Practical Strategies for Dispute Avoidance and Resolution in Business Contracts
Explore the essential mechanisms and practices for avoiding disputes in business contracts, emphasizing negotiation, mediation, and other ADR processes. Learn how upfront planning and proactive measures can prevent conflicts from escalating and lead to sustainable dispute resolution. Examples from construction contracts and recognized conflict resolution strategies are highlighted, providing valuable insights for managing business relationships effectively.
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10thArbitration and Investment Summit 2022: What are we learning from the Pandemic Session 2: DISPUTE AVOIDANCE, ADR AND SMEs By MS KAREN GOUGH, 39 Essex Chambers, London 28 January 2022
AVOIDING DISPUTES The Mechanisms of Avoidance EG: CPR International Institute for Conflict Prevention and Resolution, 21st Century Pledge: Our company pledges to commit its resources to manage and resolve disputes through negotiation, mediation and other ADR processes when appropriate, with a view to establishing and practicing global, sustainable dispute management and resolution processes."
AVOIDING DISPUTES The Mechanisms of Avoidance An example: CPR Dispute Prevention Pledge for Business Relationships: By this pledge, companies and other organizations recognize that disputes in business relationships impose costs in loss of resources, focus, and relationships. They further recognize that promptly addressing conflicts before they harden into disputes maintains business purpose, preserves cooperative working relationships, better ensures business continuity and saves costs.
AVOIDING DISPUTES Begin at the beginning: the Contract 1. Recognise the inherent risk of failure in abuse of economic strength; 2. Negotiate a fair contract; 3. Provide for a tiered approach to disputes; 4. Make provision for early identification and discussion and negotiation of issues; 5. Include real dispute avoidance provisions;
AVOIDING DISPUTES Begin at the beginning: the Contract [2] 5. Dispute Avoidance provisions 6. Using construction contract examples: FIDIC 2017 clause 20, claims, disputes, especially clause 21.3 Avoidance of Disputes, see too clause 3.7 Agreement or Determination; NEC 4 Dispute Resolution Services Contract 2016; JCT 2021 Dispute Adjudication Board Documentation 2021.
AVOIDING DISPUTES Recognised Mechanisms of Dispute Avoidance and Resolution Basic conflict resolution strategies: 1. Collaborating species of avoidance 2. Avoidance 3. Compromising negotiation/mediation 4. Accommodation negotiation/ mediation 5. Defeating adjudication/arbitration/ litigation
AVOIDING DISPUTES The Mechanisms of Avoidance 1. Collaborating The Sir Michael Latham partnering approach common aims, collaborating to achieve a win for all stakeholders; Report of 1994, it s now 2022! Risk and reward sharing a new contracting culture remove/limit the historically adversarial approach of contracting parties to problems.
AVOIDING DISPUTES The Mechanisms of Avoidance 3.-4. Compromising/accommodation: negotiation and mediation. Processes rooted in a common desire to avoid disputes; Compromise, be realistic about issues and likely outcomes if a dispute escalates; Accommodate remove the blame culture which underpins many unresolved disputes; Mediation get help! Get talking, work through the issues, keep control of the problem and work on solutions.
TEMPORARY RESOLUTION Adjudication in The Bahamas: proposals 1. A statutory scheme for the Adjudication of Payment Disputes; 2. Applicable to: Construction Works Contracts; and Construction Consultancy Contracts; 3. Should it extend beyond payment disputes? 4. Currently drafted as a flexible speedy process to secure prompt payment of money claims under contract.
TEMPORARY RESOLUTION Adjudication in The Bahamas: proposals 1. Enabling infrastructure required for successful adjudication; 2. Binding obligation to make immediate payment [no stay pending merits determination, pay now argue later]; 3. Limited rights of challenge jurisdiction and natural justice; 4. Effective and speedy enforcement of Adjudication Decisions via Courts or arbitration.
CONCLUSION Dispute Avoidance For all jurisdictions: pay attention to the underlying terms of the Contract; Make sure the contract contains clear and effective provisions for discussion and avoidance of disputes: Including resort to neutral support; facilitative negotiations; Adopt / incorporate institutional rules and enabling clauses; Make greater use of mediation.
Thank you for listening KAREN GOUGH BARRISTER, ATTORNEY AT LAW, CHARTERED ARBITRATOR, ADJUDICATOR, CIP [FAiADR] PAST PRESIDENT OF THE CIARB. 39 ESSEX CHAMBERS, LONDON EMAIL: karen.gough@39essex.com
