Dispute resolution clauses – a must-have for doing business
As one of the world’s leading construction and project development companies, Skanska currently runs building projects across the Nordic region, Europe and the United States. The company has many longstanding contractual relationships with its subcontractors. We asked Jenny Bergendorff, General Counsel at Skanska Sweden, three questions about contract writing and the importance of the dispute resolution clause in implementing a project and closing a deal.
How is contract writing itself a key to a successful business deal?
The agreements are incredibly important for Skanska as a company as well as in individual projects. It’s all about getting the content right in terms of risk sharing and responsibility. But the agreements also need to be clearly formulated because they will govern the relationship if, at the end of day, the parties suddenly disagree. For Skanska, it’s also important that people involved in a project and who execute the agreement also understand this. They’ve got to be aware of what is stipulated, what rights and obligations Skanska has, and at what point in time a right must be claimed in order to run the project in the best and most predictable way.
Can you write the perfect agreement, or is there always a risk of disagreement and disputes in a contractual relationship?
In the best of worlds, you write your agreement and put it in the drawer where it sits while the project goes on. But it is very rarely done that way. Although we can usually avoid ambiguities and weaknesses in the contract formulations to a great extent, we can’t foresee every situation that might arise in a contract that runs for an extended period of time. Anything can happen, from a new condition being discovered during ground work to sudden objections from the municipality or third parties. That’s why the dispute resolution clause can have a major impact on the continuing contractual relationship.
The contracting parties can agree from the outset that agreement disputes have to be resolved through arbitration. What do you think is the main advantage of private dispute resolution compared with ordinary court proceedings?
Disputes that are going to be resolved in an ordinary court of law can last for years, with testimony and so on, which takes its toll on the relationship. It’s like all forms of disputes – in private relationships or between companies. The sooner you can settle things and find a solution, the easier it is to find your way back to each other after the period of a strained relationship. So the speed of the private dispute resolution alternative can have a huge impact on completing the deal.
For some time now, the general trend in our industry has been towards larger international projects. At the moment, it seems like there are more disputes than usual. Many companies are under financial pressure and have a lot to lose. In business relationships with foreign subcontractors, as I see it, arbitration is often a necessity as a dispute resolution procedure in order to resolve the jurisdictional issue and to gain a predictable agreement even in the event of a dispute.
Read more about the SCC Model Clauses >> here