Alternative dispute resolution and commercial agreements

Feb 23, 2017

There are many types of commercial disputes that companies may be faced with over the course of doing business. When a business is facing a dispute in a commercial context, such as a breach of contract or a disagreement between shareholders, a commercial litigation lawyer will protect your interests and guide you through the resolution process.

Your lawyer, for instance, may advise you to include dispute resolution mechanisms within your commercial agreements. Provisions like mandatory mediation or binding arbitration offer an alternative way to settle business disputes than the pursuit of litigation.

Dispute Resolution Clauses

When an arbitration clause is included in a commercial agreement it becomes a contract in which the parties agree to settle any disputes outside of court. The main benefit of binding arbitration is that disputes are resolved in a less formal, less costly and less time consuming way than traditional litigation affords. This is why arbitration is the most common alternative dispute resolution option. In the event of a dispute, parties submit their dispute to an authorized arbitrator, who will work with the parties to resolve the dispute and will render a binding decision.

Mediation is considered an important step in dispute resolution, which is why it is often included in a dispute resolution clause. Meeting with a mediator (a neutral third party), each disputing party will attempt to create a mutually agreed upon settlement before the dispute moves to trial. Mediators, unlike arbitrators, cannot impose settlements.

Considerations to make for dispute resolution clauses

Alternative dispute resolution tools are useful, however, they can have limitations before your business moves forward in including a clause consider the following:

  • Is the arbitration clause mandatory or permissive?
  • Is there a specific scope of disputes that should be limited to arbitration?
  • Will a pre-determined list of mediators or arbitrators be established?
  • How will mediators or arbitrators be appointed, what qualifications are mandatory?
  • Will a right to appeal be included? What are the limitations to this right to appeal?
  • Is the arbitrator’s decision binding?

To protect the interests of your business, it’s partners and your employees, you should be work with a commercial litigation lawyer to craft any alternative dispute clauses. To learn more about resolving business disputes and protecting your business from disputes contact one of Chown Cairns Commercial litigation lawyers.