Dispute resolution clauses: Arbitration

Of course, litigation is not the only option when it comes to drafting the dispute resolution clause in your contract. Arbitration can be a better choice in some circumstances, for a variety of reasons. But your dispute resolution clause should provide for either one or the other. What will happen if you don't it doesn't though?

In the recent case of Melford Capital v Digby, the contract entered into between the parties contained both an exclusive jurisdiction clause in favour of the English courts (to settle any disputes arising out of the contract) and an arbitration clause (also covering any dispute arising out of the contract). Could effect still be given to the arbitration clause? The judge held that it could.

There is long-standing authority that, in a case like this, one of the clauses must be chosen and prior caselaw has held that there is a "strong impetus" to give effect to the arbitration clause (see Ace v CMS Energy ([2008)]). That is what happened here: the judge found that there was a valid, separable arbitration agreement which he should uphold. He gave effect to the exclusive jurisdiction clause by finding that the English court retained a supervisory jurisdiction over any arbitration proceedings which took place.