11 - Multi-tier Commercial Dispute Resolution Processes in the United States

Summary

In the USA, commercial contracts often include tiered or stepped dispute resolution schemes that comprise multiple, varied mechanisms for resolving conflict. Contractual relationships are particularly suitable for tiered processes that accommodate business priorities, although critiques raise issues regarding necessity, utility and enforceability. Where courts have found contractual negotiation or mediation provisions to be valid and enforceable, the manner in which they address non-compliance under such agreements varies. When a party to a multi-step process fails or refuses to participate in contractually required negotiation or mediation prior to arbitration, there may be issues as to whether the consequences should be addressed in court or via arbitration. Despite being conventionally disfavoured in the USA, many neutrals have experience with ‘switching hats’ – ie moving from being mediator to being arbitrator, or vice versa – in the course of resolving disputes. Guidelines for the use of multi-tier processes take into account the uncertainties associated with judicial handling of stepped agreements as well as their inherent complexities, while recognising potential benefits.