* Non-Tolkien fans, please don't look away
Alternative Dispute Resolution, well, arbitration at least has found its way into Middle Earth. Fans of the Hobbit will be aware of the contract between Bilbo Baggins and the Dwarves for the provision of burglary services that briefly appears in the books. This contract was expanded for the films, including, amongst others a dispute resolution clause (see below).
Looking at the clause, do you think it has been thought through? As part of the contract, the Dwarves and Bilbo embark on a perilous journey to reclaim the Lonely Mountain, the ancestral home of House of Durin, with lives, reputations, careers, countless riches and the safety of the free world on the line; risks largely not too dissimilar to those faced in the commercial world.
This doesn't include other important considerations such as the multitude of parties involved, 14 to the contract (13 stubborn and proud Dwarves and 1 Hobbit), not to mention the host of external stakeholders: Gandalf the wizard, the Elves of Rivendell and Mirkwood, the aggrieved citizens of Laketown and potentially other Dwarven clans. Also, the parties to the contract many encounter different types of disputes from the breakdown of relationships to the divvying up of the treasure upon successful completion of the quest and a whole raft of others.
Therefore, is a quick jump to arbitration the best choice? I would argue mediation is a much more appropriate choice of dispute resolution tool. Mediation is as effective when handling tremendously high-value disputes as working to repair relationships between colleagues. It is also well suited to manage disputes between large and varied groups all with different and competing interests. You also need not use only mediation. CEDR encourages the consideration of stepped dispute resolution clauses where a dispute can progress through negotiation, mediation and arbitration before litigation can commence.
"For even the very wise cannot see all ends." These enlightened words from Gandalf the wizard encapsulate the need to think carefully about dispute resolution clauses.
They are vital to the proper functioning and effectiveness of commercial contracts, especially if something goes wrong and a lot is at stake. A poorly drafted clause can wreak havoc in the event of a dispute, causing confusion, mistrust, uncertainty and exacerbate the loss of time and money and the strain on internal and external relationships.
To learn more about dispute resolution clauses and how to effectively use them as part of your commercial contracts, read CEDR's industry-leading and annually updated model documents and clause guidance notes here https://www.cedr.com/about_us/modeldocs/.
Ben Thomson is a Communications Analyst at CEDR and is the project lead for the annual model document update.
Mandatory Binding Arbitration in the Dwarvish Tongue There are also a group of clauses dealing with disputes arising under the contract. Somewhat anachronistically, the contract contains an arbitration clause: "Disputes arising between the Contract Parties shall be heard and judged by an arbitrator of the Company’s choosing."