A results-oriented Contract Management leader with 10+ years of experience across the full contract lifecycle—drafting, strategic management, and practical application—in sectors including mining, energy, finance, and technology. Joánri has handled agreements from daily operational needs to complex, multi-year master contracts exceeding a billion dollars. Now, she applies this expertise to guide individuals and businesses through contract disputes, optimization, and implementation.
While the intention behind including an Alternative Dispute Resolution (ADR) clause in commercial contracts is often to provide a clear and efficient route for resolving disagreements outside of the traditional courtroom, the desire for absolute certainty can sometimes lead to overly complex clauses that ultimately undermine this very aim.
The initial appeal of a highly detailed, almost court-like ADR process is understandable. It offers a perceived sense of control and predictability by meticulously outlining each step. However, this approach can often inadvertently create a ‘court process by another name’, replicating the very complexities and potential delays that ADR is intended to avoid.
The Pitfalls of Overly Prescriptive ADR Clauses
- Disputes as Part of the Agreement Lifecycle:
- When the primary focus shifts to meticulously adhering to every procedural detail of an overly complex clause, the actual substance of the dispute can become secondary. Parties may become more concerned with ‘ticking the boxes’ of the process than with actively seeking a mutually acceptable and pragmatic resolution, thereby undermining the fundamental purpose of ADR.
- Overly rigid timelines can create procedural breaches due to practical challenges in gathering information or agreeing on a neutral.
- Disputes rarely unfold in a predictable manner. Overly detailed clauses often lack the necessary flexibility to adapt to the specific and evolving circumstances of a particular disagreement. Rigid procedural steps can also limit the arbitrator or mediator’s ability to guide the process effectively and tailor it to the specific needs of the dispute. In other words – neither the parties’ purpose, not the arbitrator or mediator function, is enabled.
- Increased Costs:
- Mandating specific and/ or external technical experts at various stages, even in straightforward disputes, can significantly inflate costs and make the ADR process disproportionately expensive.
- Overly prescriptive provisions relating to the arbitrator themself, especially those specifying highly niche expertise or requiring a panel of multiple arbitrators, can further increase costs. Finding individuals who meet these specific criteria within the stipulated timelines can become exceedingly difficult and costly, leading to further delays and frustration for the parties.
In instances where these clauses are used and many of the challenges above are applicable, it may even frustrate the intention of the clause altogether and make the described dispute resolution clause functionally ineffective. Pretty to look at certainly, but useless in practice.
The Benefits of Dispute-Responsive Clauses:
In contrast to these overly prescriptive approaches, dispute-responsive clauses, such as a progressive dispute resolution clause, offer a more pragmatic and adaptable framework that provides the flexibility for the parties to agree on the specific dispute and mediation and/ or arbitration process for it. This allows for:
- Flexibility and Adaptability: Tailoring the process to the specific needs of the dispute and available mediators or arbitrators, leading to more efficient and cost-effective resolutions.
- Focus on Substance: Keeping the attention on the actual issues in dispute and encouraging parties to work towards a resolution, rather than being bogged down trying to check procedural boxes.
- Reduced Costs: Avoiding unnecessary steps and the involvement of excessive personnel.
- Greater Efficiency: Allowing parties to move through the process more quickly and reach a resolution sooner.
Conclusion:
While a desire for absolute certainty and control when drafting ADR clauses is understandable, overly complex and prescriptive approaches can often backfire and make the process unusable. Dispute-responsive clauses, which prioritise flexibility for both the parties and an arbitrator or mediator and the ability to tailor the process to the specific needs of the dispute, are often far more effective in achieving the core goals of ADR: efficient, cost-effective, and mutually acceptable resolutions that help preserve valuable business relationships.
Disclaimer: This article offers general commentary and suggestions for consideration by ADR practitioners. It is not intended as a substitute for professional legal advice, and practitioners are responsible for exercising their own professional judgment and seeking specific legal guidance when advising clients or drafting legal documents.
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