and preserves the relationship — especially valuable if a foreign court would otherwise have jurisdiction.
Why a dispute resolution mechanism?
Court proceedings are lengthy, public, and costly, and often put irreparable strain on the relationship. With a dispute resolution arrangement, you agree to first attempt to resolve issues yourselves or through an independent third party. Both parties usually benefit from this.
The advantage of clarity
By establishing in advance how a dispute will proceed—who you engage, what timeframes apply, and which route you follow—everyone knows where they stand if things go wrong. This prevents a conflict regarding the approach from becoming an additional factor on top of the actual dispute.
Choose law and competent court
A choice of law and forum is particularly important when doing business across borders. Without this choice, a foreign court may unexpectedly have jurisdiction, with an unfamiliar legal system and high costs. A clear arrangement prevents this.
Where do you record it?
You include a dispute resolution clause in your general terms and conditions and, for companies, often also in the articles of association or a shareholders' agreement. If you would like to know how to draft such a clause in practice, please also read our article on creating a good dispute resolution clause.
Frequently Asked Questions
Why not just go to court?
Legal proceedings are expensive, slow, and public, and damage the relationship. A dispute resolution procedure often offers a faster, cheaper route.
What is the biggest risk without a scheme?
Uncertainty regarding the approach and, in the case of international contracts, an unexpectedly competent foreign court.
Where do I record the arrangement?
In your general terms and conditions and, for companies, often also in the articles of association or shareholders' agreement.
Have a dispute resolution agreement drawn up?
Our legal experts incorporate a dispute resolution clause into your general terms and conditions or contracts. View our litigationteam or schedule a free consultation.
