Dispute Resolution Clause

DisputeResolution Clause

DisputeResolution Clause

Dispute resolution clauses arefrequently regarded as a means to end contractual agreements andnegotiations hence regarded as “boilerplate” (Schneider, 2011Lumineau &amp Oxley, 2012). In cases that involve potentialdisagreements over issues like performance, cost, time, delivery, andothers, there is a need to draft a dispute resolution clause thathelps to save money, time, and unnecessary litigations to avoiddestroying the relationship among the parties in dispute (Evans,2015). These clauses have a huge impact on how a particular disputeis resolved by taking into consideration the contractual rights andenforcement of legal issues.

To resolve disputes,litigators focus on clauses used in the contract while taking intoconsideration the governing law clauses. These are the basic rules ofengagement when the judge or panel of litigators sits down to resolveany disputes (Maggi &amp Staiger, 2009 Evans, 2015). There arevarious types of dispute resolution clauses: jurisdiction clauses,international arbitration clauses, hybrid clauses, conflictingdispute resolution clauses, among others. This paper willinvestigate the international arbitration clause by identifyingraising legal issues, its application to a business setting andfinally illustrate remedies for contract breaching.

InternationalArbitration Clauses

It is unethical to introduce a“standard” arbitration since there is nothing like a “standard”contract or dispute. This is because different disputes call fordifferent arbitration procedures. Therefore, involved parties shouldput into considerations other issues that the clause must addressunder specific conditions (Anglade, 2004). Below are significantquestions to consider.

  • Which rules should the arbitrator use? Either ad hoc or institutional arbitration rules.

  • Which place should arbitration take place? It is important to identify where the seat of the arbitrator should take place since it determines the attitude, procedure, and legal enforceability.

  • How many arbitrators are present? Normally, arbitrations require one or three arbitrators. In simple disputes, a sole arbitrator is enough to resolve the dispute. However, complex international disputes require the appointment of a tribunal consisting of three arbitrators.

  1. Legal Issues to Consider when Drafting International Arbitration Clauses


It is important to draftclearly the dispute resolution clause to avoid complications andambiguity. Both judges and litigators will prefer to resolve disputesabout the parties’ agreement. However, if the agreement is notspecific as a result of poor drafting of the clauses, then theparties in dispute may perhaps find themselves in a differentdiscussion from the one they intended (Merrills, 2011).


It is easier to enforcearbitration awards than court rulings. Different countries usedifferent enforcement rules for international arbitration procedures.

Referenceto Arbitration

Since arbitration isconsensual, there is a need to have a clear contract to referdisputes to arbitration. Usually, parties will make sure that theyconsider all disputes in the arbitration. Consequently, the capacityof arbitration section must be sufficient to cover all disputestatements presented (Merrills, 2011).

Assimilationof the rules governing the arbitration

Dispute resolution clausesusually specify the rules used to govern the arbitration. These rulesmay include institutional rules or contractual rules (Lumineau &ampMalhotra, 2011).

Seat of the Arbitration

As already stated, it isimperative to specify the venue of arbitration since laws andjurisdictions vary from one country to another.

Choiceof Language

The choice of language shouldbe immediately identified. This is important to identify the languagethat will be used in writing hearings and submissions.


Due to the consensual natureof conciliation, third parties find it difficult to join thearbitration process unless they agree (Schneider, 2011 Lumineau &ampMalhotra, 2011). Therefore, is important to draft carefully clausesto include the joiner.


In countries like Hong Kongand Singapore, arbitration confidentiality is already protected.However, other jurisdictions will apply confidentiality only when theclause offers a confidentiality provision (Gaillard, 2010).

  1. How the contract clause can be applied in a business managerial setting

The international arbitrationclauses are commonly used by managers to ensure the performance ofemployees. For example, when employees are offered contracts, thereis normally a performance clause that the employee must fulfillfailure to which the contract may be terminated as a result of notachieving what the clause entails (Maggi &amp Staiger, 2009).

A good dispute clause helpsthe managers to anticipate disputes that may arise, hence cater forarbitration of potential disputes within the involved parties(Gaillard, 2010). The drafting of dispute resolution clause to coverexpected problems depends on the parties’ interests and agreement.

The international arbitrationclause can be used by managers to preserve relationships between twodisputing international parties. Dispute clauses offer asingle-tiered or multi-tiered approach, to resolve conflictsdepending on the welfare of the parties (Anglade, 2004).

  1. Best possible remedies in case of a breach

International arbitrationclauses usually have remedies stated in them. Remedies for contractbreach include monetary and non-monetary remedies (Maggi &ampStaiger, 2009). Monetary remedies include

  • Compensatory damages involves giving out money to compensate for losses by reimbursing costs.

  • Incidental damages are awarded to potential losses incurred in case of breach of contract when it was being signed.

  • Liquidation damages are specific damages outlined in a contract.

  • Punitive damages are penalties or punishments given for offensive actions.

  • Attorney’s fees are fines to recover damages in a contract context.

On the other hand,non-monetary remedies include

  • Specific performance where the court orders each party to stick with the initial agreement (Schneider, 2011 Lumineau &amp Oxley, 2012).

  • Rescission where the contract is canceled and any money returned.

  • Reformation is attained by re-writing parts and components of a contract or re-writing the whole contract again (Maggi &amp Staiger, 2009).


Anglade,L. (2004).&nbspInternationaldispute resolution.London: Sweet &amp Maxwell.

Gaillard,E. (2010).&nbspLegaltheory of international arbitration.Leiden: Martinus Nijhoff.

Evans,P. (2015). The Enforcement of Dispute Resolution Agreements in theResources Sector. In&nbspArbitrationand Dispute Resolution in the Resources Sector&nbsp(pp.43-61). Springer International Publishing.

Lumineau,F., &amp Malhotra, D. (2011). Shadow of the contract: How contractstructure shapes interfirm dispute resolution. StrategicManagement Journal,32(5), 532-555.

Lumineau,F., &amp Oxley, J. E. (2012). Let`s work it out (or we`ll see you incourt): litigation and private dispute resolution in verticalexchange relationships.Organization Science,&nbsp23(3),820-834.

Maggi,G., &amp Staiger, R. (2009). Breach,remedies and dispute settlement in trade agreements. Cambridge, Mass.: National Bureau of Economic Research.

Merrills,J. (2011). Internationaldispute settlement(5th ed.). Cambridge, U.K.: Cambridge University Press.

Schneider,M. (2011).&nbspPerformanceas a remedy: Non-monetary relief in international arbitration.Huntington, N.Y.: Juris.

Ware,S., &amp Ware, S. (2007).&nbspPrinciplesof alternative dispute resolution&nbsp(2nded.). St. Paul, MN: Thomson/West.