Conditions for Multi-Tier Dispute Resolution Clauses in Commercial Contracts with Emphasis on the Judicial Practice of European Countries and the International Chamber of Commerce Arbitration Court

Abstract

The use of multi-tier dispute resolution clauses in commercial contracts is very common. These clauses combine various stages of alternative dispute resolution methods with arbitration or judicial proceedings. The agreement or decision resulting from the pre-arbitration or pre-litigation stages, such as an expert opinion or mediation, is often not binding on the parties. Given this feature, the most important question that arises is whether it is mandatory for the parties to undergo all the stages stipulated in these clauses. Furthermore, what conditions are necessary for the pre-arbitration or pre-litigation stages to become obligatory? This study outlines two differing opinions on this issue and examines the reasons for each. By comparing the practices of the International Chamber of Commerce, the courts of England, and other countries, the necessary conditions for the mandatory nature of the pre-arbitration or pre-litigation stages are clarified. The findings indicate that if the necessary conditions, including binding language, a clear definition of each stage, and the presence of good faith among the parties, are met, judicial and arbitral bodies deem the adherence to the stages agreed upon by the parties as mandatory. The authors believe that this view aligns with the principle of freedom of contract and is correct.