In this article, we have a look at some of the important aspects that must be kept in mind when drafting dispute resolution clauses.
1.1 Dispute resolution: A dispute under this Agreement must be resolved as follow:
(a) Notice of Dispute: Should at any time a Party assert that a exists between the Parties that Party may submit a written notice (“Notice of Dispute”) to the other Party specifying:
(i) the nature of the dispute that has arisen;
(ii) the areas of expertise it considers are required to resolve the dispute;
(iii) the major issues for determination, and
(iv) the relief or outcome being sought.
(b) Notice of Response: Within 10 days of receipt of the Notice of Dispute, the other Party shall provide a written response (‘Notice of Response’) stating their position in relation to the dispute, including:
(i) a statement of the areas of expertise it considers are required to resolve the dispute;
(ii) any additional issues that should be referred for determination; and
(iii) any comment on the relief or outcome referred to in the Notice of Dispute.
1.2 Good faith negotiations: After receipt of the Notice of Response or after 10 days of receipt of the Notice of Dispute (whichever is the earliest), the Parties must attempt to negotiate in good faith the dispute for at least 7 days.
1.3 Escalation: If the dispute is not resolved within the period provided for good faith negotiations, either Party may escalate such dispute by providing written notice (the “Escalation Notice”):
(a) Steering Committee: The dispute will be referred to the Steering Committee for resolution, which will in good faith attempt to resolve the dispute within 7 days from the date that the dispute was referred to them.
(b) Designations of executives: If the dispute is not resolved by the Steering Committee, each Party must designate an executive (with authority to make commitments that would resolve the dispute) which will in good faith attempt to resolve the dispute within 7 days from the date that the dispute was referred to them.
(c) No further action: Except to the extent necessary to prevent irreparable harm or to preserve rights or remedies, neither Party shall institute any further action until the period for escalation has come to an end.
1.4 Mediation: If the dispute is not resolved within the period stipulated above the Parties must attempt mediation administered by ABC in accordance with the abc rules:
(a) Notice of mediation: Either Party may call for mediation by written notice to the other.
(b) Appointment of mediator:
(i) The Parties may agree to appoint a particular person as the mediator.
(ii) Failing agreement between the Parties, the mediator must be appointed in accordance with the abc rules.
(c) Place of mediation: The mediation will be held in Johannesburg, South Africa.
(d) Legal representation: The mediation shall be held without legal representation.
(e) Fees and disbursements: The Parties shall share equally in the fees and disbursements relating to the mediation.
(f) Role and powers of the mediator:
(i) The mediator shall convene a hearing of the Parties.
(ii) The mediator may hold separate discussions with any Party and shall assist the Parties in reaching a mutually acceptable settlement of their differences through means of reconciliation, interpretation, clarification, suggestion and advice.
(iii) The mediator is authorised to end the mediation process whenever in their opinion further efforts at mediation would not contribute to a resolution of the dispute between the Parties.
(g) No further action: Except to the extent necessary to prevent irreparable harm or to preserve rights or remedies, neither Party shall institute any further action until the mediation process has come to an end.
1.5 Expert determination: If the dispute is not resolved during the above process, and if the dispute relates to technical aspects concerning the Products,technical aspects concerning billing and accounting,technical aspects concerning the SaaS, or technical aspects concerning the Software such dispute shall be referred to expert determination:
(a) Appointment of expert:
(i) The Parties may agree to appoint a particular person as the expert.
(ii) Failing agreement between the Parties, either party may request the Bryan Habanna to appoint the expert.
(b) Role and powers of the expert: The expert will:
(i) act as an expert and not as an arbitrator;
(ii) act independently of, and act fairly and impartially as between the Parties, giving each party a reasonable opportunity of presenting their case and countering any arguments of any opposing party, and a reasonable opportunity to make submissions on the procedure or the expert determination;
(iii) proceed in any manner they think fit;
(iv) determine whether it is appropriate to co-opt legal or other technical expertise to assist their coordination of the dispute;
(v) conduct any investigation which they consider necessary to resolve the dispute;
(vi) examine such documents, and interview such persons, as they may require; and
(vii) make such directions for the conduct of the expert determination as they consider.
(c) Fees and disbursements:
(i) The expert shall provide the Parties with an estimate of the fees and disbursements in the expert determination.
(ii) Unless otherwise agreed by the Parties, the Parties shall provide the expert with a security deposit in a form acceptable to the expert in the amount of the estimate.
(d) Representation and attendance: During any conference or any stage of the expert determination, the Parties may wish to be represented by a legal representative and other persons with information or knowledge relevant to the expert determination.
(e) Obligations of Parties: The Parties shall take all reasonable steps for the expeditious and cost-effective conduct of the expert determination.
(f) Determination of expert: The determination of the expert:
(i) must be in writing, accompanied by reasons,
(ii) in the absence of manifest error, be final and bind the Parties; and
(iii) is not an arbitration within the meaning of any statute.
(g) Payment of interest: Unless otherwise agreed by the Parties the expert determination may include the payment of interest on any monetary component of the expert determination in such amount as the expert may determine.
1.6 Arbitration: If a dispute cannot be resolved during the above process, and provided that the dispute must not be resolved under Section 1.5 (Expert determination), the dispute must be submitted to mandatory, binding arbitration administered by XYZ in accordance with the xyz rules:
(a) Notice of arbitration: Either Party may call for arbitration by written notice to the other.
(b) Number of arbitrators: The arbitral panel shall consist of 3 arbitrators.
(c) Qualification of arbitrators: The arbitrators must:
(d) Appointment of arbitrators:
(i) The Parties will jointly appoint the arbitrators.
(ii) Failing agreement between the Parties, the arbitrator must be appointed in accordance with the xyz rules.
(e) Seat of arbitration: The place of arbitration will be Johannesburg, South Africa.
(f) Legal representation: The Parties may make use of legal representation.
(g) Fees and disbursements: The Parties shall share equally in the fees and disbursements relating to the arbitration.
(h) Judgment: Judgment on an arbitration award may be entered by any court with competent jurisdiction.
(i) Right of appeal: The arbitrator’s decision will be binding on the Parties to the arbitration at the date of the arbitrator’s ruling, and there will be no right of appeal.
1.7 Confidentiality: The Parties will treat as confidential and not disclose to any third-party details of the dispute submitted to the above proceedings, the conduct of the proceedings or the outcome of the proceedings without the written consent of the other Party.
1.8 Continued performance: Each Party must continue performing their obligations under this Agreement while a dispute is being resolved except when the issue in dispute precludes performance.
1.9 Governing law: All disputes under Article 1 must be decided in accordance with the law of the Laws of South Africa.
1.10 Language: Any dispute resolution proceedings under Article 1 must be conducted in English.
1.11 No suspension of contractual obligations: The referral of a dispute to proceedings under Article 1 does not suspend the contractual obligations of the Parties under the Agreement.
1.12 Binding nature of dispute resolution provisions: The provisions under Article 1 will be binding on the Parties despite any expiration, termination, or cancellation of this Agreement.
1.13 Interim relief: The provisions under Article 1 does not limit either Party’s right to provisional or ancillary remedies from a court of competent jurisdiction before, during, or after any proceedings contemplated under Article 1.
Martin Kotze is a commercial lawyer with over 10 years of experience. He specialises in transactional work within the Tech, Financial Services and Property industries.
He is also one of the co-founders at DocNinja and regularly advises listed companies to small and medium enterprises on how to contract better with their customers.
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