Choosing a Dispute Resolution Clause: Courts, Arbitration or Escalation

Court with exclusive jurisdiction

Simplest, and often correct for domestic contracts of modest value. Name a court with jurisdiction and make it exclusive, so neither party can file elsewhere.

The parties cannot confer jurisdiction on a court that has none, but where more than one court would have jurisdiction they may agree to one. Commercial Courts handle commercial disputes above the specified value, with tighter case management.

Arbitration

Private, with a statutory twelve-month timeline from completion of pleadings, and an award enforceable as a decree. Attractive for confidentiality and for cross-border enforceability under the New York Convention.

It is not automatically cheaper. Arbitrator fees, institutional charges and venue costs are borne by the parties, where court fees are modest. For low-value disputes arbitration can cost more than the claim.

Escalation tiers

A tiered clause requires negotiation between named senior executives for a defined period, then mediation, then arbitration or litigation. Each tier has a time limit after which the next is available.

The main benefit is that it forces a structured conversation before positions harden. The main risk is a clause drafted so that the tiers become a precondition a party can exploit to delay — so each tier should have a hard time limit.

Mandatory pre-institution mediation

Section 12A of the Commercial Courts Act requires parties to exhaust pre-institution mediation before filing a commercial suit, unless urgent interim relief is contemplated.

This is not optional and a suit filed without it is liable to rejection. Build it into the expected timeline rather than discovering it after drafting the plaint.

Frequently asked questions

### Is arbitration cheaper than going to court?

Not necessarily. Arbitrator fees, institutional charges and venue costs fall on the parties, whereas court fees are modest. Arbitration is usually faster and private, but for low-value disputes the cost can exceed the claim.

### What is an exclusive jurisdiction clause?

A clause naming one court as the only forum for disputes, where more than one court would otherwise have jurisdiction. It prevents a party filing in an inconvenient forum, though parties cannot confer jurisdiction on a court that has none.

### Is mediation compulsory before a commercial suit?

Yes, under Section 12A of the Commercial Courts Act, unless the suit contemplates urgent interim relief. A commercial suit filed without exhausting pre-institution mediation is liable to be rejected.