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Peter Godwin Partner Registered Foreign Lawyer Tel: +81 3 5412 5412 E: peter.godwin@herbertsmith.com
Dominic Roughton Partner Registered Foreign Lawyer Tel: +81 3 5412 5412 E: dominic.roughton@herbertsmith.com
Thirdly, the party who had brought the challenge to the award had not tried to pursue negotiations at the time of the dispute or during arbitration. Rather, they had simply gone along with the arbitration and then tried to challenge it on the basis that the multi-tiered clause had not been properly complied with. These three factors are particular to this case, and it is unclear what decision the court would have made in the absence of them. Consequently, the decision leaves open the question of whether non-compliance with a multi-tiered clause affects the arbitral tribunals' jurisdiction or results in liability. In addition, courts in different jurisdictions may take difference approaches. As a result, there is a risk that that such clauses will be detrimental to the ultimate dispute resolution process chosen by the parties. To avoid this, the clause needs to be very clear about what is required at each tier.
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David Gilmore Senior Solicitor Registered Foreign Lawyer Tel: +81 3 5412 5412 E: david.gilmore@herbertsmith.com
PricewaterhouseCoopers, SIA School of International Arbitration & Queen Mary, University of London, International Arbitration: Corporate Attitudes and Practice (2006), available at http:// www.pwc.com/extweb/pwcpublications.nsf/docid/B6C01BC8008DD57680257171003177F0/ $file/pwc_IA_Study.pdf.
The need for clear drafting and cost of ambiguity It is essential that any dispute resolution clause is clear and unambiguous. At the time of drafting a contract, such a clause may not be at the forefront of the parties' minds, as the hope will be that it will never be necessary to resort to it. However, if a clause (whether simple or multi-tiered) is not properly drafted it can be hugely expensive and time consuming. A recent New Zealand case2 is a clear reminder of this the parties' dispute over what method should be used to resolve their substantive disagreement was appealed all the way to the NZ Court of Appeal, an ironic result given that the one clear purpose of the clause was to keep any disputes out of the court system! Practical advice In a relatively simple contract, a single level dispute resolution clause is normally the best solution. This is because the less complex the ADR clause, the less scope there is to dispute its meaning. This means that if a dispute arises the parties can get on with resolving it rather than debating the procedure that should be used to do so. However, even in a simple clause it is essential to include the appropriate procedural details and legal advice should be taken on this. If the contract is complex enough to warrant it, then a well drafted multi-tiered dispute resolution clause can take the parties through a structured process and help resolve the dispute in an appropriate, cost effective and efficient manner. However, the requirements of each tier should be clear, precise and sufficiently detailed in respect of timetable and procedure in order to avoid problems with enforceability. Should you wish to discuss any of the issues outlined in this newsletter, or any other issues which may be relevant to your business, please do not hesitate to contact us.
Index of previous 12 newsletters October 2006 Legal Strategies for Coping with an Avian Flu Epidemic November 2006 Drafting an Effective Arbitration Clause December 2006 Exclusion Clauses and the Concept of 'Gross Negligence' January 2007 CIETAC Arbitrations in Practice Part II February 2007 Arbitration Clauses and their Scope March 2007 Terminating Contracts for Breach: Risks and Rewards April 2007 English Company Law: Claims against Directors May 2007 New Rules on Enforcement of Judgments in China - Part 1 June 2007 New Rules on Enforcement of Judgments in China - Part 2 July 2007 HKIAC and SIAC: The Differences August 2007 Enforcement of Arbitration Awards Under the New York Convention September 2007 Expert Determination Material
The content of this article does not constitute legal advice and should not be relied on as such. Specific advice should be sought about your specific circumstances. Herbert Smith, Gleiss Lutz and Stibbe are three independent firms that have a formal alliance.
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Port & Ors v Gullivers Travel Group Ltd [2007] NZCA 345