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Is Arbitration Killing Jurisdictional Law?

February 22, 2013

I always enjoy conversations with Dr. Ulrich Hagel, who works at Bombardier Transportation. He never disappoints me with his ability to offer new insights and ideas.

Yesterday we were recording a brief podcast related to claims and disputes (Ulrich is a speaker at the forthcoming IACCM Europe conference and the recording will soon be in the IACCM member library). He offered excellent insights to the reasons why the frequency of claims is increasing. Among these was an observation that increasing complexity is accompanied by increased misunderstanding. He illustrated it with the following comment:

“I used to be developing and negotiating contracts for the sale of trains. But today I am involved with complex network agreements for rail systems – the products, their performance, the support and maintenance services, perhaps some outsourcing and financing”.

An interesting observation, nicely expressed; but it was his next comment that really struck me. Ulrich proceeded to make the point that such agreements inevitably create more potential for claim and dispute, but rather than resorting to the courts, it has meant the introduction of mediators and recourse to arbitrators (indeed, the courts themselves increasingly require that businesses follow these steps). The consequence of this is that settlements and resolution are no longer in the public record, so lawyers have very limited guidance when they are preparing agreements or advising their clients. “Most complex solution agreements are not settled in court,” Ulrich explained, “So this means the law is not developing – the precedents still largely relate to old and much simpler contracting models”.

I think this is an excellent point – I wish I had thought of it! And once again, it suggests that we must increasingly design our contracts to be more effective business and communication tools, rather than for litigation.

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