Originally from the ICDR Handbook on International Arbitration & ADR - Third Edition

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I.    Introduction

The number of transnational transactions spawned by an expanding global economic environment and trade liberalization is increasing at a rapid rate. Many of these are in the form of joint ventures, alliances and other collaborative arrangements which envisage ongoing, usually long-term, business relationships.

But just as two people getting married are not disposed to foresee disputes between themselves or contemplate the unthinkable, a rupture or a divorce, so business negotiations typically have failed to recognize, in otherwise detailed documentation of their venture, the importance of anticipating the consequences of future disagreements that might result in serious disputes. Lawyers’ efforts to get the business people to focus on these issues, let alone to adopt well-articulated modalities to handle differences of opinion, often fall short. What frequently results is a truncated dispute resolution clause that fails to take into account the nature of the transactions envisaged, the organization and cultures of the participants, and their intentions, whether or not expressed at the outset.

Yet, business executives will acknowledge that in any long-term contractual relationship differences in business philosophy and interpretation of the negotiated deal are inevitable. The document evidencing the relationship cannot possibly foresee, nor perhaps should it, the myriad areas of possible conflict and disagreement. Nevertheless, the ideal time to acknowledge and deal with potential future conflict is at the outset: that is, during the negotiations, when there is still mutual good will and hopes are high.

Business people are generally pragmatic and favor predictability, certainty and timely attention to problems. Yet, frequently, both they and their lawyers fail to take the time and effort to provide for dispute resolution provisions that match the desired goals of flexibility, certainty and quick resolution.