Most projects/transactions thankfully do not end in dispute but, when they do, the first thing a legal adviser will look and hope for in the subject contract is a bespoke and carefully drafted dispute resolution clause. If, at the time of drafting a contract, parties carefully consider the likely type and value of dispute that may arise under the contract, and put thought into how they would like to exit the contractual relationship in the event of a dispute, then the chance of resolving any future dispute economically and successfully is greatly increased.
Internationally, arbitration is becoming a preferred method of dispute resolution. Even in jurisdictions with trusted and efficient (but often overly prescriptive and increasingly costly) court systems, contract parties are increasingly choosing arbitration for the flexibility it can bring to resolving disputes.
Arbitration is an obvious choice when:
- the parties to a contract are from different jurisdictions;
- enforcement of a locally obtained decision is in question; and
- a dispute is likely to involve specialist technical evidence and a specialist tribunal is required; hence, arbitration clauses are commonly found in contracts for construction, aviation, shipping and complex financial transactions.
To ensure that arbitration works as intended, the starting point is to have a well-drafted and thought-out arbitration clause. The following are some obvious but commonly overlooked points in ensuring arbitration brings the desired outcome:
- Ensure the clause is enforceable - in Oman, this means you must expressly and in writing exclude the jurisdiction of the local Courts.
- Ensure that the language of the arbitration is the same as that of the contract, and is also the parties’ common language.
- Consider where the assets are, and how the seat of arbitration may influence enforceability.
- Include sensible pre-conditions to the commencement of arbitration - such as a requirement to attempt amicable resolution. Consider whether including a mediation clause is helpful as a precursor to commencing arbitration.
- Consider limiting arbitration to major disputes only - include a monetary value cut-off, below which disputes are not settled by arbitration but by another mutually agreed method.
Give careful thought to the rules or institution chosen, and tailor the same to the likely nature and value of the dispute.
- In Omani law/ad hoc arbitration, give thought to including referral to an international arbitral institution for the appointment of an arbitrator should the parties not be able to agree on such appointment.
- Even in the Oman Standard Conditions of Contract for Construction, there is the possibility to craft a bespoke dispute resolution clause, including different forms of expert determination or mediation, prior to or in addition to arbitration.