Considerations in Drafting Dispute Resolution Clauses

Facilitator: Gary Kelechi Amadi
Research Fellow

Most activities in our lives are governed by contracts which are about relying on people’s promises. The expectation of people entering into a contract is that the promises they made while entering the contract will remain good until full performance. (Prof. Bolaji Owasanaoye, 2014 NIALS Course on Legal Writing Skills and Banking Documentation)

Contract law has obligations though the obligations are voluntary with mutual benefits for the parties involved. However when two parties are involved in a contract or any form of commercial activities disputes are almost certain to arise. Most of these disputes can be resolved through litigation, or any of the available alternative dispute resolution mechanisms, which include arbitration, negotiation, mediation etc.

One of the preliminary considerations is whether to draft one – tiered, two – tired or three – tiered clauses. In some instances, a dispute resolution clause can cut across negotiation, mediation, conciliation and arbitration. Where the dispute relates to the construction industry, the dispute resolution board (DRB) or dispute adjudication board may be considered as the dispute resolution institution. It is important to take note of these at the initial stages of drafting the agreement. (Prof. Paul Obo Idornigie, 2014 NIALS course on legal Writing Skills and Banking Documentation)

In order to ensure an effective dispute resolution clause, an understanding of the nature of the dispute and its implications is important; this is because a particular dispute may have its subject matter spread across different jurisdictions or even different subject matters.

Other considerations to be considered in drafting a good dispute resolution clause include:
– The dispute resolution mechanism most suited for the transaction
– The national laws of the parties
– The arbitration law of the legal seat
– Choice of applicable law
– Is the nature of the transaction simple or complex, which may involve multiple parties e.g. Public Private Partnership Contracts PPP, and possible dispute that may arise from such transaction
– The venue, appointment and constitution of the panel,
Issues raised in this note will be discussed in details in subsequent legal bites by the same contributor.

This note was contributed by Gary Kelechi Amadi, a Research Fellow at the Nigerian Institute of Advanced Legal Studies. Contact: