Staggered clauses, also known as multi-tiered clauses or multi-step clauses, are an alternative in dispute resolution that has been increasingly used in various types of contracts and sectors, especially in construction.
In general terms, staggered clauses are an alternative method of dispute resolution that has become increasingly popular in recent years. This type of clause allows the parties involved in a contract to establish a graduated system for resolving differences that begins with several alternative methods for dispute resolution (such as negotiation between top executives, mediation, and dispute boards, among others) and culminates in arbitration if the alternative methods do not resolve the conflict.
Staggered clauses offer several advantages compared to dispute resolution through arbitration from the outset. Firstly, it aims to reach a solution through processes that do not damage the commercial relationship between the parties, avoiding the stigma of the process. Secondly, the use of alternative methods of dispute resolution represents a significant saving in time and money for the parties. Additionally, in cases where the result of alternative dispute resolution procedures does not work, the parties, and in particular, the defendant, have more time to prepare their defense.
However, the use of staggered clauses is not exempt from problems. If one of the parties does not respect the staggered procedure or if the wording of the clause is unclear or ambiguous regarding the different steps and the imperative or non-imperative nature of the steps prior to the commencement of arbitration, problems may arise.
For this reason, it is essential to consider whether a staggered procedure actually fits the parties’ interests before incorporating such a clause into a contract. Additionally, it is essential to pay attention to the wording of the clause to avoid or mitigate potential problems, such as clearly determining whether the procedures prior to arbitration are imperative or not, establishing deadlines, and determining the facts that determine the failure of the steps prior to arbitration.
One of the most contentious issues related to staggered clauses is the effects and consequences in arbitration, as well as their recognition and enforcement of the award that results if one of the parties does not follow the procedure provided for in the staggered clause. Another potentially contentious issue is when one of the parties requests interim measures from a judicial tribunal whose legal system requires the party to initiate arbitration within a certain period (usually days), which means that the party cannot respect the staggered procedure.
Despite the potential problems, staggered clauses remain an interesting option in dispute resolution. They have been used in various types of contracts and sectors, especially in construction. This type of clause establishes a gradual system that begins with several alternative methods of a staggered clause in a contract.
