Before inking the contract, you did everything a general counsel should do: You got a good handle on the relationship between your company and the other party, you consulted with outside counsel about traditional and alternative dispute resolution mechanisms, and you asked the appropriate division manager within your company what disputes might crop up during the project. Concerned about keeping your legal spend in check, you opted for an arbitration clause with a pre-arbitration mechanism requiring senior executives on both sides to meet and negotiate in good faith before proceeding to arbitration. According to your outside counsel, yours was the gold standard in dispute resolution provisions: effective, efficient, and sure to avoid the time-consuming, unpredictable and distracting vicissitudes of litigation.
When a dispute eventually arose, you were on the ball. You alerted outside counsel, you promptly interviewed your division manager and key line staff, you brought your CEO up to speed, and you retained outside counsel. When your CEO and CFO asked you to review the dispute resolution process, you said that while it would not be without pain, it would at least be efficient and cost-effective. You then helped your CEO prepare for face-to-face negotiations with his counterpart, and you even had a cordial chat with the general counsel from the other side about the benefits of arbitration, including the freedom to dispense with the distracting and expensive chore of litigation holds. When pre-arbitration negotiations did not yield a settlement, you were disappointed but at least comfortable that the arbitration process would move along swiftly and cost-effectively.