Australia: Mediation and arbitation clauses in commercial contracts

Drafting key clauses in commercial contracts - Part 3
Last Updated: 3 July 2014
Article by Paul Kordic
This article is part of a series: Click Assignment & novation clauses in commercial contracts for the previous article.

Contracts to mediate have been held to be valid where they describe clearly the steps which the parties are required to take or they incorporate a structure for a mediation.

A clause which required the parties to attempt in good faith to resolve a dispute or claim through ADR procedure recommended by a mediation centre was regarded as enforceable.

A clause was held uncertain where it simply stated that a dispute shall be submitted to a 'Third Party Mediation procedure'.

A mediation clauses has also been held uncertain where it does not state the person who is to nominate an expert failing the agreement of the disputing parties or where it does not provide who is to bear the costs of a mediator.

5.1 Extract of issue resolution clause from AMPLA Joint Venture Agreement

16 Issue Resolution

16.1 Limitation on proceedings

The parties agree that it is a condition precedent to the commencement of any litigation proceedings by a party in respect of a dispute under, or in relation to, this agreement (Issue ) that the party has complied fully with the agreed process of resolving an Issue (Issue Resolution Process) under this clause (regardless of the level or levels on which the Issue has previously been considered) except where the Issue is the non-payment of monies due or:

  1. if the party seeks urgent interlocutory, injective or declaratory relief ; or
  2. if the other party has failed to observe the requirements of this clause and the party seeks to enforce compliance with the Issue Resolution Process,

in respect of the Issue.

16.2 Issue Resolution Process

The Issue Resolution Process for this agreement is set out in Schedule 5.

Schedule 5

Issue Resolution Process [Example only]

1.1 Issue Resolution Process

  1. Where an Issue arises between the parties, a party may give notice to the other parties initiating an Issue Resolution Process in respect of the Issue (Issue Notice) which Issue Notice must:
    1. state that the notice is given under this subclause;
    2. describe the nature of the issue; and
    3. nominate a representative of the party who is authorised to negotiate and settle the Issue on the party's behalf.
  2. (Representative of other parties) Each other party must within 7 days after receipt of an Issue Notice nominate in writing to the other parties a representative authorised to negotiate and settle the Issue on its behalf.
  3. (Negotiation by Representatives) The parties' representatives must negotiate in good faith with a view to resolving the Issue within 21 days after the receipt of the Issue Notice, (or such longer period as those representatives agree), failing which the Issue must be immediately referred to the Chief Executive Officers of the parties.
  4. (Chief Executive Officers) The Chief Executive Officers must negotiate in good faith with a view to resolving the Issue within 14 days of the Issue being referred to them (or such longer period as the Chief Executive Officers agree) failing which, the Issue may be immediately referred by a party by notice to mediation or Expert determination under this agreement.

1.2 Mediation

Mediation of an Issue must:

  1. be conducted in the Nominated State by the person or body agreed to by the parties or, failing agreement within 35 days after receipt of the Issue Notice, as nominated by the President for the time being of the Law Society of the Nominated State on request by either party;
  2. be conducted in accordance with such rules as may be agreed to by the parties or, failing agreement within 35 days after receipt of the Issue Notice, in accordance with the rules nominated by the person or body agreed or nominated to conduct the mediation;
  3. be at the cost and expense of the parties equally (expect that each party must pay its own advisers, consultants and legal fees and expenses) unless the parties otherwise agree;
  4. if not earlier resolved, be continued for a period expiring on the date being 14 days after the nomination of the mediator (or such other period as the parties may agree) after which either party may at any time after that date seek Expert determination in accordance with this agreement or commence litigation proceedings in respect of the Issue.

1.3 Issue Resolution Process not to interrupt Joint Venture Activities

The parties must ensure that neither the commencement nor conduct of any Issue Resolution Process, including mediation, or Expert determination, causes any interruption to Joint Venture Activities or to the performance by the parties of their respective obligations under this agreement, nor will It affect any of the Activities or a party under this agreement is materially affected by the submission of the matter in dispute of arbitration, litigation or by the result of the litigation or arbitration.

1.4 Clause does not apply to matters where consent required

If this agreement refers to the parties reaching agreement on a matter or the consent of any party being given then, except where this agreement requires that consent or agreement is not to be unreasonably withheld, the Issue Resolution Process cannot be used to resolve a dispute between the parties in relation to the reaching of that agreement or the giving of that consent.

6. Arbitration

Many commercial contracts provide that disputes between the contracting parties shall be resolved outside the courts, or at least that the parties shall attempt to resolve their disputes outside the courts before they litigate with each other.

An arbitration clause often sets out the manner of appointment of the arbitrator and of proceedings. Often the clause provides that if arbitration is not acceded to, any claims will be treated as waived and absolutely barred.

The ability of a court to enforce compliance with the arbitration process depends on whether the clause providing for arbitration is sufficiently certain, whether the dispute is within the scope of the arbitration clause, and the circumstances in which a court will exercise discretion to enforce compliance with a prescribed arbitration process.

An arbitration clause which purports to finally and exclusively prescribe the method in which disputes may be resolved will be void for attempting to oust the jurisdiction of the courts altogether. A clause which provided that a dispute cannot be litigated, but must only be submitted to arbitration, was held to be unenforceable.

Careful attention must also be paid to drafting arbitration clauses where third parties are involved or ancillary agreements would unintentionally escape the arbitration process agreed in the principal contract. Failure to provide for related project documents to be brought within the same dispute resolution process could result in a forum fragmentation.

6.1 Short form arbitration clause

In the event of a dispute arising out of, relating to or in connection with this agreement or its validity, the dispute must be determined by arbitration in accordance with the Commercial Arbitration Act 1985 (WA).

Possible additions:

  1. Appointment of arbitrator The parties agree to appoint an arbitrator from XXXX. If the parties do not agree on the arbitrator to be appointed, either party may request the President of XXXX to appoint an arbitrator. XXXX: refer to appropriate appointing body.
  2. Legal Representation
    Each party may be represented by a legal practitioner [or any other representative]
  3. Negotiation If a dispute between the parties arises out of, relates to or is in connection with any aspect of this agreement, or the validity of this agreement, the parties undertake with each other to use all reasonable endeavours, in good faith, to settle the dispute by negotiation.
  4. Dispute Notice and Representatives
    For the purpose of facilitating the process of negotiation referred to in clause XX:
    1. the party claiming that the dispute has arisen is to give notice to that effect to the other party which:
      1. briefly identifies the subject matter of the dispute; and
      2. designates a representative for the negotiation who will have authority to settle the dispute on behalf of that party; and
    2. the other party is then to promptly designate by notice to the party giving the Dispute Notice, its representative for the negotiation who will have authority to settle the dispute on behalf of the other party.
  5. Procedure All evidence and submissions to the arbitrator are to be in writing unless the arbitrator otherwise directs or the parties otherwise agree.
  6. Arbitrator's authority
    The arbitrator is to have authority to give a party any relief which could be ordered by a court having the appropriate jurisdiction.
  7. Related Disputes
    The arbitrator may, in the arbitrator's discretion, determine any dispute raised by either party in the course of the arbitration additional to that or those referred to in the Dispute Notice, subject to:
    1. the additional dispute being capable of being referred to arbitration in terms of this clause; and
    2. any conditions as to costs or otherwise which the arbitrator may propose.
  8. Privacy The Arbitration proceedings are to be conducted in private, and information disclosed by any party in the course of the proceedings is to be kept confidential by the parties and their advisers, except as otherwise agreed by the parties or directed by a court.
  9. Obligations continue Pending and during the arbitration, the parties are to continue to perform their obligations under this agreement.


  1. If an international element, add the following words: "The International Arbitration Act 1974 and the Uncitral Model Law set out in schedule 2 of that Act do not apply to this agreement."
  2. Insert a relevant industry organisation or a general nominating body such as the Institute of Arbitrators & Mediators, Australia, the Law Society of WA, The Institute of Chartered Accountants or possibly the International Chamber of Commerce in an international situation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

This article is part of a series: Click Assignment & novation clauses in commercial contracts for the previous article.
This article is part of a series: Click Costs, competition and restraint of trade clauses in commercial contracts for the next article.
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.