Dispute resolution clauses: lessons to be learned

• The nature of dispute resolution clauses.
• The lessons to be learned from a number of recent decisions.

Dispute resolution clauses (also referred to as tiered dispute resolution clauses or escalation clauses) are becoming increasingly common in commercial agreements and it is clear that the courts will uphold and enforce such clauses.

Nature of dispute resolution clauses

Dispute resolution clauses typically require the parties to exhaust various alternative dispute resolution (ADR) procedures before they are permitted to commence court or arbitration proceedings and the courts have recognised and enforced dispute resolution clauses (Cable & Wireless Plc v IBM United Kingdom Ltd [2002] EWHC 2059 (Comm), [2002] 2 All ER (Comm) 1041). In Holloway v Chancery Mead Ltd [2007] EWHC 2495 (TCC), [2008] 1 All ER (Comm) 653 Mr Justice Ramsey helpfully identified three procedural requirements for dispute resolution clauses to be enforceable:

• the process must be sufficiently certain;
• the administrative processes for selecting a party to resolve the dispute and to pay that person should be defined;