12th December 2019
Gwendoline Davies, Walker Morris’ Head of Commercial Dispute Resolution, explains that businesses should think carefully about what dispute resolution options work best for them; and should ensure that their choices are properly catered for in contractual arrangements.
Alternative Dispute Resolution (ADR) encompasses a range of dispute resolution options which are available outside litigation (court proceedings). ADR options can include simple negotiation between parties, mediation, expert determination, arbitration and so on.
Each type of ADR process has different advantages and disadvantages, which can mean that different options will work for different businesses. In addition, flexibility to factor in commercial considerations and practical remedies (over and above what a court could allow or order), means that, in many cases, attempting or exhausting ADR prior to pursuing court proceedings is preferable.
Furthermore, promoting – or even in some circumstances, requiring – the use of ADR is one of the key ways in which the courts are trying to reduce the costs of litigation.
As such, any business involved in litigation or intending to litigate should explore all options for an out-of-court resolution in the early stages of a dispute and should respond promptly and constructively to any settlement approaches made by the other party .
However, for many businesses, the even more proactive approach of including a dispute resolution clause  within contractual arrangements can be desirable.
An effective dispute resolution clause requires the parties to follow a pre-agreed route to resolution if and when a dispute arises. That can prevent any potential secondary dispute about whether and how the primary issue should be resolved; it can minimise the scope for any tactical game-playing (thereby helping to preserve commercial relationships); and it can ensure that the time and costs of dealing with formal litigation are only incurred as a last resort.
This recent case  distils some essential principles for businesses and their legal representatives seeking to enforce dispute resolution clauses, and highlights the importance of careful drafting.
Ohpen Operations confirms that, when considering whether to enforce a dispute resolution clause (by means of an order staying court proceedings) the court must take into account the following:
So, how can you best cater for your business’ dispute resolution requirements?
In Ohpen Operations a dispute (the primary dispute) arose as a result of delays to the development and implementation of an online platform. The contract between the parties was terminated and a secondary dispute arose as to how the primary dispute should be resolved.
The contract contained a dispute resolution clause which prescribed different mandatory ADR/mediation processes for disputes which arose at different phases of the project. The claimant commenced court proceedings having not complied, arguing that the clause did not apply outside the prescribed phases of the project or following termination of the contract.
In deciding whether to enforce the dispute resolution clause by means of a stay of proceedings, the High Court decided that the terms of the clause were mandatory, clear and, although the term “condition precedent” was not used, the right to commence proceedings was subject to the failure of the specified ADR process. As a matter of contractual interpretation and construction, whilst the parties had consciously decided to apply different procedures in relation to different stages of the project, a plain and natural reading of the dispute resolution clause overall led to the conclusion that it encompassed all project disputes, whether arising before or after termination. The dispute resolution clause was therefore valid and would be enforced by an order for a stay of the litigation.
An additional interesting point to note in this particular case is that, despite its overall conclusions, the court nevertheless exercised its discretion to further order that the parties close pleadings (that is, that the claimant having filed particulars of claim, the defendant must also file any defence/counterclaim) before the ADR process in the dispute resolution clause could proceed. The court’s reasoning was that clarifying the issues in this way would help the parties to reach a resolution. However it is arguable that this decision is incongruous with both the terms and intention of the particular dispute resolution clause, and with the fact that many ADR processes are adopted precisely to avoid the time and cost of preparing pleadings and so that the parties can take into account commercial, and not just legal, arguments. This aspect of the case, alongside the fact that time and costs were incurred in litigating a secondary dispute at all, emphasise how important it is to clearly and precisely draft your dispute resolution clause.
 a failure to promptly and properly engage in settlement attempts can lead to costs penalties in subsequent litigation
 sometimes also referred to as tiered dispute resolution clauses or escalation clauses
  EWHC 2246
 or as a condition precedent to arbitration. Arbitration is a confidential alternative to litigation as a formal means of resolving disputes, whereby an independent arbitrator makes an award, acting in a judicial fashion, which is final and binding on the parties. (Challenges to awards can only be made within certain timescales and for certain, prescribed reasons.) Parties can choose the applicable law and jurisdiction to govern the arbitration and international conventions are in place which facilitate the cross-border enforcement of arbitration awards. Arbitration is particularly well suited to cross-border disputes. It is not, however, necessarily quicker or cheaper than litigation.
 Civil Procedure Rule 1.1 (1), that is, dealing with cases justly and at proportionate cost