There is no conformity across Europe in the way that companies avoid and handle disputes
A recent DLA Piper survey of risk management, contract drafting and methods of dispute resolution amongst leading UK, German, French, Spanish and Italian companies operating internationally, shows the majority of businesses adopt a fragmented and often contradictory approach to these issues.
There is much dissatisfaction when it comes to dispute resolution: only 28% of respondents said they had managed disputes very effectively in the last two years, and less than a third said they had been successful at avoiding disputes altogether.
Even though most businesses appreciate the best way to resolve disputes is to ensure contracts are well drafted, there are clear variations across Europe in the approach to contract drafting. Ironically, most companies channel more legal resources into dispute resolution than dispute avoidance.
In Germany, 97% of respondents said their legal departments influenced the content and drafting of the contract. In stark contrast, only 23% of French respondents said their legal departments were involved. Unsurprisingly, 43% of German respondents rated their organisation's success in avoiding disputes as very high, whereas in France only 17 % did. When asked how respondents would like to see their organisations improve their approach to dispute resolution, the most frequent response was better contract drafting.
When it comes to applicable law and the location for resolving disputes, over 70% of respondents said their contracts with parties in other countries contain a clause specifying this. 73% of respondents preferred to resolve disputes in their own countries, but almost a quarter of respondents' choice of jurisdiction is governed by the circumstances relating to the contract and the governing law of the contract.
In France, Italy and Spain 87% of respondents' contracts contain a clause governing the method of dispute resolution, whereas in Germany the figure is only 60%.
Although litigation remains the most commonly used form of dispute resolution, over 40% of companies did not consider it a successful method. Yet its use is still predicted to rise by a significant proportion of respondents.
Alternative dispute resolution (ADR) including mediation, is growing in popularity, with over half of all European businesses surveyed having used it in the last two years. Even so, over half of European organisations still do not include ADR clauses in their contracts.
Less than a third of respondents had used arbitration. Almost half of those who had engaged in arbitration in the last two years rated it as unsuccessful.
