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Home > Country profiles > UK (England and Wales) > Articles > Article detail

Use Dispute Resolution Clauses: Prevent Aggro And Promote Settlement

Tuesday, 4th March 2020

"When disputes arise, it can be difficult for parties to agree on how to resolve them. Human nature being what it is, emotions can prevail. Perversely, whether right or wrong, a party might want to make life as hard as possible for the other party. Or, a defending party with no cash to meet the liability might put its head in the sand rather than find a way forward.

Such tactics could be justifiable but are often dubious. This is where dispute resolution (DR) clauses in contracts prove their usefulness: they remove the scope for emotive responses in the early, uncomfortable stages of a dispute. They impose mandatory processes to bring parties together, promote early settlement and limit commercial damage.

‘Tiered’ DR clause are common, especially in complex projects. They start with simple processes (communication and information exchanges) and escalate to alternative dispute resolution (ADR) processes (eg mediation or expert determination). They set the scene for and encourage early settlement and treat litigation or arbitration as the last resort. Being analogous to arbitration clauses, they generally survive the discharge of contractual obligations. DR clauses are also agreed as part of normal trade practice between commercial partners as a proven way of reducing the costs, wasted management time and further project disruption that disputes cause.

For these reasons, DR provisions are firmly in the public interest. There are strong policy reasons for their enforcement and they therefore enjoy robust judicial support provided they are clearly drafted. When disputes arise, parties must follow the process they have agreed and judges will refuse to permit court action brought in breach of such agreements.

The decision in Ohpen Operations UK Ltd v Invesco Fund Managers Ltd [2019] EWHC 2246 (TCC) is a good example of how the courts support DR clauses."

Read in full:  

Source: Dentons
Language: English
Contact: by Akin Akinbode , Gurbinder Grewal , Esther McDermott , Kirsti Olson and Tracey Summerell

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