The following Construction practice note provides comprehensive and up to date legal information covering:
This article appears as originally published in Construction Law on 1 August 2016 and is not maintained.
Multi-tiered dispute resolution clauses can save parties time and money but, as Elizabeth Kantor and Philip Parrott of Herbert Smith Freehills warn, there are potential pitfalls to watch out for.
Multi-tiered dispute resolution clauses provide for parties to resolve disputes using different methods in sequence and usually include at least one method of alternative dispute resolution before a final decision by the courts or an arbitral tribunal
They can allow parties to resolve disputes in a less formal and adversarial setting, and can save time and money
They should be drafted and negotiated with care, as there are a number of pitfalls for the unwary party
In particular, parties should carefully consider the project and the disputes likely to arise to ensure that the clause addresses the specific needs of the project
Further, these clauses should be sufficiently clearly worded to avoid procedural arguments
A multi-tiered dispute resolution clause (also known as an ‘escalation clause’) is a clause in a contract incorporating several different stages or methods for parties to resolve (or attempt to resolve) disputes. It either requires or permits parties to use a form of alternative dispute resolution (for example, negotiation, mediation, adjudication, expert determination or dispute board) before providing for a binding resolution
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